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Abstract
We empirically examine the impact of corporate social responsibility (CSR) on CEO compensation using a large sample of the
US firms from 1996 to 2010. We develop and test two hypotheses, the overinvestment hypothesis based on agency theory and the
conflict–resolution hypothesis based on stakeholder theory. We find that the lag of CSR adversely affects both total compensation
and cash compensation, after controlling for various firm and board characteristics. Our estimates show that an interquartile
increase in CSR is followed by a 4.35% (2.78%) decrease in total (cash) compensation. We also find an inverse association
between lagged employee relations and CEO compensation. Our results are robust to the correction for endogeneity using instrumental
variable approach. Taken together, our results support the conflict–resolution hypothesis, but not the CSR overinvestment
argument.
- Content Type Journal Article
- Pages 1-15
- DOI 10.1007/s10551-011-0909-7
- Authors
- Ye Cai, Department of Finance, Leavey School of Business, Santa Clara University, 500 El Camino Real, Santa Clara, CA 95053-0388, USA
- Hoje Jo, Department of Finance, Leavey School of Business, Santa Clara University, 500 El Camino Real, Santa Clara, CA 95053-0388, USA
- Carrie Pan, Department of Finance, Leavey School of Business, Santa Clara University, 500 El Camino Real, Santa Clara, CA 95053-0388, USA
- Journal Journal of Business Ethics
- Online ISSN 1573-0697
- Print ISSN 0167-4544