Dissertations, Theses, and Capstone Projects

Date of Degree

9-2016

Document Type

Dissertation

Degree Name

Ph.D.

Program

Business

Advisor

Joseph Weintrop

Committee Members

Rong Huang

Jeremy Bertomeu

John Shon

Subject Categories

Accounting | Business

Keywords

corporate social responsibility, CEO compensation, voluntary disclosure, environmental disclosure, social disclosure, corporate governance disclosure

Abstract

The construct of corporate social responsibility (CSR) itself is comprised of three underlying components: environmental, social, and corporate governance. However, it is unclear from the extant literature whether and how these underlying components of CSR are related to CEO compensation. In the absence of a theoretical model of CSR that specifically considers its underlying components, I present in this paper an exploratory analysis of the relationships between CEO compensation and CSR disclosure type and quality. My CSR proxies are based on a firm’s environmental, social and corporate governance-related disclosure, as reported by Bloomberg. I calculate total CEO compensation as the annual change in a comprehensive measure of total CEO wealth. Using a sample of US firms for the period 2007 through 2014, I first test the relationship between overall CSR disclosure and CEO compensation, and I find no significant association. I then disaggregate the CSR firms by disclosure type and provide evidence that: (1) relative to non-CSR firms, CEO compensation is lower in firms providing only corporate governance-related CSR disclosures; (2) CEO compensation is higher in firms providing both corporate governance-related and social-related CSR disclosure, as compared to firms providing only corporate governance-related CSR disclosure; (3) CEO compensation is roughly equivalent in firms providing both corporate governance-related and social-related CSR disclosure and in non-CSR firms; and (4) CEO compensation is higher in firms providing all three types of CSR disclosure, as compared to all other firms (CSR or non-CSR). I then test the association between CSR disclosure quality and CEO compensation, and results in the CSR subsample analysis show a positive association between the two that is driven solely by the quality of the environmental-related CSR disclosures. Additional analysis is provided using a more common measure of compensation; these results suggest that the quality of the corporate governance-related CSR disclosures drives the positive association between overall CSR disclosure quality and CEO compensation. A detailed comparison of the two compensation measures highlights the importance of equity-based incentives for CSR disclosure quality.

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