Corporate social responsibility and abnormal executive compensation

Abstract

PurposeThe authors examine the association between corporate social responsibility (CSR) and abnormal executive compensation. The authors hypothesize that socially responsible firms are more likely to pay their executives at a level that is in line with economic determinants.Design/methodology/approachUsing the expected compensation model developed by Core et al. (2008), the authors test our hypothesis using a large sample of US public companies.FindingsThe authors find that CSR performance is negatively associated with how much executive compensation deviates from the expected level. The authors further examine whether CSR performance is associated with excess compensation or inadequate compensation and find that socially responsible firms are less likely to pay their executives either excessively or inadequately.Originality/valueThis study provides evidence on the association between CSR performance and abnormal executive compensation, especially how CSR is associated with inadequate compensation, an area that has been largely overlooked by the literature.