Signal Incongruence and Its Consequences: A Study of Media Disapproval and CEO Overcompensation

Vergne Jp (), Georg Wernicke () and Steffen Brenner ()
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Vergne Jp: Ivey Business School, London, Ontario N6G 0N1, Canada
Georg Wernicke: HEC Paris, 78350 Jouy-en-Josas, France
Steffen Brenner: Copenhagen Business School, 2000 Frederiksberg, Denmark

Organization Science, 2018, vol. 29, issue 5, 796-817

Abstract: We draw on the signaling and infomediary literature to examine how media evaluations of CEO overcompensation (a negative cue associated with selfishness and greed) are affected by the presence of corporate philanthropy (a positive cue associated with altruism and generosity). In line with our theory on signal incongruence, we find that firms engaged in philanthropy receive more media disapproval when they overcompensate their CEO, but they are also more likely to decrease CEO overcompensation as a response. Our study contributes to the signaling literature by theorizing about signal incongruence and to infomediary and corporate governance research by showing that media disapproval can lead to lower executive compensation. We also reconcile two conflicting views on firm prosocial behavior by showing that, in the presence of incongruent cues, philanthropy can simultaneously enhance and damage media evaluations of firms and CEOs. Taken together, these findings shed new light on the media as agents of external corporate governance for firms and open new avenues for research on executive compensation.

Keywords: media; CEO compensation; social evaluations; philanthropy; signaling (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ororsc:v:29:y:2018:i:5:p:796-817

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