An Examination of the Structure of Executive Compensation and Corporate Social Responsibility: A Canadian Investigation

Lois Mahoney () and Linda Thorn

Journal of Business Ethics, 2006, vol. 69, issue 2, 149-162

Abstract: We explore the extent to which Boards use executive compensation to incite firms to act in accordance with social and environmental objectives (e.g., Johnson, R. and D. Greening: 1999 , Academy of Management Journal 42(5), 564–578 ; Kane, E. J.: 2002 , Journal of Banking and Finance 26, 1919–1933.). We examine the association between executive compensation and corporate social responsibility (CSR) for 77 Canadian firms using three key components of executives’ compensation structure: salary, bonus, and stock options. Similar to prior research (McGuire, J., S. Dow and K. Argheyd: 2003 , Journal of Business Ethics 45(4), 341–359), we measure three different aspects of CSR, which include Total CSR as well as CSR Strengths and CSR Weaknesses. CSR Strengths and CSR Weaknesses capture the positive and negative aspects of CSR, respectively. We find significant positive relationships between: (1) Salary and CSR Weaknesses, (2) Bonus and CSR Strengths, (3) Stock Options and Total CSR; and (4) Stock Options and CSR Strengths. Our findings suggest the importance of the structure of executive compensation in encouraging socially responsible actions, particularly for larger Canadian firms. This in turn suggests that executive compensation can be an effective tool in aligning executives’ welfare with that of the “common goodâ€\x9D, which results in more socially responsible firms (Bebchuk, L., J. Fried and D. Walker: 2002 , The University of Chicago Law Review 69, 751–846; Zalewski, D.: 2003 , Journal of Economic Issues 37(2), 503–509). In addition, our findings suggest the importance of institutional context in influencing the association between executive compensation and CSR. Further implications for practice and research are discussed. Copyright Springer 2006

Keywords: corporate governance; executive compensation; social performance; social responsibility (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (88)

Downloads: (external link)
http://hdl.handle.net/10.1007/s10551-006-9073-x (text/html)
Access to full text is restricted to subscribers.

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:kap:jbuset:v:69:y:2006:i:2:p:149-162

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10551/PS2

DOI: 10.1007/s10551-006-9073-x

Access Statistics for this article

Journal of Business Ethics is currently edited by Michelle Greenwood and R. Edward Freeman

More articles in Journal of Business Ethics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().