Corporate Governance and the Rise of Integrating Corporate Social Responsibility Criteria in Executive Compensation: Antecedents and Outcomes
This study examines the antecedents and consequences of integrating corporate social responsibility (CSR) criteria in executive compensation, a relatively recent practice in corporate governance. Using a novel database of CSR contracting, we find that CSR contracting is more prevalent in emission-intensive industries and has become more prevalent over time. We further find that the adoption of CSR contracting leads to i) a reduction in short-termism; ii) an increase in firm value; iii) an increase in social and environmental performance; iv) a reduction in emissions; and v) an increase in green innovations. These findings are consistent with our theoretical arguments highlighting a new form of agency conflict — the misalignment between shareholders' and managers' preferences for stakeholder engagement — and suggest that CSR contracting can enhance corporate governance.
Dylan Minor, Bryan Hong, Caroline Flammer
Minor, Dylan, Bryan Hong, and Caroline Flammer. 2017. Corporate Governance and the Rise of Integrating Corporate Social Responsibility Criteria in Executive Compensation: Antecedents and Outcomes.