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Empirical examination of the direct and moderating role of corporate social responsibility in top executive compensation

Author

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  • Mahfuja Malik
  • Eunsup Daniel Shim

Abstract

Purpose - The purpose of this study is to examine the direct association between firms’ corporate social responsibility (CSR) scores, CSR disclosures and executive compensation. This study further investigates the moderating role of CSR in the association between executive compensation and firms’ stock market and accounting performances. Design/methodology/approach - This study collects CEO compensation information from the Execucomp database and CSR performance information from the MSCI ESG database. The final sample consists of 4,193 firm-year observations for 1,318 US public firms for the period 2009–2013. This study uses lagged regression analysis to test the direct and moderating roles of CSR in executive compensation. Findings - Regarding the direct role of CSR, this study finds that CEO compensation is positively related to CSR performance but not to firms’ issuance of CSR reports. This study also finds a positive moderating role of CSR in the relationship between CEO compensation and firms’ stock performance. However, the authors do not identify any role for CSR in the relationship between CEO compensation and accounting performance. The results also show a negative association of CSR in the relationship between CEO compensation and firm size. Originality/value - This study fills a gap in the literature by providing empirical evidence on the direct association between CSR and CEO compensation and how the association between CEO compensation and firm performance is moderated by CSR scores. The novel findings of this study will benefit managers, boards of directors, shareholders and other stakeholders, including regulators and policymakers.

Suggested Citation

  • Mahfuja Malik & Eunsup Daniel Shim, 2022. "Empirical examination of the direct and moderating role of corporate social responsibility in top executive compensation," Pacific Accounting Review, Emerald Group Publishing Limited, vol. 34(5), pages 708-727, May.
    • Handle: RePEc:eme:parpps:par-09-2021-0162
    DOI: 10.1108/PAR-09-2021-0162
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    More about this item

    Keywords

    Firm performance; CSR performance; Direct role; Moderating role; Top executive compensation; ESG ratings; Accounting returns; Market performances; M41; M52; M55;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • M55 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Contracting Devices

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