CSR-contingent executive compensation contracts

By A. Ikram, Zhichuan Frank Li, Dylan B. Minor. Journal of Banking & Finance, 2019

172 citations recorded by the source corpus.

Abstract Firms have increasingly started tying their executives’ compensation to CSR-related objectives. In this paper, we attempt to understand why firms offer CSR-contingent compensation and the conditions under which such compensation improves corporate social performance. Using hand-collected data from proxy statements, we find that this emerging compensation practice varies significantly across industries and across different CSR categories. Further, well-governed firms are more likely to offer CSR-contingent compensation, and such compensation does lead to higher corporate social standing. Such firms are more likely to offer formula-based, Objective CSR-contingent compensation. However, our results suggest that non-formulaic, Subjective CSR-contingent compensation also helps improve companies’ social performance when firm outcomes are more volatile and unpredictable, and therefore executives’ effort and performance are harder to evaluate, and when firms have better corporate governance.

Subfields: Accounting, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/be65d7e7baadfbe9ea3048a1b672471867204ff1

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Citations in the corpus

Corporate Social Performance and Firm Performance: Comparative Study among Developed and Emerging Market Firms (2019, background): “Firms incur costs due to ESG initiatives, which are expected to be compensated by the advertising effect of increased brand image, stable revenues from loyal clients, improved employee productivity [14], decreased risk [15] and reduced capital cost [16].”
Corporate Social Responsibility and Financial Performance: The Moderating Role of Ownership Concentration in Turkey (2019, background): “In addition, the moderating role of other corporate governance characteristics, such as family ownership, CEO duality, board characteristics, or executive compensation [55,56], could constitute fruitful avenues for further research.”
Alignment Versus Monitoring: An Examination of the Effect of the CSR Committee and CSR-Linked Executive Compensation on CSR Performance (2021, background): “Both the CSR committee and CSR-linked executive compensation are conditioned by the board’s awareness of CSR concerns and the priority given to those concerns (Gennari & Salvioni, 2019; Godos-Díez et al., 2018; Ikram et al., 2019).”