Takeaway: Different kinds of managers can improve CSR performance in different ways. Transformational leaders – those who lead by articulating inspiring visions of the future, intellectually stimulating their employees, and paying close attention to their employees’ individual differences – are best suited for initiating and designing socially responsible practices in companies. Transactional leaders – who pay attention primarily to constraints and efficiency – are best suited for implementing these practices and deriving business benefits from them.
Suggested audience: Top leadership, managers, HR personnel
In this study, researchers investigated the relationship between leadership styles and corporate social responsibility practices. They focused on two leadership styles:
1. Transformational leadership: The manager articulates an exciting vision of the future, intellectually stimulates followers, and pays attention to individual differences between employees. These leaders are more effective at driving change, or transcending the status quo.
2. Transactional leadership: The manager motivates primarily through reward schemes, such as bonuses. These leaders are more effective at operating in an existing system, and are highly concerned with navigating constraints to achieve maximum efficiency.
Researchers surveyed 440 managers, predominantly in middle- or upper-level positions, at U.S. firms ranging in size from 20 employees to more than 1,000. The survey asked respondents to assess what kind of managers their firms tended to employ, and to provide information about the CSR practices of their firms.
- Firms with more transformational leadership are more likely to engage in institutional CSR practices (such as community giving, environmental programs, and education programs).
- Transformational leadership’s influence on engagement in institutional CSR practices is stronger the more firms practice stakeholder-oriented marketing, a marketing strategy that addresses multiple stakeholder groups rather than just customers.
- Increased transactional leadership does not make a firm more likely to engage in institutional CSR practices. It has no effect on engagement.
- Firms with more transactional leadership derive greater business benefit (specifically, improved relationship with stakeholders, improved corporate reputation, and increased national and international visibility) from their institutional CSR practices.
- While increased transformational leadership increases the likelihood that firms will engage in institutional CSR practices, it slightly reduces the business benefit firms receive from their institutional practices.
In short, a transformational leadership style is best suited for initiating and designing institutional CSR practices, and a corporate environment that is more stakeholder-oriented, rather than purely customer-oriented, helps this relationship flourish. In contrast, a transactional leadership style is best suited for implementing and deriving business benefits from existing socially responsible practices.
Keywords: Leadership, transformational leadership, transactional leadership, CSR initiation, CSR implementation, stakeholder-oriented marketing
If citing, please refer to original article: “The Roles of Leadership Styles in Corporate Social Responsibility”, Journal of Business Ethics, 2012, Shuili Du, Simmons School of Management, Valérie Swaen, Louvain School of Management, Adam Lindgreen, Cardiff Business School, and Sankar Sen, Zicklin School of Business, City University of New York