Date of Degree
Accounting | Business
corporate social responsibility, CEO compensation, voluntary disclosure, environmental disclosure, social disclosure, corporate governance disclosure
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.
Heron, Nicole M., "An Analysis of the Relationship between CEO Compensation and Corporate Social Responsibility Disclosure Type and Quality" (2016). CUNY Academic Works.