Vice or Virtue? The Impact of Corporate Social Responsibility on Executive Compensation

Abstract

We empirically examine the impact of corporate social responsibility (CSR) on CEO compensation using a large sample of the US firms from 1996 to 2010. We develop and test two hypotheses, the overinvestment hypothesis based on agency theory and the conflict-resolution hypothesis based on stakeholder theory. We find that the lag of CSR adversely affects both total compensation and cash compensation, after controlling for various firm and board characteristics. Our estimates show that an interquartile increase in CSR is followed by a 4.35% (2.78%) decrease in total (cash) compensation. We also find an inverse association between lagged employee relations and CEO compensation. Our results are robust to the correction for endogeneity using instrumental variable approach. Taken together, our results support the conflictresolution hypothesis, but not the CSR overinvestment argument.

Determinants of Corporate Environmental and Social Disclosures in China: A Comparative Study within High-profile Industries

“…The overall results show that there are four common variables that are positively significant in all industries: member of industrial association, company age, company size and profitability, which is consistent with the existing literature (see Chen et al, 2018;Oh et al, 2011;Kang, 2013;Cai et al, 2011;Gomez-Mejia et al, 2003). The variable management role approaches moderate significance in mining and utility industry, with operating leverage approaching moderate significance in the chemical industry, and significant correlation can be observed in utility industry.…”

CEO Compensation and Sustainability Reporting Assurance: Evidence from the UK

“…This paper extends studies examining social performance as a determinant of CEO pay (e.g. Riahi-Belkaoui 1992; Cordeiro and Sarkis 2008;Cai et al 2011;Francoeur et al 2017) and focuses on the impact of sustainability assurance and the existence of board-level sustainability committees on CEO compensation. The voluntary external assurance of sustainability reports can enhance their reliability and credibility and mitigate management camouflaging sustainability issues (Bebchuk and Fried 2003;Brown-Liburd and Zamora 2014;Cohen and Simnett 2014;Eccles et al 2014;Wong and Millington 2014).…”

A feedback-based model for CSR assessment and materiality analysis

“…This happens in all business areas, and particularly in controversial sectors such as tobacco, alcohol, gambling and petroleum (Kolk & Levy, 2001), where socially irresponsible conduct can draw strong media attention. In these areas, the CSR/CSI balance may represent opportunistic behaviour, involving attempts to hide bad conduct (Cai, Jo, & Pan, 2011;Hemingway & Maclagan, 2004) and to exploit CSR as a protective facade in case of hostile events, thus contributing to shareholder welfare (Bansal & Clelland, 2004).…”

“…If previous CSI conduct has been detected, greater efforts and time are required (Brunk & Blümelhuber, 2011). Nonetheless, customer CSR expectations are generally very high and, consequently, the percentage of disappointed customers can be significant, especially in controversial sectors (Cai et al, 2011).…”