Top Management Team Pay Structure and Corporate Social Performance

Abstract

This paper examines the influence of top management team (TMT) pay structure characteristics (such as pay dispersion, long-term variable pay, and short-term variable pay) on corporate social performance (CSP) based on upper echelon theory and agency theory. The analysis using a large panel sample of US public firms reveals that long-term oriented and egalitarian TMT pay structure has a positive influence on CSP. In addition, the negative influence of short-term variable pay on CSP becomes stronger as the pay difference among TMT members becomes greater. Theoretical and practical implications of these findings will be discussed.

Sustainable compensation policies and its effect on environmental, social, and governance scores

“…There are a number of control variables used by other studies analyzing a similar relationship between compensation policies and ESG performance (de Villiers, Naiker, & van Staden, ; Haque, ; Ji, ; Mallin & Michelon, ): board independence, board size, CEP‐Chair Separation, CSR committee, firm size, ROA, and debt ratio. All of these variables of control have been also obtained from the database Asset4.…”

“…In fact, several authors such as Haque () or Ji () emphasize the importance of a sustainable executive compensation policy in order executives embrace long‐term social and environmental perspectives. This approach is similar to Campbell et al (), aimed at achieving environmental performance.…”

“…Measuring three different aspects of CSR (total CSR, CSR strengths, and CSR weaknesses), they suggest the importance of the structure of executive compensation in encouraging socially responsible actions. Finally, Ji () reveals the positive influence of top management team pay structure characteristics on corporate social performance.…”

Collective Pay for Performance: A Cross-Disciplinary Review and Meta-Analysis

“…TMT PFP research challenges. As noted, most research on TMT PFP examines equitybased PFP (e.g., stock options), often measured as the ratio of TMT PFP to total TMT pay (Ji, 2015;Sanders & Hambrick, 2007). This is informative because it captures TMT PFP relative to other types of pay instead of its absolute level.…”

Sustainable Compensation and Performance: An Empirical Analysis of European Banks

“…These contributions documented not only the importance of the executive compensation structure for in°uencing the top managers' focus on CSR but also an important and positive linkage between long-term incentives and better non-¯nancial performance of¯rms. Therefore,¯rms that aim to enhance CSR in the long run should develop managerial remuneration plans mostly based on a long-term perspective (Ji 2015). In other words, \corporations might consider using stock options and other long-term incentives to more e®ectively motivate CEOs or other executives to achieve CSR objectives" (Callan & Thomas 2014, p. 224).…”