Preventing Disclosure-Induced Moral Licensing: Evidence from the Boardroom

Thomas G. Canace (), Leigh Salzsieder () and Tammie J. Schaefer ()
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Thomas G. Canace: Wake Forest University
Leigh Salzsieder: University of Missouri-Kansas City
Tammie J. Schaefer: University of Missouri-Kansas City

Journal of Business Ethics, 2023, vol. 187, issue 4, No 11, 857 pages

Abstract: Abstract Market participants continue to demand greater transparency from boards of directors, yet little is known about the effect of increased transparency on director decisions. Using a sample of practicing board members, our first experiment provides evidence that increased transparency via disclosure may license directors to make more biased decisions. Guided by rich insights provided by these directors, we examine whether considering a company’s ethical values can deter disclosure-induced licensing by activating a morality mindset. In two additional experiments, we find that exposure to a code of conduct that includes an ethics component does not mitigate the licensing effects we observed; however, considering a separate, concise ethics statement does mitigate these effects. Our findings highlight important differences between the code of conduct and ethics statement for decision-making which can help organizations to mitigate adverse effects of disclosure. Implications for users of financial information and regulators are also discussed.

Keywords: Corporate governance; Ethics; Code of conduct; Directors; Disclosure; Moral license (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10551-022-05226-7

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