Since the end of the 1990s, considerable attention and research have been focused on the field of CSR worldwide. As the corporate influence on society grows, social demands are increasing for company to introduce CSR and instigate related activities. Now, CSR is focused on as a strategic management issue. Accordingly, more companies have introduced CSR to their management. In Korea, interest in and academic research on corporate sustainability and CSR have increased since 2000.
Most discussions on the original concept of CSR suggested by Bowen (1953) focused on whether a company’s manager should take ethical responsibility for the social demand, i.e., whether an organization’s CSR activities vary depending on the organizational leader’s perception on ethics and social responsibility (Skouloudis and Evangelinos 2012). As a responsible leader is a major element in determining the relation with the organization and the stakeholders (Waldman and Galvin 2008) and since the leader’s personality and values determine the perception of CSR, the leader is very critical in introducing, keeping and development CSR (Quazi 2003). Likewise, Waldman et al. (2006) also argued that the ethical leaders positively affect CSR.
Nevertheless, no attention has been directed at the relationship between the unethical traits of the company’s leader and his or her perception of social responsibility. Moreover, media reports of company managers’ delinquencies raise interest in the relationship between a leader’s negative trait and the perception of CSR. In South Korea, the mass media widely covered big news stories about Namyang Dairy Product Co., Ltd.Footnote 1, Korean Air,Footnote 2 POSCO EnergyFootnote 3, Samsung semiconductor factoryFootnote 4, and the ScandalFootnote 5 between President and Chaebols since 2010. These stories were related to ethical, social and leadership issues, and highlighted a need to consider the relationship. In this study, the dark triad (Machiavellianism, psychopathy and narcissism) was used as the representative negative trait. Those with this trait tend to deal with others unethically or manipulatively (Furtner et al. 2011). Other studies, however, have reported that their superficial attractions such as cool-headed or cold-blooded behavior help them to climb the corporate ladder (Babiak et al. 2010). Therefore, it is necessary to identify the relationship between the dark triad of an organization’s leader and his or her perception of ethics and social responsibility.
Lastly, we have investigated whether the individual performance-based compensation system played any moderating role between the dark triad of an organization’s leader and his or her perception of CSR. The human resource management system has experienced major changes in South Korea since the financial crisis of 1997. It is well known that, the individual performance-based compensation systems have been widely adopted in every aspect to firms, according to global standards (Yu and Park 2007). Bae and Park (2005) articulated that Korean firm has focused on short-term performance allowed the firm to set its goals. Therefore, the individual performance-based compensation has weakness in Korean context, although designed to be beneficial to all, owing to focusing on the achievement of business outputs. The system, thus, can lead to unethical behaviors at the expense of other value when a leader who has negative propensity exists in an organization. Therefore, it is necessary to determine whether the individual performance-based compensation system moderates the relationship between the dark triad trait and the perception of CSR.
Dark triad trait
Kowalski (2001) regarded Machiavellianism, psychopathy and narcissism as social-aversive personality traits. Paulhus and Williams (2002) deemed them to be socially undesirable as an aggressive personality and termed them the ‘Dark Triad’ with a negative personality trait primarily. Machiavellianism has some characteristic ways of deceitful behaviors, wickedness, cunningness, and hypocrisy (Corral and Calvete 2000). According to Geis and Moon (1981), Machiavellianism traits are self-beneficial behaviors, lack of empathy, deception and interpersonal manipulation (Jakobwitz and Egan 2006; Furtner et al. 2011). Those with a Machiavellianism trait attempt to gain advantage by any means necessary, with no consideration for ethics. Additionally, Machiavellianism suppresses other’s feeling in order to establish and attain one’s own purpose, emphasizes practicability, and has the strong desire for harsh power (Ali et al. 2009). Machiavellian leaders tend to ignore ethical issues without prudence and with no attempt to solve them (Ford and Richardson 1994). Machiavellianism has a negative relationship with the perception of business ethics (Simmons et al. 2009).
Psychopathy is divided into primary psychopathy (e.g., selfishness, deficiencies in interpersonal affect, remorselessness, superficial charm, exploitation) and secondary psychopathy (antisocial lifestyle and behaviors) (Karpman 1948). As argued later, Machiavellianism and primary psychopathy are essentially identical constructs (McHoskey et al. 1998). Nathanson et al. (2004) presented manipulation, a lack of affective experiences, and impulsive or irresponsible behavior as characteristics of psychopathy. It can be rendered as glibness and superficial charm, manipulation, cunning, coldness, grandiose sense of self-worth, lack of remorse and empathy, emotionally shallow, calculating, and refusing to take responsibility for their own actions (Boddy et al. 2010; Williams et al. 2002). Boddy (2011) mentioned that the global financial crisis in 2008 proceeded from the psychopaths who worked in firms and financial service providers.
The narcissism trait induces a strong desire to achieve recognition of one’s superiority and, in order to prove it, attempts to gain attention and envy. Narcissistic supply appears out of compliment, affirmation and flattery, which are identified by others (Wallace and Baumeister 2002; Chatterjee and Hambrick 2007). The narcissism trait attempts to attain others’ envy by means of fulfilling a hard or challenging mission voluntarily. Cognitively, the narcissism trait is presented in any constant personal differences (self-love, self-assessment, exaggeration, grandiosity) compared with others (Morf and Rhodewalt 2001; Campbell et al. 2006), such as in exaggerating, oppressive, egocentric and dominant personalities (Emmons 1987; Sedikides et al. 2002). Narcissists tend to overvalue their creativity, leadership, ability and intelligence compared with all others (Robins and John 1994; Farwell and Wohlwend-Lloyd 1998; Judge et al. 2006).
Theoretical background and hypothesis development
Leaders’ dark triad trait and their CSR perception
The attitude of leaders is a salient component in establishing positive relationships with a variety of stakeholders (Waldman and Galvin 2008). Furthermore, the personality of the leader of an organization like a CEO is an important driver in deciding the perception of social responsibility, and his or her morality positively affects CSR (Quazi 2003; Waldman et al. 2006).
CSR is understood as a discretionary and strategic management (William and David 2011), and thus varies according to each company’s unique situation (Marrewijk and Werre 2003; Peng 2008). The strategic CSR is in the area of a leader’s personal decision-making (Robbins 2008; Thomas and Simerly 1994), and virtue of the leader’s authority (Batra 2007). The CEO’s trait has been dealt with as an important factor of organizational behaviors (Klann 2003). Therefore, a leader’s ethical attitude is a critical point in determining the level of CSR which is performed discretionarily.
The dark triad has several common characteristics: callous, twofold, self-interested and exploitative personality. A leader with the dark triad trait may manipulate, exploit and deceive colleagues, and conduct morally inappropriate behavior while avoiding cooperation and collective solution with co-workers (Furtner et al. 2011). An ethical culture in an organization is an important element in a positive perception of CSR, and a leader’s undesirable traits are related with individual attitudes in an organizational culture (Valentine and Fleischman 2008). Machiavellianism has a negative relationship with business ethics (Simmons et al. 2009). Similarly, a lack of empathy, which is a representative disposition of psychopathy, may negatively affect a company. Therefore, the probability that narcissism does not enrich the substance of CSR owing to regarding social responsibility as a superficial means to prove oneself and gratify self-attachment is presumed to be high. Narcissistic leaders aggrandize their power with self-conviction, although they may make irresponsible judgements and decisions (Hogan et al. 1990).
In other words, the stronger a leader’s dark triad trait in an organization, the more unethical management practices increase, and the higher others’ stress (Fox 2000). Therefore, it can be anticipated that the dark triad is coupled with the level of perception of and concern for CSR negatively. The ethics of top managements works as an essential driver of a responsible corporate citizen’s activities (Perrini 2006; Swanson 2006; Valentine and Fleischman 2008). The dark triad may not recognize CSR as a critical issue and may have little attention to solve social and environmental problems (Singhapakdi and Vitell 1991).
Because personal values, dispositions and characteristics determine the CSR perception (Quazi 2003), the leader as a decision-maker plays an important part in the initialization, maintenance and development of CSR. Therefore, it can be anticipated that the dark triad will result in forming a usual practice of ignoring ethics and social responsibility, and influence the level of CSR perception. Based on the above discussion, the following hypothesis can be proposed:
Hypothesis 1. The dark triad traits (Machiavellianism, psychopathy and narcissism) of a leader in an organization are negatively related to his or her perception of CSR.
The moderating effect of the individual performance-based compensation system
The individual performance-based compensation system is a market-based system which focuses on results of employees’ tasks. It therefore must be developed and operated strategically in terms of human resource management. Especially, this system is an individual management system that is connected with organization goals, individual performance and team achievements, and that differentiates rewards. In terms of conventional organizational behavior, the offering of clear rewards to the related achievements can be a strong motivation (Heneman 1992; Milkovich and Newman 1996; Yu and Park 2007).
However, the motivation effect of individual performance-based compensation system is not always positive. If only exogenous reward with regard to task outputs is offered, the self-determination of a management implementer tends to be decreased, and intrinsic job-motivation will be further decreased accordance with developing an attention for rewards (Deci 1971; Eisenberger and Armeli 1997; Collins and Amabile 1999). Similarly, when the polarization of the compensation level becomes more serious, employees may lack their self-efficacy and job satisfaction, and thus lose self-respect and intrinsic motivation (Heneman 1992; Deci et al. 1999).
In accordance with the goal-oriented or egocentric disposition of dark triad traits, an individual performance-based compensation system can stimulate the disposition. Nearly one-third of financial services professionals reported that their bonus or compensation plans created pressure to engage in unethical or illegal behavior, according to the New York TimesFootnote 6. Because the dark triad trait tends to neglect cooperation and communications with others, a leader with the trait will manipulate others much more and give little attention to ethics or CSR in order to maximize his or her profits.
Bazerman and Tenbrunsel (2011) articulated that compensation systems are usually designed with good intentions, but it is a possibility that their goals will not be achieved, because no one can predict accurately how employees will respond to the rewards system. The performance-based compensation system of Korean companies has concentrated on the typical business performance (Park 2007), thus, the desirable perception of ethics or social responsibility which is excluded from the reward system is suppressed (Bazerman and Tenbrunsel 2011). Moreover, supposed to the dark triad traits of self-beneficial behavior and lack of empathy, the compensation system can be expected to exacerbate the perception of CSR, and consider visible outputs more importantly. Therefore, the CSR that is connected with not direct and short-term results but long-term value may be dealt with unimportantly. As mentioned above, the following hypothesis on the individual performance-based compensation system can be made:
Hypothesis 2. The individual performance-based compensation system moderates the relationship between the dark triad trait of a leader and his or her perception of CSR