Are Employees Safer When the CEO Looks Greedy?

Greed and Safety

Our summary

In the world of industrial safety, if there is one idea on which everyone agrees, it is that beyond legally required provisions, the effective development of safety within a company depends largely on the commitment of top management — and above all, on its highest representative. Experts strongly emphasize that it is not enough to simply state that safety is a priority; rather, it requires consistently allocating concrete resources (financial, human, etc.) and steadfastly supporting, through the decisions made at the highest level, choices that favor safety. Quite naturally, we imagine that such sustained attention and commitment from a leader can only stem from a genuine concern for safety. And this concern, in turn, seems obviously rooted in an equally genuine concern for the well-being of others — particularly company employees. Thus, everyone — experts, employees, observers, and even the general public — takes for granted that it is the altruistic dimension of a leader’s psychology that motivates ambitious safety policies. Conversely, it seems just as evident that the absence of this altruistic dimension will result in an indifference to safety, inevitably leading to negative consequences for safety policies and investments, and ultimately for the company’s safety performance. The situation appears even worse when a leader is known for what seems like the opposite of altruism: greed — an excessive attraction to money and material goods, potentially exercised at the expense of others. A greedy leader, seeing safety policies only as useless expenses likely to reduce the organization’s returns — and their own — would naturally tend to cut such spending and prioritize more directly lucrative investments. 

It is a widely shared idea that the psychology of leaders — and, more generally, their personal characteristics — are strongly reflected in a company’s strategies and policies. For the general public, this link simply seems like common sense. In the field of organizational sciences, the idea has been developed under the label of upper echelons theory. The research presented in this article belongs to this school of thought, but in such a distinctive way that, in practice, it almost overturns its very foundations. Indeed, upper echelons theory, like common sense, assumes a direct translation of the leader’s characteristics into the company’s practices and policies. Greed, for example, would be expected to lead to decisions aligned with greed — here, divestment in safety policies.

But, argue our authors, drawing on research in social psychology, leaders are attentive to their image and strive to manage it. In this regard, they are no different from any other human being. We are all concerned with our reputation. We try to understand how others interpret our behaviors and what judgments they form about us. Consequently, in our decisions, we take into account the anticipated reactions of other people or groups who matter to us. Our behavior is therefore the joint result of our psychology and the expectations we form about others’ responses. From this perspective, leaders — who are particularly closely observed — must pay attention to a wide range of audiences: employees, unions, customers, investors, the press, various stakeholders, and even the general public in the case of very large firms.

The authors of this research then propose the idea that greedy — but not foolish — leaders would be particularly concerned with avoiding exposure to negative judgments and criticism in the event of an adverse outcome, such as serious accidents affecting their employees. Indeed, aware of their negative image, they would anticipate — accurately, according to the research — that they would be held responsible for such an event because of their greed, following the common-sense reasoning outlined above. Given their proven greed, the negative event would be interpreted as the result of negligent or malicious behavior on their part. Beyond the immediate consequences for the company, this public reaction could lead to their dismissal, damage their reputation, and harm their career.

In a counterintuitive reversal, it is precisely because of their greed that these leaders would be especially attentive to preventing negative safety events and, consequently, to promoting and supporting ambitious policies in this area.

This reasoning is tested empirically by examining workplace safety outcomes in more than 16,000 establishments belonging to 629 U.S. companies over the period 2002-2011. These outcomes were then linked to data on the leaders of these companies included in the Standard & Poor’s 1500 index. Leaders’ greed was measured using a composite variable that aggregates three different measures of the excessiveness of their compensation. It is not possible to go into technical details here, but it is important to keep in mind that this variable is relative: it distinguishes, among these leaders, those who earn “more”, or even “too much”, relative to others, rather than making an absolute judgment about the level of executives’ compensation.

The statistical analyses confirm the researchers’ hypothesis: companies led by greedy executives show superior workplace safety outcomes. Having studied and ruled out other mechanisms that could explain this correlation (such as the hypothesis that greedy leaders might be more inclined to punish employees who report incidents), the researchers conclude that greed has a positive effect on safety. The interpretation in terms of anticipated attribution of responsibility in the event of an accident is supported by a parallel qualitative study of executives and senior managers, which confirms that it is the fear of severe blame — assigning accidents to the leader’s greed — that motivates them to become deeply involved in workplace safety.

Finally, two additional tests support the proposed thesis. Empirically, it appears that if greedy leaders are not exposed to direct sanctions — because, due to the company’s governance structure, they are protected from dismissal — safety outcomes remain poor. Little concerned about the consequences of serious accidents for themselves, these leaders do not support safety policies. Conversely, greedy leaders of firms offering consumer goods appear to be even more concerned: their companies achieve excellent safety results. This can be explained by the fact that consumers are a crucial stakeholder, likely to react very negatively in the event of an adverse outcome.