Explaining Performance in Annual Reports: Are American or Japanese Executives More Self-Serving?

Abstract

When a company experiences a year of disap pointing results, are executives more likely to blame themselves or challenging eco nomic conditions? And when a company has a banner year, are executives more likely to credit themselves or favorable economic circumstances? Psychologists refer to this pattern?where in dividuals see themselves as fully responsible for their successes yet blame external sources for their failures?as the self-serving attributional bias. The classic example is the student who attributes his superior grades to internal reasons (e.g., intelli gence or hard work) but relies heavily on external reasons to explain lousy grades (e.g., lousy teach ers). Generally speaking, researchers have found that individuals use the self-serving attributional bias to maintain their psychological well-being and to manage impressions. Considering that the self-serving attributional bias has been shown by many classic social psy chological studies to be fairly common, it may have also found its way into the executive suite. In particular, corporate leaders may stand to gain if they can take credit for success while avoiding blame for failure, especially when it comes to firm performance. Reggy Hooghiemstra of the Univer sity of Groningen in the Netherlands addressed this topic in a recent study that compared how U.S. and Japanese companies apply the self-serv ing attributional bias in explanations of their an nual performance to shareholders. The fact that most research on the self-serving attributional bias has been conducted in the United States raises questions about the extent to which this phenomenon exists in other cultures. Indeed, studies have shown that the self-serving attributional bias tends to be less prevalent in Asian cultures (e.g., China and Japan) than it is in the United States. Essentially, in Western cultures a person's self-esteem and identity are much more connected with his individual achievements and unique contributions than in many Asian cul tures. As a result, individuals from Western cul tures generally may have a greater need to protect their self-esteem through biased explanations of their own behavior than do their counterparts in Asia. Conversely, in Japan and other Asian soci eties, people may feel more social pressure to blend in and harmonize with their peer groups, making it socially awkward to take credit for any successes that would make them stand out. Con