Corporate Social Responsibility and Governance: The Role of Executive Compensation

Sandra Cavaco, Patricia Crifo and Aymeric Guidoux

Industrial Relations: A Journal of Economy and Society, 2020, vol. 59, issue 2, 240-274

Abstract: This article examines the relationship between corporate governance and corporate sustainability by focusing on an essential component of companies' governance structure: executive compensation programs. We propose an original empirical strategy based on a large set of the biggest capitalizations in Organization for Economic Cooperation and Development (OECD) countries over the period 2004–2018, with explicit measures of how companies integrate into executive managers' remuneration precise criteria of corporate social responsibility, an incentive scheme called corporate social responsibility (CSR) contracting. Our results show that proposing executive compensation programs including CSR criteria has a negative impact on financial performance, and a large positive impact on extra‐financial performance based on the following dimensions: relationship with customers and suppliers, and community involvement. Second, we explore the moderating role of the corporate governance model by distinguishing the impact between firms with a shareholder or stakeholder corporate governance model and reveal significant differences in the impact of CSR contracting. For firms with a stakeholder corporate governance model, CSR contracting is no longer associated with a fall of financial performance and has a large positive impact on human resources, environmental, and human rights performance. On the other hand, CSR contracting has a negative impact on financial performance but no impact on extra‐financial performance for firms with a shareholder corporate governance model.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://doi.org/10.1111/irel.12254

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:indres:v:59:y:2020:i:2:p:240-274

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0019-8676

Access Statistics for this article

Industrial Relations: A Journal of Economy and Society is currently edited by Christopher (Kitt) Carpenter, Steven Raphael and stevenraphael@berkeley.edu

More articles in Industrial Relations: A Journal of Economy and Society from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().