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CEO Compensation, Performance Variables, and Socially Responsible Investing

CEO Compensation, Performance Variables, and Socially Responsible Investing Significant investment dollars are now allocated to companies deemed by investors as socially responsible. This socially responsible theme contends that corporations should be held accountable for the totality of their actions and decisions, including CEO compensation levels. This paper investigates whether CEO compensation levels are more associated with traditional performance measures for socially responsible firms than for firms deemed not socially responsible, with the assumption being that social choice firms will be more sensitive to and may attempt to align CEO compensation levels with corporate performance. Rank correlation analysis and regression results using nine performance variables for 270 firms indicated that CEO compensation levels at social choice companies were more highly associated with performance variables than those at nonsocial companies. The study results suggest that social choice companies, in addition to their other corporate good deeds, seem to include CEO compensation levels as a part of their overall corporate decision process. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Journal of Business Emerald Publishing

CEO Compensation, Performance Variables, and Socially Responsible Investing

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1935-5181
DOI
10.1108/19355181200000004
Publisher site
See Article on Publisher Site

Abstract

Significant investment dollars are now allocated to companies deemed by investors as socially responsible. This socially responsible theme contends that corporations should be held accountable for the totality of their actions and decisions, including CEO compensation levels. This paper investigates whether CEO compensation levels are more associated with traditional performance measures for socially responsible firms than for firms deemed not socially responsible, with the assumption being that social choice firms will be more sensitive to and may attempt to align CEO compensation levels with corporate performance. Rank correlation analysis and regression results using nine performance variables for 270 firms indicated that CEO compensation levels at social choice companies were more highly associated with performance variables than those at nonsocial companies. The study results suggest that social choice companies, in addition to their other corporate good deeds, seem to include CEO compensation levels as a part of their overall corporate decision process.

Journal

American Journal of BusinessEmerald Publishing

Published: Apr 22, 2000

Keywords: Social responsibility; Socially responsible investing; CEO compensation; Performance variables

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