Keywords

corporate social performance, executive compensation, stakeholder theory, human-capital theory

Abstract

The link between firm corporate social performance (CSP) and executive compensation could be driven by a sorting effect (a firm’s CSP is related to the initial levels of compensation of newly hired executives), or by an incentive effect (incumbent executives are rewarded for past firm CSP). Existing empirical work focuses exclusively on the incentive effect. In contrast, in this paper we explore the sorting effect of firm CSP on the initial compensation of newly hired executives. In doing so, we develop a novel theoretical approach based on an integration of stakeholder theory and human capital theory, suggesting a positive association between the initial compensation of executives and firm CSP strengths and concerns. It also suggests that the strength of this relationship varies between different executive roles (as a function of stakeholder-management responsibilities). We find support for this theoretical framework in a large sample of newly-hired executives employed by Standard & Poor 1500 firms.

Original Publication Citation

"Do Socially Responsible Firms Pay their Executives More or Less? A Stakeholder Management Perspective on the Link between Social Performance and Executive Compensation", Business Ethics Quarterly, 2014

Document Type

Peer-Reviewed Article

Publication Date

2014

Publisher

Business Ethics Quarterly

Language

English

College

Marriott School of Business

Department

Marketing

University Standing at Time of Publication

Full Professor

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Marketing Commons

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