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The Role of Institutional Investors in the Sustainable CEO Compensation Structure

Author

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  • Kyoungwon Mo

    (School of Business Administration, Chung-Ang University, Seoul 06974, Korea)

  • Kyung Jin Park

    (College of Business Administration, Myongji University, Seoul 03674, Korea)

  • YoungJin Kim

    (College of Business, Hawaii Pacific University, Honolulu 96813, HI, USA)

Abstract

Chief executive officer (CEO) retirement pension plans are known as sustainable compensation because they induce managers to make more sustainable and long-term-oriented corporate decisions. We focused on the role of institutional investors in awarding CEO pension plans. Long-term and short-term institutional investors are expected to increase and decrease the CEO pension plan, respectively, wherein the former is aimed at persuading the manager to focus more on the firm’s long-term performance and the latter is aimed at making the CEO assume more risk. We empirically tested our hypothesis and found significantly negative (positive) relationship between short-term (long-term) institutional ownership and CEO pension plans, which is consistent with our hypothesis. Our results suggest the institutional ownership horizon’s differing impact on managers’ sustainable compensation structure.

Suggested Citation

  • Kyoungwon Mo & Kyung Jin Park & YoungJin Kim, 2019. "The Role of Institutional Investors in the Sustainable CEO Compensation Structure," Sustainability, MDPI, vol. 11(19), pages 1-21, October.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:19:p:5485-:d:273381
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    Cited by:

    1. Maximilian Focke, 2022. "Do sustainable institutional investors influence senior executive compensation structures according to their preferences? Empirical evidence from Europe," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(5), pages 1109-1121, September.

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