The impact of CSR on the asymmetric Payfor- Performance Sensitivity of CEO compensation

Abstract

It was examine whether the Corporate Social Responsibility (CSR) activities affect the asymmetric Pay-for-Performance Sensitivity (PPS) of the compensation of a firm's Chief Executive Officer (CEO). Recent studies find that while a CEO's compensation increases by a large amount when the firm's performance is good, it decreases only by a small amount when the performance is poor. This study shows that such downward CEO compensation stickiness is mitigated by the firm's CSR performance. Using various regression analyses, we find that CSR not only decreases the excessively high PPS for positive performance firms, but also increases the excessively low PPS for negative performance firms. This result can be evidence consistent with the theory that the CSR benefits the shareholders. © 2002-2019 Allied Business Academies.