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| Author: | Cai, Y. Jo, H. Pan, C. |
| Title: | Vice or virtue? The impact of corporate social responsibility on executive compensation |
| Journal: | Journal of Business Ethics
2011 : DEC, VOL. 104:2, p. 159-173 |
| Index terms: | social responsibility chief executive officers executives compensation agency theory stakeholders conflict USA |
| Language: | eng |
| Abstract: | We empirically study the effect of corporate social responsibility (CSR) on CEO compensation based on a large sample of the US firms in 1996-2010. Two hypotheses are developed and tested, the overinvestment hypothesis stemming from agency theory and the conflict-resolution hypothesis based on stakeholder theory. The lag of CSR is found to adversely affect both total compensation and cash compensation, after controlling for numerous firm and board characteristics. Our estimates indicate that an interquartile raise in CSR results in a 4.35% (2.78%) decrease in total (cash) compensation. An inverse association is also discovered between lagged employee relations and CEO compensation. The results are robust to the correction for endogeneity using instrumental variable approach. To conclude, our results support the conflict-resolution hypothesis, however not the CSR overinvestment argument. |
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