Does risk matter for executive compensation?

Eklund, Mehtap Aldogan

doi:10.1108/cg-12-2020-0536

Cited by 5 publications

(5 citation statements)

References 63 publications

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“…For market risk, consistent with our result, Addo et al (2020) and Eklund (2022) highlighted that systematic risk is inversely linked to the existence of a CSR committee. It means that companies in a lower market-risk environment with greater financial strength are more likely to have a CSR committee to indicate to the stakeholders that they are willing to cope with the sustainability costs associated with CSR activities.…”

Section: Discussionsupporting

confidence: 90%

“…It is related to market or economic factors and impacts most firms. Sigma is an unsystematic risk that can be eliminated by proper diversification (Eklund, 2022; Weston et al , 1996).…”

Section: Methodsmentioning

confidence: 99%

“…Specifically, for the firm characteristics, Khalid et al (2022), Pradhan and Nibedita (2021), Rashid (2018) and Habbash (2016) found that the firm size, sector and firm performance are significantly related to CSR, ESG performance, governance mechanism and executive compensation. For risk, previous scholars (Addo et al, 2020;Eklund, 2022;Miller et al, 2002) noted a significant relationship between risk, sustainability, corporate governance and executive pay.…”

Section: Variablesmentioning

confidence: 99%

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The determinants of corporate social responsibility (CSR) committee: executive compensation, CSR-based incentives and ESG performance

Aldogan Eklund,

Pinheiro

2024

SRJ

Self Cite

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Purpose This paper aims to investigate whether executive compensation, corporate social responsibility (CSR)-based incentives, environmental social and governance (ESG) performance and firm performance are the significant predictors of CSR committees, in addition to CEO, firm and corporate governance characteristics, from the tenet of stakeholder and managerial power theories. Design/methodology/approach Switzerland is an exemplary country from the perspective of corporate governance and executive compensation. This empirical study includes a panel data set of listed Swiss companies, so fixed-effect logistic regression has been used. Findings It has been found that the companies that offer CSR-based incentives and higher compensation to their CEOs and have better ESG performance are more likely to have CSR committees. Practical implications This empirical paper fills the gap in the literature, guides practitioners about the factors that influence the creation and efficiency of CSR committees, and inspires regulatory bodies to ponder on a mandatory CSR committee to form resilient and sustainable organizations worldwide. Social implications COVID-19 has re-emphasized the prominence of sustainability and the stakeholder approach. Thus, this paper indicates that CSR committees require the adaption and implementation of a holistic sustainability policy that integrates both external and internal factors and thereby provides a whole process for sustainability issues. Originality/value The impact of CSR committees on corporate social performance (CSP) has already been investigated. However, the predictors of CSR committees have been less scrutinized in the literature.

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Section: Discussionsupporting

confidence: 90%

“…It is related to market or economic factors and impacts most firms. Sigma is an unsystematic risk that can be eliminated by proper diversification (Eklund, 2022; Weston et al , 1996).…”

Section: Methodsmentioning

confidence: 99%

Section: Variablesmentioning

confidence: 99%

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The determinants of corporate social responsibility (CSR) committee: executive compensation, CSR-based incentives and ESG performance

Aldogan Eklund,

Pinheiro

2024

SRJ

Self Cite

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“…The independent variable consists of two sets of variables. The first set includes several CG mechanisms, namely, block ownership (Kaur and Gill, 2009), ownership concentration (Luo, 2015; Ben Saad and Belkacem, 2022), outsider blockholder (Core et al , 1999), board size (Ullah et al , 2019; Agyei-Mensah, 2022; Menicucci and Paolucci, 2022), board independence (Agyei-Mensah, 2021; Aladwey et al , 2022; Chatjuthamard et al , 2022; Gupta and Mittal, 2022) and CEO duality (Ghosh, 2006; Aldogan Eklund, 2022; Khan, 2022). The ownership variables block ownership and ownership concentration aids in estimating the distribution of power between large and minority shareholders (Kaur and Gill, 2009), whereas outsider blockholder capture the influence of the external type of blockholder on the COMP decision (Boone et al , 2011).…”

Section: Methodsmentioning

confidence: 99%

Corporate governance, CEO compensation, and corporate performance: evidence from India

Jatana

2022

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Purpose The purpose of this study is to examine the impact of corporate governance (CG) on chief executive officer compensation (CEO COMP) and pay–performance relationship (PPR) in Indian listed firms. Design/methodology/approach A sample of 196 companies listed on the S&P BSE 500 (Standard and Poor's Bombay Stock Exchange 500) Index has been analyzed using the panel (random effects) regression technique over the period 2010–2019. In addition, the system GMM technique was used to deal with the endogeneity issue. Findings The study found that block ownership and ownership concentration negatively impact COMP measures and PPR. Board size also had a negative direct and moderating impact on CEO COMP; however, the linkages were generally insignificant, especially for total pay. Similarly, outsider blockholders were found to be playing an insignificant role. Further, board independence positively influences COMP levels and PPR, though the results were mixed with respect to significance. Finally, CEO duality positively and significantly influences CEO COMP and PPR. A comparison before and after the new Indian Companies Act 2013 also revealed similar results, particularly in the after period. It suggests that the new legislative initiative was not effective enough in improving the CG and, hence, the alignment of pay with performance. Originality/value This study investigates the direct and moderating impact of CG on CEO COMP in the context of emerging economy India. Further, it makes a comparison before and after the introduction of the new governance reform, that is, the Indian Companies Act, 2013. Moreover, providing support to the entrenchment effect, the study reveals that large shareholders expropriate minority shareholders’ wealth by not aligning CEO pay with performance, making agency problems graver in emerging economies like India.

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“…According to earlier studies Al-Shammari (2021); Aldogan Eklund (2022); Brockman, Ma, and Ye (2015) and Chu, Liu, Ma, and Li (2020), the company's high director compensation may pose risks to the business. Although compensation given to directors is a mechanism that can reduce agency problems, previous research has shown that excessive compensation will exacerbate agency problems (Dah & Frye, 2017).…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

The relationship between director’s compensation and audit fee: Empirical evidence from developing countries

Ardianto,

Putri,

Ghani

et al. 2023

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The present study investigates the correlation between director remuneration and audit fees within the context of a corporation operating in a developing nation. Additionally, this study investigates whether the extent of national consumption strengthens the association between director compensation and audit fees. This study employed the Ordinary Least Square (OLS) method to analyses a dataset consisting of 3,417 samples of non-financial firm data reported on the stock exchanges of Indonesia and Malaysia. The observation period for this study spanned from 2015 to 2019. The findings of this study indicate a substantial positive relationship between director salaries and audit fees in both countries. Furthermore, the evidence shows that the level of household consumption in a country will increase because of the positive relationship between director compensation and audit fees. In addition, CEOs and CFOs who have experience working as auditors carry a more negligible risk for the company. Meanwhile, directors' overcompensation will pose a greater risk for the company. This study is robust based on sensitivity testing using Coarsened Exact Matching (CEM) and Heckman regression. In general, the amount of compensation paid to the CEO shows the company's financial capacity, which reflects the company's liquidity and asset capabilities, which will be read as risk. Furthermore, the distinctiveness of the governance systems in these two countries, as observed in our sample, demonstrates a consistent outcome.

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Does risk matter for executive compensation?

Cited by 5 publications

References 63 publications

The determinants of corporate social responsibility (CSR) committee: executive compensation, CSR-based incentives and ESG performance

The determinants of corporate social responsibility (CSR) committee: executive compensation, CSR-based incentives and ESG performance

Corporate governance, CEO compensation, and corporate performance: evidence from India

The relationship between director’s compensation and audit fee: Empirical evidence from developing countries

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