Given the numerous business scandals in recent years (e.g., Volkswagen, AIG, etc.), many scholars and practitioners have advocated for increased CEO morality. Although CEO morality is assumed to be a highly desirable trait, in this research I propose its downside —reduced firm innovation. I propose that CEOs high on morality are likely to promote a rule-adhering organisational climate within their organisations, which discourages their employees to think “outside of the box”. This rule-adhering organisational climate will in turn stifle firm innovation as a whole. This research will provide a more complete understanding of the effects of CEO morality on firm-level outcomes.