Does an increase of board compensation boost the corporate philanthropy: an empirical study

Marta Idasz-Balina, Rafał Balina and Noer Azam Achsani

Cogent Economics & Finance, 2024, vol. 12, issue 1, 2416990

Abstract: Our study examines the relationship between the management board compensation and corporate philanthropy in financial institutions. By analyzing a sample of 240 cooperative banks over six years, the research investigates the impact of management board compensation on the level and extent of corporate philanthropy these institutions undertake. To estimate the models, we used the Generalized Method of Moments (GMM) approach. The findings demonstrate that the bank’s management board’s compensation significantly influences the size and scope of corporate philanthropy. Moreover, the study reveals that financial institutions consider their financial situation when formulating strategies for implementing corporate philanthropy. Notably, the analysis highlights that the increase in variable components of management board compensation has a more pronounced effect on corporate philanthropy’s volume and range than fixed compensation. These results shed light on aligning management board compensation with social responsibility objectives in financial institutions. By understanding the influence of compensation structures on corporate philanthropy, organizations can take conscious decisions to enhance their social impact while considering their financial performance. This study contributes to the growing literature on corporate social responsibility and provides valuable insights for practitioners, regulators, and stakeholders in the financial industry.This study examines the influence of management board compensation on corporate philanthropy in cooperative banks, offering valuable insights for shaping regulatory frameworks and corporate governance practices. By exploring this relationship, the research highlights how compensation structures can promote socially responsible behavior within financial institutions. The findings provide practical guidance for stakeholders and investors in assessing banks' commitment to social causes and sustainability. This study fills an important gap in the literature by addressing the underexplored connection between executive compensation and corporate philanthropy, particularly in the context of cooperative banks.

Date: 2024
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DOI: 10.1080/23322039.2024.2416990

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