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  • June 2016
  • Article
  • Journal of Business Ethics

Corporate Governance and Executive Compensation for Corporate Social Responsibility

By: Bryan Hong, Zhichuan (Frank) Li and Dylan B. Minor
  • Format:Print
  • | Pages:36
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Abstract

We link the corporate governance literature in financial economics to the agency cost perspective of corporate social responsibility (CSR) to derive theoretical predictions about the relationship between corporate governance and the existence of executive compensation incentives for CSR. We test our predictions using novel executive compensation contract data and find that firms with more shareholder friendly corporate governance are more likely to provide compensation to executives linked to firm social performance outcomes. Also, providing executives with direct incentives for CSR is an effective tool to increase firm social performance. The findings provide evidence identifying corporate governance as a determinant of managerial incentives for social performance and suggest that CSR activities are more likely to be beneficial to shareholders, as opposed to an agency cost.

Keywords

Corporate Social Responsibility; Incentives For CSR; Non-financial Performance Measures; Agency Costs; Board Independence; Institutional Holdings; Managerial Power; Motivation and Incentives; Corporate Social Responsibility and Impact; Executive Compensation; Corporate Governance

Citation

Hong, Bryan, Zhichuan (Frank) Li, and Dylan B. Minor. "Corporate Governance and Executive Compensation for Corporate Social Responsibility." Journal of Business Ethics 136, no. 1 (June 2016): 199–213.
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  • Workplace Design: The Good, the Bad, and the Productive By: Michael Housman and Dylan Minor
  • The Organization of Non-market Strategy By: Dylan B. Minor
  • Executive Compensation and Environmental Harm By: Dylan Minor
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