Study shows high levels of corporate responsibility are not always good

Does philanthropy set the stage for corporate irresponsibility? The Huffington Post published a recent study of Fortune 500 company CEOs that revealed this may be true. Researchers were very surprised to discover that firms lead by CEOs who actively engage in such activities as charitable giving and adopting socially responsible practices are more likely to engage in wrongdoing that harms their employees or stockholders.

For example, BP’s safety record was their top priority but, just a couple years later, missed warning signs of lax conditions that ultimately led to the Deepwater Horizon explosion. Kenneth Lay of Enron donated vast amounts to charities before he was dethroned in the accounting scandal that rocked the country.

The findings are at odds with what most people expect, but the research reveals that those who attempt to create a high moral image are more likely to engage in illegal or irresponsible corporate actions in the future. Seeking the moral high ground is not usually an attempt to cover-up corporate misdeeds, however. The study showed that the firms felt their good deeds entitled them to cut some corners at a rate of approximately one misdeed for every five good acts.

Forewarned is forearmed

Realizing there is an unconscious tendency to dip into the corporate moral bank is the first step in keeping a business from doing so. Other steps may include the following:

• Stay vigilant about seeking the moral high ground.
• Do not rely on the company’s prior performance.
• Seek a fresh perspective on business operations from time to time.
• Maintain a corporate board that does more than rubberstamp CEO decisions.
• Resolve contract disputes and potentially litigious corporate matters in a timely fashion.

Most importantly, surround yourself with trusted advisors who are willing to ask probing questions and are not necessarily focused on the company’s bottom line. Seek advisors such as:

• An in-house legal advisor or outside counsel
• A veteran in the industry who has already experienced what you may face
• An innovator who focuses on fresh ideas, better processes and updated best practices
• An outsider who sees corporate actions from a different perspective

Hire an attorney

Few corporations actively seek to break the law. Most corporate missteps are inadvertent and can result from inattention to details or inadequate preparation. An experienced corporate attorney can provide invaluable assistance at every stage of your business. From initial conception and formation, through corporate development and growth, a lawyer knowledgeable about business and corporate law can help your company avoid litigation and reduce business risks.