Executive compensation, corporate social responsibility, and corporate financial performance: A multi-equation framework

Corporate Social Responsibility and Environmental Management

Volumn 18, Issue 6, 2011, Pages 332-351

  Callan, Scott J ^a   Thomas, Janet M ^a  

^a BENTLEY UNIVERSITY   (United States)

Author keywords

Agency theory; Corporate financial performance (CFP); Corporate social performance (CSP); Corporate social responsibility (CSR); Executive compensation; Pay for performance; Social performance measures; Stakeholder theory; Sustainable development

Indexed keywords

EID: 81255205447     PISSN: 15353958     EISSN: 15353966     Source Type: Journal    
DOI: 10.1002/csr.249     Document Type: Article

References (67)

1. Attaway MC. 2000. A study of the relationship between company performance and CEO compensation. American Business Review 18(1): 77-85.
2. Berle Jr AA, Means GC. 1932. The Modern Corporation and Private Property. The Macmillan Company: New York, NY.
3. Bragdon Jr JH, Marlin JAT. 1972. Is pollution profitable? Risk Management 19(4): 9-18.
4. Callan SJ, Thomas JM. 2009. Corporate financial performance and corporate social performance: An update and reinvestigation. Corporate Social Responsibility and Environmental Management 16(2): 61-78.
5. Center for Corporate Policy. 2010. Executive Compensation. Available at [July 21, 2010].
6. st Century Corporation: The Ceres Roadmap for Sustainability. Ceres: Boston, MA.
7. Chand M. 2006. The relationship between corporate social performance and corporate financial performance: Industry type as a boundary condition. The Business Review 5(1): 240-45.
8. Chapple W, Cooke A, Galt V, Paton D. 2001. The determinants of voluntary investment decisions. Managerial and Decision Economics 22(8): 453-463.
9. Core JE, Holthausen RW, Larcker DF. 1999. Corporate Governance, Chief Executive Officer Compensation, and Firm Performance. Journal of Financial Economics 51: 371-406.
10. Dahlsrud A. 2008. How corporate social responsibility is defined: An analysis of 37 definitions. Corporate Social Responsibility and Environmental Management 15(1): 1-13.
11. Deckop JR, Merriman KK, Gupta S. 2006. The effects of CEO pay structure on corporate social performance. Journal of Management 32(3): 329-342.
12. Dowell G, Hart S, Yeung B. 2000. Do corporate global environmental standards create or destroy market value? Management Science 46(8): 1059-1074.
13. Elsayed K, Paton D. 2005. The impact of environmental performance on firm performance: Static and dynamic panel data evidence. Structural Change and Economic Dynamics 16(1): 395-412.
14. Freeman RE. 1984. Strategic Management: a Stakeholder Approach. Pitman: Boston, MA.
15. Friedman M. 1962. Capitalism and freedom. The University of Chicago Press: Chicago, IL.
16. Friedman M. 1970. The social responsibility of business is to increase its profits. The New York Times Magazine, September 13, 1970, pp. 32-33.
17. Graves SB, Waddock SA. 1994. Institutional owners and corporate social performance. Academy of Management Journal 37(4): 1034-1046.
18. Graves SB, Waddock SA. 2000. Beyond built to last... Stakeholder relations in 'Built-to-Last' companies. Business and Society Review 105(4): 393-418.
19. Griffin JJ, Mahon JF. 1997. The corporate social performance and corporate financial performance debate: Twenty-five years of incomparable research. Business and Society 36(1): 5-31.
20. Hall BJ, Liebman JB. 1998. Are CEOs really paid like bureaucrats? The Quarterly Journal of Economics CXIII(3): 653-691.
21. Hart SL, Ahuja G. 1996. Does it pay to be green? An empirical examination of the relationship between emission reduction and firm performance. Business Strategy and the Environment 5: 30-37.
22. Hausman JA. 1978. Specification tests in econometrics. Econometrica 46(6): 1251-1271.
23. Hillman AJ, Keim GD. 2001. Shareholder value, stakeholder management, and social issues: What's the bottom line? Strategic Management Journal 22(2): 125-139.
24. Institute for Policy Studies and the Center for Corporate Policy. 2007. Congress and Excessive CEO Pay: A Summary of Legislation Proposed, Enacted, and Under Discussion. March 7, 2007 (updated).
25. Jensen MC, Murphy KJ. 1990. Performance pay and top-management incentives. Journal of Political Economy 98(2): 225-264.
26. Jensen MC, Murphy KJ. 2004. Remuneration: Where we've been, how we got to here, what are the problems, and how to fix them. Negotiation, Organizations and Markets Research Paper Series; Harvard Business School NOM Research Paper No. 04-28, July 2004.
27. Kennelly JJ. 2000. Institutional Ownership and Multinational Firms: Relationship to Social and Environmental Performance. Garland Publishing, Inc.: New York.
28. King AA, Lenox MJ. 2001. Does it really pay to be green? Journal of Industrial Ecology 5(1): 105-116.
29. KLD Research & Analytics, Inc. 2008. Getting started with KLD STATS and KLD's ratings definitions. KLD Research & Analytics, Inc., Boston.
30. Konar S, Cohen MA. 2001. Does the market value environmental performance? The Review of Economics and Statistics 83(2): 281-289.
31. Lindenberg E, Ross S. 1981. Tobin's q Ratio and Industrial Organization. Journal of Business 54(1): 1-32.
32. Lindgreen A, Swaen V, Johnston WJ. 2009. Corporate social responsibility: An empirical investigation of U.S. Organisations. Journal of Business Ethics 85(S): 303-323.
33. Lorsch J, Khurana R. 2010. The pay problem: Time for a new paradigm for executive compensation. Harvard Magazine, May/June 2010, pp. 30-35.
34. Maddala GS. 1977. Econometrics. McGraw-Hill: New York, NY.
35. Maddala GS, Trost RP, Li H, Joutz F. 1997. Estimation of short-run and long-run elasticities of energy demand from panel data using shrinkage estimators. Journal of Business and Economic Statistics 15(1): 90-100.
36. Mahoney LS, Thorne L. 2005. Corporate social responsibility and long-term compensation: Evidence from Canada. Journal of Business Ethics 57: 241-253.
37. Mahoney LS, Thorne L. 2006. An examination of the structure of executive compensation and corporate social responsibility: A Canadian investigation. Journal of Business Ethics 69: 149-162.
38. Makni R, Francoeur C, Bellavance F. 2009. Causality between corporate social performance and financial performance: Evidence from Canadian firms. Journal of Business Ethics 89(3): 409-422.
39. Margolis JD, Walsh JP. 2001. People and Profits? The Search for a Link Between a Company's Social and Financial Performance. Lawrence Erlbaum Associates, Publishers: Mahwah, NJ.
40. Margolis JD, Walsh JP. 2003. Misery loves companies: Rethinking social initiatives by business. Administrative Science Quarterly 48: 268-305.
41. Marom IY. 2006. Toward a unified theory of the CSP-CFP Link. Journal of Business Ethics 67: 191-200.
42. McGuire J, Dow S, Argheyd K. 2003. CEO incentives and corporate social performance. Journal of Business Ethics 45(4): 341-359.
43. McWilliams A, Siegel D. 2000. Corporate social responsibility and financial performance: Correlation or misspecification? Strategic Management Journal 21(5): 603-609.
44. Mitchell R, Agle B, Wood D. 1997. Toward a theory of stakeholder identification and salience: Defining the principle of who and what really counts. Academy of Management Review 22: 853-886.
45. Murphy KJ. 1999. Executive compensation. In Handbook of Labor Economics, Ashenfelter OC, Card DE (eds.) Elsevier: NY.
46. Nourayi MM, Daroca FP. 2008. CEO compensation, firm performance and operational characteristics. Managerial Finance 34(8): 562-584.
47. O'Reilly III CA, Main BGM. 2007. Setting the CEO's pay: It's more than simple economics. Organizational Dynamics 36(1): 1-12.
48. Pava ML, Krausz J. 1996. The association between corporate social responsibility and financial performance: The paradox of social cost. Journal of Business Ethics 15(3): 321-357.
49. Pindyck RS, Rubinfeld DL. 1998. Econometric Models and Economic Forecasts. 4th Edition. Irwin McGraw-Hill: Boston, MA.
50. Porter ME, van der Linde C. 1995. Green and competitive: Ending the stalemate. Harvard Business Review 73: 120-134.
51. Preston LE, O'Bannon DP. 1997. The corporate social-financial performance relationship: A typology and analysis. Business and Society 36(4): 419-429.
52. Riahi-Belkaoui A. 1992. Executive compensation, organizational effectiveness, social performance and firm performance: An empirical investigation. Journal of Business Finance and Accounting 19(1): 25-38.
53. Roman RM, Hayibor S, Agle BR. 1999. The relationship between social and financial performance. Business and Society 38(1): 109-125.
54. Rosen S. 1992. Contracts and the Market for Executives. In Contract Economics Werin L, Wijkander H (eds). Blackwell: Cambridge, MA.
55. Ruf BM, Muralidhar K, Brown RM, Janney JJ, Paul K. 2001. An empirical investigation of the relationship between change in corporate social performance and financial performance: A Stakeholder Theory Perspective. Journal of Business Ethics 32(2): 143-156.
56. Salama A. 2005. A note on the impact of environmental performance on financial performance. Structural Change and Economic Dynamics 16(2): 413-421.
57. Sharfman M. 1996. The construct validity of the KLD Social Performance Ratings Data. Journal of Business Ethics 15(3): 287-296.
58. Simerly RL, Li M. 2000. Corporate Social Performance and Multinationality, A Longitudinal Study. B > Quest. Available at: [April 10, 2007].
59. Simerly RL, Li M, Bass KE. 2000. CEO compensation and corporate social performance: A longitudinal examination. B > Quest. Available at: [June 26, 2008].
60. Sloan RG. 1993. Accounting earnings and top executive compensation. Journal of Accounting and Economics 16(1-3): 55-100.
61. Standard & Poor's. 2006. Standard & Poor's Compustat. User's Guide. Standard & Poor's: Centennial, CO, USA.
62. Standard & Poor's. 2008. Standard & Poor's Compustat Execucomp: The Executive Compensation Database, McGraw-Hill: Englewood, CO, USA.
63. Tosi HL, Werner S, Katz JP, Gomez-Mejia LR. 2000. How much does performance matter? A meta-analysis of CEO pay studies. Journal of Management 26(2): 301-339.
64. Waddock SA, Graves SB. 1997. The corporate social performance-financial performance link. Strategic Management Journal 18(4): 303-319.
65. Wagner M, Phu NV, Azomahou T, Wehrmeyer W. 2002. The relationship between the environmental and economic performance of firms: An empirical analysis of the European paper industry. Corporate Social Responsibility and Environmental Management 9(3): 133-146.
66. Wagner M, Schaltegger S. 2004. The effect of corporate environmental strategy choice and environmental performance on competitiveness and economic performance: An empirical study of EU manufacturing. European Management Journal 22(5): 557-572.
67. Wahba H. 2008. Does the market value corporate environmental responsibility? An empirical examination. Corporate Social Responsibility and Environmental Management 15(2): 89-99.