Not-for-profit leaders and corporate misconduct

Purpose: This article examines whether CEOs with not-for-profit (NFP) leadership positions (NFP CEOs) influence the likelihood of corporate misconduct. We also test whether directors on boards with NFP leadership involvement (NFP boards) strengthen or weaken the association described above. Design/methodology/approach: We embrace multiple perspectives in developing our hypothesised associations. Based on benevolent leadership and upper-echelon theoretical perspectives, we hypothesise a negative association between NFP CEOs and corporate misconduct. Then, drawing on competing arguments in the literature, such as CEO power and moral licensing, we hypothesise a positive association between NFP CEOs and corporate misconduct. The NFP CEOs and directors are recognised for their involvement in not-for-profit leadership roles concurrently with their corporate leadership roles. Corporate misconduct refers to any unethical event by firms that negatively influences stakeholders. We hand-collected data for a sample of Australian-listed firms from 2010 to 2019. Findings: Our baseline results indicate a positive association between NFP CEOs and misconduct, aligning with the competing hypothesis. We further document a positive moderating role of NFP boards on the association between NFP CEOs and misconduct. Tests of theoretical arguments suggest that the positive association between NFP CEOs and misconduct is driven by potential conflicts of priorities and/or moral licensing. However, the additional analysis indicates that NFP CEOs with four or more positions are less likely to be associated with corporate misconduct. We contend that this nuanced result stems from differences in moral ethics among NFP CEOs. Originality/value: Our research contributes new insights into the determinants of corporate misconduct, particularly the relationship between leaders’ moral characteristics and misconduct. The originality of this study lies in examining the bright-side characteristics of leaders in influencing corporate misconduct, in contrast to most prior research on dark-side characteristics. Research limitations/implications: New knowledge of the drivers of corporate misconduct is essential in pursuing avenues to prevent, detect, and discourage unethical actions by firms. We contribute to the literature and practice by examining the link between CEOs’ moral characteristics and corporate misconduct, providing insights into the complexities that drive or impede misconduct. JEL Classification: G41, M14