Not all stakeholders are created equal: executive vertical pay disparity and firms’ choice of internal and external CSR

Xi Zhong (), Ge Ren () and XiaoJie Wu ()
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Xi Zhong: Guangdong University of Technology
Ge Ren: South China University of Technology
XiaoJie Wu: Guangdong University of Technology

Review of Managerial Science, 2022, vol. 16, issue 8, No 7, 2495-2525

Abstract: Abstract This study explores the role of executive vertical pay disparity in explaining firms’ choice of CSR activities (internal vs. external CSR). Based on tournament theory and the attention-based view, we first propose that vertical pay disparity leads executives to increase CSR activities, but in this process, compared to external CSR activities, executives are more likely to increase internal CSR activities. We then propose that the effect of executive vertical pay disparity on the choice of CSR activities will be moderated by three situational cues: state-owned enterprises (SOEs), litigation risk, and slack resources. Empirical analyses based on unbalanced panel data of China’s listed manufacturing firms from 2010 to 2018 show that our hypotheses are largely supported. Our results show that vertical pay disparity drives executives to increase CSR activities that contribute to the long-term interests of shareholders; however, in the process, executives focus on certain stakeholders over others.

Keywords: Vertical pay disparity; Internal CSR; External CSR; State-owned enterprises; Litigation risk; Slack resources (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s11846-021-00502-8

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