Study Finds Some Executives May Be Hired Because, Not Despite, Lack of Ethics

By:
Chris Gaetano
Published Date:
Apr 5, 2021
A recent study published in the Journal of Business Ethics has found that certain companies deliberately hire executives with "dark personality traits" who are willing to push ethical boundaries that align with organizational objectives, particularly where it concerns earnings management.

The researchers—Nick Seybert (University of Maryland's Robert H. Smith School of Business), Ling Harris (University of Nebraska-Lincoln), Scott Jackson (University of South Carolina) and Joel Owens (Portland State University)—looked specifically at the process of hiring executive management accounting candidates. They found that in the specific instance when a company needed to report earnings aggressively, experienced executives and recruiters tended to recommend hiring candidates with dark personality traits over candidates who sought input from others and believed in strong ethical foundations.

They reached this conclusion after a series of experiments in which they asked subjects to evaluate a pool of potential executives on different dimensions such as managing relationships; if the situation called for aggressive earnings management, then the subjects rated those with the dark personality traits as more capable and qualified. This resulted in candidates with potentially better management, organizational and people skills being passed over for management jobs because of, not despite, their ethical integrity.

"Dark personality traits are often framed as an accidental byproduct of selecting managers who fit the stereotype of a strong leader," said Seybert, an accounting professor. "However, our research found that this is often no accident."

Given that aggressive earnings management can sometimes skate ethical boundaries, the conclusion might be framed as: Unethical companies are more likely to hire unethical executives. This lines up with other research indicating that certain organizations and individuals are less fastidious on ethics. A 2016 Ernst & Young poll found that, worldwide, 42 percent of 2,825 executives are OK with certain unethical behaviors if it means meeting financial targets. This includes activities such as backdating contracts, booking revenues earlier than they should be, and extending a monthly reporting period.

Within the finance industry, a 2015 poll found that 22 percent of employees have observed or have direct knowledge of illegal or unethical acts in their workplace. It also found that nearly one in five respondents feel financial services professionals must at least sometimes engage in illegal or unethical activity to be successful; and that 47 percent believe that their competitors have used illegal or unethical behavior to get ahead.

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