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CEO Pay Sensitivity (Delta and Vega) and Corporate Social Responsibility

Author

Listed:
  • Atif Ikram

    (Department of Finance, Arizona State University, Tempe, AZ 85281, USA)

  • Zhichuan (Frank) Li

    (Ivey Business School, University of Western Ontario, London, ON N6A 3K7, Canada)

  • Travis MacDonald

    (Department of Economics, University of Western Ontario, London, ON N6A 3K7, Canada)

Abstract

We use CEO pay sensitivity to stock performance (delta) and stock volatility (vega) to provide empirical evidence that CEO compensation structure influences firm Corporate Social Responsibility (CSR) performance. We find that delta has no significant effect on CSR, while vega has a strong, causal relationship with CSR. Our findings suggest that CEOs do not view CSR as value enhancing, but as a way to increase their own compensation through vega. Firms that want to improve their social performance should consider vega as an important compensation incentive for executives.

Suggested Citation

  • Atif Ikram & Zhichuan (Frank) Li & Travis MacDonald, 2020. "CEO Pay Sensitivity (Delta and Vega) and Corporate Social Responsibility," Sustainability, MDPI, vol. 12(19), pages 1-20, September.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:19:p:7941-:d:419474
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    References listed on IDEAS

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    7. Hsu, Feng-Jui & Chen, Sheng-Hung, 2021. "US quantitative easing and firm’s default risk: The role of Corporate Social Responsibility (CSR)," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 650-664.

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