Corporate social responsibility engagement, corporate financial performance and CEO characteristics. (2016)

• Record Type: Journal Article
• Authors: Bian, Chao; Gan, Christopher; Li, Zhaohua; Hu, Baiding
• Is Part Of: International journal of business governance and ethics. Volume 11:Number 3(2016)
• Page Start: 243
• Page End: 265
• Publication Date: 2016
• Subjects: corporate social responsibility -- CSR -- corporate financial performance -- CFP -- Chief Executive Officer -- CEO characteristics -- tenure -- industry cycles -- firm performance -- compensation incentives -- CEO tenure -- compensation management -- share-based pay -- common-share payments -- option payments -- cash compensation; 658.4
• Languages: English
• ISSNs: 1477-9048

Abstract

The current study examines the effect of corporate social responsibility (CSR) engagement on corporate financial performance (CFP). Prior studies document a positive CSR-CFP association without considering the moderating effects of chief executive officer (CEO) characteristics such as compensation incentives and tenure. Our results show evidence of a positive association between CSR and CFP only in the firms managed by short-tenured, high-cash paid CEOs and particularly during an industry's cooling-off period. The results imply that the incentives embedded in the current CEO pay are not effective and CEOs use CSR as a compensation management tool to increase their share-based pay. To encourage a CEO to implement CSR engagement, particularly during an industry's boom period, the board of directors should decrease common-share payments and increase the CEO's option payments. In addition, the proportion of cash compensation in the CEO's total compensation should not be reduced.