The Impact of the CEO–Employee Pay Gap on Corporate Social Responsibility

PurposeThe purpose of this study is to examine the moderating role of the characteristics of the chief executive officer (CEO) on the association between CEO power and corporate social responsibility (CSR) performance.Design/methodology/approachThis paper conducts multiple regression analyses to empirically test the proposed hypotheses based on a sample of US-based publicly held companies. The sample period extends from 2000 to 2018. Firm-level CSR ratings are obtained from the Kinder, Lydenberg and Domini (KLD) database (currently known as MSCI ESG STATS). Financial data and CEO data are retrieved from Compustat and ExecuComp databases, respectively. Additional test and robustness analysis are performed.FindingsThis paper shows that firms with more powerful CEOs are less likely to engage in CSR activities. The negative association between CEO power and CSR is found to be exacerbated by CEOs who are younger, more competent and overconfident; however, this negative association is mitigated by CEOs who are female. This paper also finds that gender plays a more important role among CEO characteristics. Collectively, the findings highlight the potential opportunities to better understand the role of various CEO characteristics that jointly affect CSR.Originality/valueFirst, this is the first study providing a comprehensive empirical analysis of how various CEO characteristics jointly affect CSR. Prior studies that focus on standalone CEO characteristics offer an incomplete picture of the relation between a single CEO characteristic and a firm's CSR performance. The current study thus extends the research field by examining the association between seemingly unrelated CEO characteristics and CSR performance. The results also highlight that gender is the critical factor moderating the relationship between CEO power and CSR performance when it is compared with CEO age, ability and overconfidence. Second, the authors add to the literature on employee selection by showing that female CEOs mitigate the negative effect of managerial power on CSR performance. Although the currently available empirical research in management control systems focuses on ex-post analyses of moral hazard mitigation for incumbent employees, both the economics and management literature acknowledge ex ante evidence suggesting that employee selection is even more important. Our findings may provide insight into the selection of CEOs.

This study examines the impact of chief executive officer (CEO) ability on firms’ corporate social responsibility (CSR) performance. We find that firms’ CSR performance increases with CEO ability. Specifically, firms with more able CEOs are associated with more socially responsible activities and fewer socially irresponsible activities, and are associated with more stakeholder CSR rather than third-party CSR. We further find that the positive relation between CEO ability and CSR is weakened for CEO who is also the chair of the board and for CEO who is close to retirement; and is weakened when the CSR emphasis exerted by a firm’s external environment is high. Our results are robust after controlling for firm fixed effects and to the use of multiple measures of CSR performance and CEO ability. Overall, our evidence is consistent with our conjecture that more able CEOs have less career concerns so that these CEOs are more willing to undertake long-term investments in socially beneficial activities, leading to better CSR performance.

This study, grounded in the principles of the upper echelons theory, aims to assess how the socio-demographic attributes of chief executive officers (CEOs) and the legal systems of their operating countries impact corporate social responsibility (CSR) and corporate performance. In addition, this study seeks to establish a profile of CEO attributes associated with high CSR performance among the world’s best-performing corporations. The empirical analysis is based on a 5-year dataset sample of the top 100 CEOs globally, provided by Harvard Business Review for the years 2015 to 2019. The examined attributes include age, gender, tenure, engineering degree, MBA study, employment type and the legal system of the country where the CEO is operating, all in relation to CSR and corporate performance. Our empirical analysis indicates that CEOs’ age, gender and tenure positively influence CSR and corporate performance. The average CEO age is 60 years, with the majority being male and having a significant tenure ranging from 12 to 15 years. Furthermore, the analysis suggests that engineering and MBA studies do not substantially influence CSR and corporate performance. Insider CEOs also show a positive impact on CSR and corporate performance. The prevalent legal system, according to our analysis, is the common law, with the United States having the highest representation. Moreover, based on our further analysis, a suggested profile of CEOs’ attributes includes internally appointed male CEOs in their early sixties who do not necessarily hold an engineering or MBA degree. The distinctive aspect of this study lies in its multi-attribute approach and the offering of a CEO profile associated with high CSR and corporate performance. This approach opens avenues for future CSR research and exploration.

We explore the geography of corporate social responsibility (CSR) by examining the relationship between chief executive officer (CEO) locality (i.e. whether CEOs work near their hometowns) and CSR performance. The CSR score of firms with local CEOs exceeds that of firms without local CEOs by an amount equivalent to 11.1% of the sample mean CSR score. Further, the effect of CEO locality on CSR is more evident for firms headquartered in regions with high social capital, exhibiting a long‐term orientation, practising good corporate governance, or led by CEOs with early‐life disaster experiences or political connections. Additional analysis reveals that local CEOs emphasize CSR initiatives that boost local stakeholder welfare, strengthening the positive connection between CSR and firm performance. Our findings imply that CEO locality enhances CSR because local CEOs’ familiarity with and strong ties to their hometown regions align with CSR's emphasis on local engagement.

PurposeThis paper aims to analyze whether chief executive officer (CEO) incentives and characteristics (e.g. CEO power, CEO tenure) are linked with corporate social responsibility (CSR) and vice versa.Design/methodology/approachBased on upper echelons theory, the author conducts a structured literature review and evaluates 84 empirical-quantitative studies on CEO and CSR variables.FindingsWhile the majority of the included studies analyzed the CEO-CSR link, there are indicators for a bidirectional relationship. Moreover, prior research has focused on CEO incentives, especially compensation contracts, and on the US capital market. A major research gap relates to CEO characteristics, e.g. CEO values, education and experience.Research limitations/implicationsHeterogeneous CEO and CSR variables and endogeneity concerns lower the validity of recent studies. Future research is encouraged to implement dynamic regression models, increase CSR and CEO proxies and focus on international samples with country-specific effects.Practical implicationsAs CEO activities can have a major impact on CSR activities, the author recommends firms to search for opportunities to make their CSR strategy more comprehensive by their stakeholder communication, thus providing deeper insights into their CSR performance in line with stakeholders’ interests.Originality/valueThe paper is the first literature review on the interaction between CEO and CSR so far. The author explains the main CEO and CSR variables that have been included in research, stresses the limitations of the studies and gives useful recommendations for future research, practice and regulators.

Internal governance is the process by which vice presidents (VPs) use their influence with the chief executive officer (CEO) to impact the firm's direction and policy. This study examines the effect of internal governance on corporate social responsibility (CSR) performance. Based on a large sample of US firms and after controlling for various CEO incentives, corporate governance and other determinants of CSR performance, we find that more effective internal governance is associated with a better CSR performance. These results are robust to alternative internal governance and CSR measures, alternative samples and various approaches that mitigate potential endogeneity problems. Further analysis shows that the effect of internal governance on CSR performance is more pronounced when (a) the CEO is subject to more intensive monitoring, (b) VPs are more powerful, (c) firms experience less short‐term financial performance pressure and (d) they face stronger product market competition. This study advances our understanding of corporate governance's effect on CSR by showing the importance of internal governance.

PurposeThe study aims to explore and establish the relationship that exists between board independence and corporate social responsibility (CSR) practices of Indian firms.Design/methodology/approachA sample of 76 non-financial companies listed on the National Stock Exchange has been considered for a period of seven years (from 2013 to 2019). The study has used several statistical tools such as the static panel data model and the Arellano–Bond dynamic panel data model based on generalized method of moments approach.FindingsThe results of the analysis have indicated board independence to have a significant positive relationship with the firms’ CSR performance. However, board size and number of board meetings have been found to have a negative relationship with CSR. Further, outcomes have also revealed that variables such as companies’ size and liquidity have a positive effect on the extent of CSR activities performed.Practical implicationsThe firms which have the intention to engage in impactful CSR activities should support the independent directors’ participation in companies’ boards. The study’s findings suggest the companies to appoint independent directors strategically, keeping in mind the requirements of their board. Also, the independent directors selected should be independent in true sense, i.e. they should not be acquaintances of the company’s chief executive officer. This would ensure unbiased decision-making and would enhance the company’s CSR performance.Originality/valueIn India, CSR has gained great importance. So much so that it was made mandatory by the Companies Act, 2013. However, research studies that may assist in understanding the influence of board independence on Indian firms’ CSR performance are still scarce. The present study would foster value to the existing set of limited literature. Besides, the study has considered the dynamic nature of the relationship and has also controlled the endogeneity bias which has been examined by few studies in the past.

ABSTRACTThis study addresses the impact of female Chief Executive Officers (CEOs) on corporate social responsibility (CSR) outcomes. Based on upper echelons theory, a structured literature review of empirical research on CEO gender, CSR performance, reporting, and assurance was conducted. Country‐specific studies were differentiated according to their board structure and board gender quotas. This literature review indicates a positive impact of female CEOs on CSR performance in regimes with a one‐tier system and voluntary board gender quotas. Research results on other regimes, other CSR outcomes, and cross‐country designs are low in number or inconclusive. To the best of our knowledge, this is the first literature review with a focus on female CEOs and CSR. Key research gaps and recommendations for future research are mentioned, such as linking female CEOs with other demographic, social capital, and human capital attributes, including CSR reporting quality and moderator variables. Moreover, the study supports regulatory bodies and business practice to promote the selection of female CEOs for successful CSR transformation processes.

Purpose: This paper explores the relationship between CEO educational background and corporate social responsibility (CSR) performance in FTSE100 companies in the UK. Design/methodology/approach: The study uses ESG scores to measure CSR performance, and examines the impact of CEO's university ranking, educational attainment, professional background, MBA background, and participation in advanced management programmes on firms’ ESG performance. Findings: CEO educational background is considered to be an indicator of intelligence, as better-educated CEOs are thought to have greater management skills, experience, and innovation. However, we provide evidence that there is no significant association between CEO educational background and CSR performance in FTSE100 companies. Research limitations/implications: Overall, we add new evidence to a growing body of literature studying the association between personal characteristics of corporate executives and corporate social responsibility. Originality/value: This paper differs from previous articles that focus on the relationship between chief executive officer (CEO) characteristics and corporate social responsibility but instead attempts to answer the question of whether CEO educational background affects corporate social responsibility performance. Most of the literature examining CEO educational background links it to firm performance.

This study examines the relationship between corporate social responsibility (CSR), earnings management (EM), and the characteristics of chief executive officers (CEOs) within the context of China's economic transformation. Drawing on stakeholder theory and upper echelon theory, this study investigates the influence of CSR on EM and the role of CEO characteristics. The empirical analysis is based on a sample of 1,980 Chinese firm‐year observations from the Shenzhen and Shanghai stock markets, between 2013 and 2017. The findings reveal a negative relationship between CSR performance and discretionary accruals (DA), suggesting that higher CSR is associated with lower EM. Moreover, this relationship is more pronounced among firms with highly educated CEOs (postgraduates) and mature CEOs (approaching retirement age). Notably, the negative CSR–EM relationship is strengthened in firms with mandatory CSR reports. This study expands prior research by exploring the impact of CEO characteristics on the CSR–EM relationship, incorporating CEO attributes alongside ownership structures and governance mechanisms. The findings offer insights for organizations in terms of selecting ethically committed CEOs, as well as guidance for shareholders in understanding CEO selection criteria. Furthermore, this study highlights the importance of mandatory CSR disclosure (CSRD) for policymakers evaluating CSR performance according to the disclosure type.

Purpose – This paper aims to investigate how corporate social responsibility (CSR) performance (i.e. to the environment, society and stakeholders) and perceived brand quality influence brand preference. The mediating effect of perceived brand quality on the relationship between CSR performance and brand preference is also studied. Design/methodology/approach – In 2011, 243 valid responses to questionnaire surveys were collected from a convenience sample in China. Regression analyses were used to test the hypotheses. Findings – Customers’ brand preference can be enhanced by CSR performance. Performance in each of the three CSR domains (i.e. environment, society and stakeholders) positively impacts brand preference, although to different degrees. The impact of CSR on stakeholders has the strongest influence on Chinese customers’ brand preference among the three CSR domains. Perceived brand quality was found to be a mediator of the relationship between CSR performance and brand preference. Research limitations/implications – This research studies the relationship between CSR performance and brand preference. Results show CSR performance is not the strongest predictor of branding outcomes, its explanatory power is comparatively weaker than that of perceived brand quality. Additionally, we found a mediating effect of perceived brand quality on the relationship between CSR performance and brand preference. Practical implications – Brands can be more attractive to Chinese consumers when brands take appropriate investments in CSR activities. A socially responsible brand is not guaranteed to yield a competitive advantage. Instead a competitive advantage will more likely result through the employment of the appropriate CSR strategies, with a focus on stakeholders’ interests. Originality/value – The current research contributes to the literature by finding that not all CSR activities are equally effective. Customers in emerging markets still appear to be focused more on the quality of brands and, to some extent, stakeholder CSR practice, as these provide direct benefits to customers. Findings of this study also support the notion that Chinese consumers are beginning to use CSR information to evaluate brands.

CSR performance and firm performance in the tourism, healthcare, and financial sectors: Do metrics and CSR committees matter?

PurposeThis paper aims to examine the impact of three key factors — corporate social responsibility (CSR) awareness, CSR affordability and CSR management system (CSRMS) sophistication—on the CSR performance of Japanese firms.Design/methodology/approachUsing responses to 36 items developed on the Global CSR standard of ISO26000, two CSR indexes were constructed to assess the CSR management system sophistication and performance of Japanese firms. The relationship between the three key variables (CSR awareness, affordability and management system sophistication) and CSR performance was then examined through a partial least squares (PLS)-based structural equation model. Data were collected through a questionnaire survey of 146 firms.FindingsThe results of the study found a positive relationship between CSR performance and three exogenous variables (CSR awareness, affordability and management system sophistication). Furthermore, the study found that CSRMS sophistication played a mediating role in the relationship between CSR performance and firms' CSR awareness and affordability.Research limitations/implicationsThe study was limited to examining the CSR practices of a major province in Japan, which may hinder the generalisation of the findings to the rest of the country. Moreover, the data used for assessing the variables in this study were self-reported by the participating firms, in addition to being cross-sectional. The findings of this study clarified areas that policymakers, including Japan's business associations–Keidanren and Keizai Doyukai, and other relevant parties need to focus on for further improving CSR performances of Japanese firms.Originality/valueThis study highlights the role CSR awareness, affordability and CSRMS sophistication play in improving CSR performance. On the one hand, it identifies the critical role CSRMS plays in mediating the relationship among CSR performance, awareness and affordability. On the other hand, it advances CSR theory providing insight for practitioners to generate positive CSR outcomes.

PurposeThe purpose of this study is to examine the relationship between the corporate social responsibility (CSR) performance of job-hopping executives at their former and subsequent firms.Design/methodology/approachWe conduct regression analyses using a sample of firms listed on the Shanghai and Shenzhen Stock Exchanges from 2010 to 2020 to examine whether CSR performance is similar from one firm to the next as executives switch jobs.FindingsWe find a positive relationship between the CSR performance of former and subsequent firms under job-hopping executives. This relationship is the strongest in the year of the job switch; it weakens in the second year and eventually disappears in the third year. In addition, we show that this relationship benefits different CSR stakeholder groups and is contingent on executive and subsequent firm attributes and job-hopping characteristics. Furthermore, we demonstrate that firms that hire a new chief executive officer from a firm with a strong track record in CSR, the new firm experiences a significant surge in CSR performance compared with firms that do not experience such a shock.Practical implicationsThis study has implications for executive hiring decisions.Originality/valueThis study extends the understanding of CSR determinants through the lens of inter-organisational ties associated with job-hopping executives.

Manuscript TypeEmpiricalResearch Question/IssueThis study examines the relationship between blockholder and bank ownership and a firm's corporate social responsibility (CSR) performance. We analyze a multinational panel data sample for the period 2003–2012.Research Findings/InsightsWe find that the degree of blockholder ownership is negatively related to CSR performance, whereas the degree of bank ownership is positively related to CSR performance. The negative (positive) relationship between blockholder (bank) ownership and CSR performance is more pronounced in firms with high ownership dispersion.Theoretical/Academic ImplicationsOur study contributes to existing literature by investigating the effects of blockholder and bank ownership on CSR performance within an international context. Prior research has predominantly examined local markets. Additionally, we identify ownership dispersion to strengthen the relationship between investors and CSR and thus provide further evidence on the factors influencing investors' CSR preferences. Conducting an instrumental variables approach supports our findings that bank ownership is positively, and blockholder ownership is negatively, related to CSR performance.Practitioner/Policy ImplicationsOur results may assist firms in understanding the demand for CSR by blockholders and bank owners. An awareness of this demand may help firms to optimize their CSR performance in line with their investors' preferences. The knowledge produced in this article could assist firms in adopting the optimal level of CSR performance. Viewed from another perspective, knowing that either blockholder or bank ownership is present allows other shareholders, for instance sustainability funds, to anticipate the long‐run equilibrium level of firm‐specific CSR performance.