Being Payed for Doing Good: The Effects of TMTs’ Social Incentives on Firms’ Social Performance

Abstract

While recent years have witnessed radical environmental, regulatory, and societal transformation, an increasing number of organizations view social performance as an important business outcome. However, we know relatively little about the antecedents of this performance outcome. This study examines how the integration of social incentives in TMT compensation schemes affect firms’ social performance and what role the overall firms’ social value orientation plays in this regard. We rely on a novel database for TMTs’ social incentives for the years 2016 and 2017 and found a positive relationship between social incentives and social performance. Further, we provide evidence that social value orientation on the firm level only fosters the adoption of social incentives, but not social performance itself. Based on these findings we contribute to the literature by introducing the adaptation of social incentives as (1) an important driver for social performance, and (2) as instrumental for the effectiveness of social value orientation.