How does CEO pay slice influence corporate social responsibility? U.S.–Canadian versus Spanish–French listed firms

Abstract

Considering specific contextual differences (in laws, governance attributes, and CEO pay policies) found between the Anglo-American and the European corporate governance models and controlling for institutional attributes, ownership structures, and firm's features characterizing the two settings, we aim to explore if there is a link between CEO pay slice (CPS) and corporate social responsibility (CSR). We follow Bebchuk et al. (2011) to measure CPS. We consider sustainability indicators as proxy to capture CSR. Sustainability indicators are gathered from Global Reporting Initiative of sustainability standards (GRI's) report. Data cover the period 2010-2017 and consist of 1,440 U.S.-Canadian and Spanish-French firm-year observations. American and Canadian (Spanish and French) firms are considered as to refer to the Anglo-American (European) corporate governance model. Durbin-Wu-Hausman test is ruled to address endogeneity problem of dual variables and supports consistent null hypotheses of fixed effects model. Underthe agency theory's "bright side" paradigm, univariate and multivariate cross-country analysis supports that CPS is positively associated with firm's initiatives to engage in CSR and that sustainability is more pronounced under stronger investor protection, strict law enforcement, and higher corporate governance quality. Robustness checks reveal that (a) the deferred CPS-CSR causal effect seems higher for option-based compensation than that for stock-based compensation and (b) within the options (stocks) rewards, unvested options (restricted stocks) are the most effective to enhance firm's CSR practices.

CEO ability and sustainability disclosures: The mediating effect of corporate social responsibility performance

“…Moreover, as the decision to invest in CSR is related to the CEO's career concerns, firms should consider this fact and include CSR indicators in their assessments of the CEO's performance so that their efforts to improve CSR performance and reporting enhance their value in the labour market and career prospects (García‐Sánchez & Martínez‐Ferrero, ; Yuan et al, ). Similarly, to encourage CEOs to promote CSR practices, executive compensation plans could include CSR‐related terms (Jouber, ; Peng, ). Second, because better CSR disclosures can be attributed to the CEOs' managerial ability, such disclosures can send investors and financial analysts a “signal” of the firms' management quality and, hence, enhance the firms' reputation in the financial market.…”

“…Second, because better CSR disclosures can be attributed to the CEOs' managerial ability, such disclosures can send investors and financial analysts a “signal” of the firms' management quality and, hence, enhance the firms' reputation in the financial market. Finally, to the extent that CEO compensation packages are linked to CSR indicators, both the firms' boards and policy makers should implement measures (i.e., external monitoring mechanisms) to ensure the credibility of the firms' CSR indicators and disclosures (Jouber, ; Peng, ).…”

Corporate social responsibility practices incomes and outcomes: Stakeholders' pressure, culture, employee commitment, corporate reputation, and brand performance. A Polish–German cross‐country study

“…Moreover, Kucharska and Kowalczyk () proved that C‐suites recognize CSR practices to be on a higher level than their employees (see Appendix to notice this effect also for the current samples). It is worth mentioning here that Jouber () examined differences in CEO's compensation and CSR in the Anglo‐American and European contexts. He compared the power and ownership structure, the investor protection index, the corporate governance quality, and the law execution.…”

The role of business strategy and CEO compensation structure in driving corporate social responsibility: Linkage towards a sustainable development perspective

“…First, prior studies have focused on studying the determinants of firm CSR engagement via internal drive or outsider drive perspectives. For example, research studies have focused on internal drivers such as managerial compensation incentives (McGuire, Dow, & Argheyd, 2003;Deckop, Merriman, & Gupta, 2006;Fabriz, Mallin, & Michelon , 2014;Maas, 2018;Jouber, 2019), top management team (TMT) commitment (Lau, Lu, & Liang, 2016;Liao, Lin, & Zhang, 2018;McGuinness, Vieito, & Wang, 2017;Muller & Kolk, 2010), CEO ability (Yuan, Tian, Lu, & Yu, 2019), CEOs' political connections (Chin, Hambrick, & Treviño, 2013), board effectiveness (Harjoto & Jo, 2011), and firm ownership (Lau et al, 2016;McGuinness et al, 2017). On the other hand, external drivers include things like stakeholder activism (David, Bloom, & Hillman, 2007;Marquis, Glynn, & Davis, 2007) or institutional pressures (McGuinness et al, 2017).…”