The link between CEO compensation and CSR

A distinction needs to be made between normal and abnormal levels of investment in CSR, and this has to be viewed in the context of good corporate governance.

Published Tue, Sep 8, 2015 · 09:50 PM

CSR

CONVENTIONAL wisdom suggests that companies should reward CEOs for undertaking corporate social responsibility (CSR) that improves the firms' performance.

Corporate governance and CSR advocates such as Global Reporting Initiatives and CorporateRegister.com recommend that the compensation of top-level management should reflect the firm's CSR. For instance, the 2013 joint report by the Investor Responsibility Research Center and the Sustainable Investments Institutes suggested that 43 per cent of Fortune 500 firms tied executive compensation to CSR. Yet the overall empirical evidence on the link between CEO compensation and CSR is inconclusive.

On one hand, some studies find that in pollutive industries, good environmental performance increases CEO compensation. On the other hand, contrary to conventional wisdom, other studies find that CEO co…

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