The Face of Fairness: Self-Awareness as a Means to Promote Fairness among Managers with Low Empathy

Although managing fairness is a critical concern for organizations, not all managers are predisposed to enact high levels of fairness. Emerging empirical evidence suggests that personality characteristics can be an important antecedent of managers’ fair behavior. However, relatively little attention has been devoted to understand how to promote fairness among managers who are naturally predisposed to engage in lower levels of fairness. Building upon self-awareness theory, we argue that increasing managers’ self-awareness can motivate managers with low trait empathy to engage in greater levels of justice. We test the interactive effects of trait empathy and state self-awareness using an experimental study (N = 76) in which individuals were asked to communicate negative news. In support of our hypothesis, our results indicate that increasing self-awareness through self-focusing situations can help promote interactional justice when communicating negative news for individuals with low trait empathy. The theoretical and practical implications of these findings are discussed.     

Why and How Does Social Responsibility Differ Among SMEs? A Social Capital Systemic Approach

Research suggests that organizational justice (procedural, distributive, and interactional justice) has important impacts on work-related attitudes and behaviors, such as organizational citizenship behavior (OCB). In this article, we explore the extent to which individualism moderates the relationship between organizational justice and OCB (organizational obedience, participation, and loyalty) among citizens in Kyrgyzstan. We make additional contributions to the literature because we know very little about these constructs in this former Soviet Union country, Kyrgyzstan, an under-researched and under-represented region of the world. Results of our data collected from 402 managers and employees in Kyrgyzstan offer the following new discoveries. All three justice constructs are related to OCB. Individualism moderates only the distributive and interactive justice to OCB relationships. We develop an intricate theory with provocative implications: Procedural justice produces obedience. For “individualists,” interactional justice inspires loyalty and, interestingly, distributive justice “can only buy” participation, but “can’t buy” loyalty. Therefore, for individualists, interactional justice outweighs distributive justice for organizational loyalty. Based on Kyrgyz citizens’ justice, OCB, and individualism, our theory reveals novel insights regarding culture, money attitude, and intrinsic motivation and provides critical and practical implications to the field of business ethics.     

Individual Competencies for Corporate Social Responsibility: A Literature and Practice Perspective

Because corporate social responsibility (CSR) can be beneficial to both companies and its stakeholders, interest in factors that support CSR performance has grown in recent years. A thorough integration of CSR in core business processes is particularly important for achieving effective long-term CSR practices. Here, we explored the individual CSR-related competencies that support CSR implementation in a corporate context. First, a systematic literature review was performed in which relevant scientific articles were identified and analyzed. Next, 28 CSR directors and managers were interviewed. The literature review complemented with interview data resulted in the following eight distinct CSR-related competencies: (1)Anticipating CSR challenges; (2) Understanding CSR-relevant systems and subsystems; (3) Understanding CSR-relevant standards; (4) CSR management competencies, including (4a) Leading CSR programs, (4b) Managing CSR programs, and (4c) Identifying and realizing CSR-related business opportunities; (5) Realizing CSR-supportive interpersonal processes; (6) Employing CSR-supportive personal characteristics and attitudes; (7) Personal value-driven competencies, including (7a) Ethical normative competencies, (7b) Balancing personal ethical values and business objectives, and (7c) Realizing self-regulated CSR-related behaviors and active involvement; and (8) Reflecting on personal CSR views and experiences. Based on these results, implications for further research on this topic, as well as implications for practitioners, are discussed.     

Venture capital in transition: A Monte-Carlo simulation of changes in investment patterns

This article examines the nature of the investment process which has historically generated high returns for venture capital funds, and the impact on fund returns of perceived changes in management practice and the structure of the industry. The article outlines some policy implications for fund managers, investors, and the general management of corporations.The authors have investigated the investment process and the changes in the nature of the process through the use of a Monte-Carlo simulation model. Information gathered from interviews with fund managers and the available published data on venture fund performance (including proprietary surveys) was used to develop and calibrate the model. The model replicates the relatively high average fund returns and distribution of returns for funds through the early 1980s. The model simulates a multistaged investment process which draws on a pool of investment opportunities which have a log normal distribution of returns and a low (zero) average return. The model readily permits the exploration of the impact of management and industry practices on fund returns.The conditions identified by the authors, which led to high rates of return on the part of venture capital funds, include:

• 1.1) multistaged investment or commitment of funds on an incremental basis with evaluation of venture performance before commitment of additional fund;
• 2.2) objective evaluation of venture performance with the clear distinguishing of winners from losers;
• 3.3) parlaying funds or having the confidence to commit further funds to ventures identified as winners;
• 4.4) persistence of returns from one round to the next, which implies that valuable information is gained from previous rounds of investment in the same venture;
• 5.5) long-term holding of investment portfolios for a period sufficient for geometric averaging of compound returns to cause the winners to “take over” or raise portfolio returns.

Taken together, these conditions have permitted venture capital funds to historically realize strong average returns with a few of them realizing extraordinary returns.The article also explores the consequences of what some believe is happening in the industry: a trend toward holding investments for shorter periods, increased competition both for investments and later in the product-market arena, and a growing lack of loyalty between investors and investees. All of these conditions and their indirect consequences were shown by the model to negatively impact the limited partners in the venture capital funds while general partners, given the structure of fees and the distribution of investment returns, generally realized a reasonable to extraordinary return. The article outlines a number of management and investment policy implications for investors and fund managers.     

Public and Private Challenges of an Aging U.S. Population

The challenges posed by the aging of the U.S. population for business and public policy are vast. They are amplified particularly by:??Slow increase of incomes—and therefore low private savings—for those at the bottom of the pay distribution.??Cutbacks in employee health-care insurance and defined benefit pension plans.??Unsustainability of Social Security and Medicare as currently configured.This paper spells out these challenges and discusses how they can be addressed. Of particular importance are some combination of enhanced revenue and reduced expenditure for Social Security and Medicare, the shift of private pension plans from defined benefit to defined contribution, the need to consider later retirement ages, and the need for improved personal financial literacy.     

On the Credibility Determinants of a Quality Label: a Quasi-Natural Experiment Using the Example of <Emphasis Type="Italic">Stiftung Warentest</Emphasis>

In 2013, Stiftung Warentest, which is one of the most important consumer organizations in Germany, tested hazelnut chocolate for their leading magazine called test. The hazelnut chocolate of Ritter Sport, which is a high-quality producer of chocolate in Germany, failed the test and received the grade “unsatisfactory.” Stiftung Warentest accused Ritter Sport of labelling an artificial flavouring as a natural flavouring. Ritter Sport rejected the accusation, went to court, and won the trial. Stiftung Warentest had to withdraw the issue in question of test magazine. The affair received broad media coverage from December 2013 to September 2014. Using the case Ritter Sport versus Stiftung Warentest, it is analysed whether negative headlines really undermine the credibility of a quality label by examining Stiftung Warentest and their quality label called test. In addition, it is examined what can be done to restore or, more generally, increase the credibility of a quality label. Based on a quasi-natural experiment, it is found that the negative headlines regarding Stiftung Warentest have undermined the credibility of the test label. It is also found that the credibility of the test label can be increased by providing reference values to the tests, strengthening the independence of Stiftung Warentest, and using laboratory methods for the tests. For the most part, the same holds true for any quality label. High-quality producers, quality-conscious consumers, and the awarding organization of the quality label can benefit from an increased credibility of a quality label.     

Globalization and Poverty: Oxymoron or New Possibilities?

We examine the occurrence of ethics- related terms in 10-K annual reports over 1994–2006 and offer empirical observations on the conceptual framework of Erhard et al. (Integrity: A Positive Model that Incorporates the Normative Phenomena of Morality, Ethics, and Legality (Harvard Business School, Harvard) 2007). We use a pre-Sarbanes-Oxley sample subset to compare the occurrence of ethics-related terms in our 10-K data with samples from other studies that consider virtue-related phenomena. We find that firms using ethics-related terms are more likely to be “sin” stocks, are more likely to be the object of class action lawsuits, and are more likely to score poorly on measures of corporate governance. The consistency of our results across these alternative measures of ethical behavior suggests that managers who portray their firm as “ethical” in 10-K reports are more likely to be systematically misleading the public. These results are consistent with the integrity-performance paradox.     

Brand-anchored discrete choice experiment (BDCE) vs. direct attribute rating (DAR): An empirical comparison of predictive validity

The image of a brand provides a key driver of brand equity. To build and control a strong brand image though, brand managers require a valid procedure to measure it. This article empirically compares the predictive validity of two measurement techniques to assess brand image: First, a brand-anchored discrete choice experiment (BDCE) which is based on a brand-anchored conjoint approach where brands serve as the levels for any attribute and which was originally introduced as ranting-based approach by Louviere and Johnson Journal of Retailing, 66, 359–382 (1990) and further extended to a BDCE by Eckert et al. International Journal of Research in Marketing, 29, 256–264 (2012). Second, a direct attribute rating (DAR) approach which is commonly used for commercial applications of brand image measurement. An empirical study using a representative sample of the German beer market shows that BDCE shows significantly higher levels of predictive validity (i.e., higher correlations with the actual market shares of the brands under investigation) than the widely used DAR method.     

Understanding the Interplay Among Regulatory Self-Efficacy,Moral Disengagement,and Academic Cheating Behaviour During Vocational Education: A Three-Wave Study

This study uses a quasi-experimental design to investigate what happens to individual socially responsible attitudes when they are exposed to group dynamics. Findings show that group engagement increases individual attitudes toward social responsibility. We also found that individuals with low attitudes toward social responsibility are more likely to change their opinions when group members show more positive attitudes toward social responsibility. Conversely, individuals with high attitudes do not change much, independent of group characteristics. To better analyze the effect of group dynamics, the study proposes to split social responsibility into relative and absolute components. Findings show that relative social responsibility is correlated with but different from absolute social responsibility although the latter is more susceptible than the former to group dynamics.     

Rebuilding Trust: Ireland’s CSR Plan in the Light of <Emphasis Type="Italic">Caritas in Veritate</Emphasis>

This paper seeks to contribute to the discussion on national corporate social responsibility (CSR) plans from the perspectives of the three logics as articulated in Caritas in Veritate, by using the Irish national CSR plan as an example. Good for Business, Good for the Community: Ireland’s National Plan on Corporate Social Responsibility 2014–2016 maintains that CSR activities can enable organisations to build relationships and trust with communities. One of the consequences of the 2008 financial crisis was the decrease in trust in banking systems and in business more broadly. It is well recognised that relationships of trust are essential to the life of the market, the state and civil society. Pope Emeritus Benedict XVI’s Caritas in Veritate contends that corresponding to the life of the market, the state and civil society are three logics: the logic of exchange (i.e. giving to acquire), the logic of public obligation (i.e. giving through duty) and the logic of gift (i.e. giving due to solidarity). This paper proposes that the normative framework of the three logics of Caritas in Veritate can be read into the Irish national CSR plan. This paper argues that the examples of CSR initiatives proffered by the plan could point organisations in the direction of the logic of gift and therefore enable the rebuilding of relationships of trust with citizens and communities.     

An Overview of the U.S. Regulated Fund Industry

The largest segment of the asset management business in the United States is registered investment companies (regulated funds). This article focuses on U.S. regulated investment companies—mutual funds, exchange-traded funds, closed-end funds, and unit investment trusts. These funds manage more than $17 trillion of assets, largely on behalf of U.S. investors. The industry has experienced strong growth over the past quarter century from asset appreciation and strong demand from households due to rising household wealth, the aging of the U.S. population, and the evolution of employer-based retirement systems. Price competition and supply-side product innovations and efficiencies have reduced the average price that investors pay for fund services.     

The timing of version releases: A dynamic duopoly model

In many R&D-intensive consumer product categories, firms deliver value to consumers through the quality enhancements provided by new and improved versions of existing products. Therefore, important marketing decisions relate to a firm’s strategy for developing quality enhancements and releasing new versions. This paper explores this type of product development using a dynamic duopoly model that endogenizes each firm’s decisions over how much to invest in R&D and when to release new versions. Specifically, I explore how two key industry fundamentals—the degree of horizontal differentiation and the cost of releasing a new version—affect firms’ product development strategies and, accordingly, the evolution of industry structure. I find that varying the degree of horizontal differentiation gives rise to three distinctly different types of competitive dynamics: preemption races when the degree of horizontal differentiation is low; phases of accommodation when it is moderate; and asymmetric R&D wars when it is high. Furthermore, I find that an increase in the cost of releasing a new version can induce firms to compete more aggressively for the lead and, in doing so, release new versions more frequently despite the higher cost.     

Does Shari’ah Screening Cause Abnormal Returns? Empirical Evidence from Islamic Equity Indices

Islamic equity funds are subject to the screening criteria for stock selection imposed by the principles of Islamic jurisprudence (Shari’ah). Equities must pass three basic screens: revenue source, business activity, and financial factors to be included in an Islamic fund. However, screening criteria are not universal especially for the financial factors. One can use financial ratios based on either the book-value of total assets or the market-value of equity for screening of stocks. This may not only result in a different portfolio composition but also entail diverse rebalancing and monitoring costs. The performance of 29 Islamic equity indices (IEIs) versus conventional indices from four major international index providers using different Shari’ah screening criteria are analyzed in a single as well as in a multi-equation framework. The use of a multi-equation framework has the added advantage of utilizing the information content of different screening criteria adopted by different index providers. The empirical findings suggest that the difference in screening criteria does not significantly affect the performance of IEIs. Returns deviation, if any, stems from the relative riskiness of the IEI as compared with the relevant benchmark. Work needs to done to streamline the quantitative screening criteria to avoid confusion among the investing public.     

Age and entrepreneurship: nuances from entrepreneur types and generation effects

The literature on the relationship between age and entrepreneurship has been inconclusive. This study for the first time examines this relationship by extending the occupational choice literature to eight entrepreneur types and four generational modification effects in the USA. Multilevel mixed-effect logistic regression models are estimated to examine the age effects in entrepreneur type propensities. Generational modification effects are compared for the same ages across neighboring generations by hierarchical age-period-cohort (HAPC) models. We find that entrepreneurial propensity rises with age until around 80. The propensity of novice (versus non-novice) and unincorporated (versus incorporated) entrepreneurs has a U-shaped age trend dipping around age 60, while the propensity of full-time (versus part-time) declines since age 30s. The propensity of incorporated (versus unincorporated) entrepreneurs declines from ages 44 to 51 for Gen-Xers, but not for Boomers; this propensity also declines faster for Boomers than for Traditionalists from ages 63 to 70.     

Business Cases and Corporate Engagement with Sustainability: Differentiating Ethical Motivations

This paper explores links between different ethical motivations and kinds of corporate social responsibility (CSR) activities to distinguish between different types of business cases with regard to sustainability. The design of CSR and corporate sustainability can be based on different ethical foundations and motivations. This paper draws on the framework of Roberts (Organization 10:249–265, 2003) which distinguishes four different ethical management versions of CSR. The first two ethical motivations are driven either by a reactionary concern for the short-term financial interests of the business, or reputational, driven by a narcissistic concern to protect the firm’s image. The third responsible motivation works from the inside-out and seeks to embed social and environmental concerns within the firm’s performance management systems, and the fourth, a collaborative motivation, works to bring the outside in and seeks to go beyond the boundaries of the firm to create a dialogue with those who are vulnerable to the unintended consequences of corporate conduct. Management activities based on these different ethical motivations to CSR and sustainability result in different operational activities for corporations working towards sustainability and thus have very different effects on how the company’s economic performance is influenced. Assuming that corporate managers are concerned about creating business cases for their companies to survive and prosper in the long term, this paper raises the question of how different ethical motivations for designing CSR and corporate sustainability relate to the creation of different business cases. The paper concludes by distinguishing four different kinds of business cases with regard to sustainability: reactionary and reputational business cases of sustainability, and responsible and collaborative business cases for sustainability.     

Enacted identities in the university spin-off process—bridging an imaginative gap

This paper employs a case study to explore the interdependencies between enacted role identities and behavioural logics of eight inventor-founders embedded in university spin-off venturing. The major tendencies in the findings suggest that the inventor-founders enact their academic role identity following three distinct paths; re-use, return or discard. Based on these findings, two propositions are developed. Firstly, it is proposed that some academic founders may find themselves in an identity dilemma; choosing between returning to their academic roots normatively speaking or discarding their academic role identity to pursue entrepreneurial opportunities. Secondly and as an alternative, it is suggested that effectuation logics allows inventor-founders situated in volatile international environments to re-use their academic role identity as an important means in leveraging new entrepreneurial opportunities. Consequently, practical implications are drawn recommending that services, such as incubators and tech-transfer offices, incorporate tools that accommodate and assist inventor-founders in this kind of identity dilemma or alternatively employ training programs inspired by an effectuation approach.     

Corporate Governance,Ethics, and the Backdating of Stock Options

Backdating of stock options is an example of an agency problem. It has emerged despite all the measures (i.e., new regulations and additional corporate governance mechanisms) aimed at addressing such problems? Beyond such negative controlling measures, a more positive empowering approach based on ethics may also be necessary. What ethical measures need to be taken to address the agency problem? What values and norms should guide the board of directors in protecting the shareholders’ interests? To examine these issues, we first discuss the role values and norms can play with respect to underlying corporate governance and the proper role of directors, such as transparency, accountability, integrity (which is reflected in proper mechanisms of checks and balances), and public responsibility. Second, we discuss various stakeholder approaches (e.g., government, directors, managers, and shareholders) by which conflicts of interest (i.e., the agency problem) can be addressed. Third, we assess the practice of backdating stock options, as an illustration of the agency problem, in terms of whether the practice is legally acceptable or ethically justifiable. Fourth, we proceed to an analysis of good corporate governance practice involving backdating options based on a series of ethical standards including: (1) trustworthiness; (2) utilitarianism; (3) justice; and (4) Kantianism. We conclude that while executive compensation schemes (e.g., stock options) were originally intended to help remedy the agency problem by tying together the interests of the executives and shareholders, these schemes may have actually become “part of the problem,” and that the solution ultimately depends upon whether directors and executives accept that all of their actions must be based on a set of core ethical values.     

The Relation Between Policies Concerning Corporate Social Responsibility (CSR) and Philosophical Moral Theories – An Empirical Investigation

This article examines the relation between policies concerning Corporate Social Responsibility (CSR) and philosophical moral theories. The objective is to determine which moral theories form the basis for CSR policies. Are they based on ethical egoism, libertarianism, utilitarianism or some kind of common-sense morality? In order to address this issue, I conducted an empirical investigation examining the relation between moral theories and CSR policies, in companies engaged in CSR. Based on the empirical data I collected, I start by suggesting some normative arguments used by the respondents. Secondly, I suggest that these moral arguments implicitly rely on some specific moral principles, which I characterise. Thirdly, on the basis of these moral principles, I suggest the moral theories upon which the CSR policies are built. Previous empirical studies examining the relation between philosophical moral theories and the ethical content of business activities have mainly concentrated on the ethical decision-making of managers. Some of the most prominent investigations in that regard propose that managers mainly act in accordance with utilitarian moral theory (Fritzsche, D. J. and H. Becker: 1984, Academy of Management Journal 27(1), 166–175; Premeaux, S. and W. Mony: 1993, Journal of Business Ethics 12, 349–357; Premeaux, S.: 2004, Journal of Business Ethics 52, 269–278). I conclude that CSR policies are not based on utilitarian thinking, but instead, on some kind of common-sense morality. The ethical foundation of companies engaged in CSR, thus, does not mirror the ethical foundation of managers.     

Is there Informational Value in Corporate Giving?

In this article, we propose that giving in cash and non-cash (in-kind) differ in their relation with the giving firm’s future corporate financial performance (CFP) and only cash giving is associated with future CFP. Using a novel dataset from ASSET4 that differentiates corporate giving over a sample period of 2002–2012, we examine three competing hypotheses: (1) agency cost hypothesis that cash giving reflects agency cost and destroys value for shareholders, (2) investment hypothesis that cash giving is an investment by management that aims for better future return, and (3) information hypothesis that cash giving has informational value to shareholders as cash is a critical resource at a firm and giving is a decision by managers who are insiders. We find that indeed, only cash giving is positively associated with future CFP and firm value, measured by Fama–French five-factor abnormal risk-adjusted stock returns, future return on assets, and Tobin’s Q. In addition, we find that the positive association exists only between excess, i.e., unexpected, but not expected cash giving and future CFP. Our empirical findings support the information hypothesis, but neither the agency hypothesis nor the investment hypothesis, and are robust to a number of endogeneity tests, including orthogonalized cash giving, instrumental variable regression using geography-based instruments, and propensity score matching. Furthermore, we show that the positive association between future CFP and unexpected cash giving is only pronounced at firms with good governance and relatively higher sales growth where agency problems are less likely, and at firms with no alternative mechanisms to demonstrate the strength of cash flow. Additionally, we do not find evidence that suggests in-kind giving to possess any informational value.