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Corporate Social Performances Incentives In Ceo Compensation Contracts
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Book Synopsis Corporate Social Performances Incentives in CEO Compensation Contracts by : Rozhin Yousefvand-Mansouri
Download or read book Corporate Social Performances Incentives in CEO Compensation Contracts written by Rozhin Yousefvand-Mansouri and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: "This study extends the literature on the relation between executive compensation, Corporate Social Performance (CSP), and Corporate Financial Performance (CFP) by illustrating how the relation between CSP and CFP is informative in setting executive compensation. Given the role of the board of directors (BOD) in setting executive compensation, I discuss the BOD' fiduciary duty in the contexts of corporate social responsibility by referring to American corporate law and explain how the fiduciary duty of the BOD accommodates and does not prevent Corporate Social Responsibility (CSR), even if complying with CSR goes against shareholders' wealth maximization. Moreover, by combining contract theory literature with economics literature, I propose a theoretical framework which illustrates that contracting on CSP is effective only in situations when corporate social performance negatively affects financial performance and that contracting on CSP is inefficient when CSP is positively reflected in CFP. Next, I examine the framework by focusing on employee health and safety aspects of CSR in extractive industries, using the Total Reportable Incident Rate (TRIR) as the measure of CSP. I find that for companies with a TRIR target in their executive compensation, the relation between TRIR and financial performance is significantly lower than for companies without a CSP target. Furthermore, relying on the disclosures provided in companies' annual reports on compliance with safety standards, I measure the degree to which concern about companies' disclosure relates to the negative effect of the costs of compliance or noncompliance with safety standards, and I categorize the companies into those with a low (high) degree of concern about the negative effect of the costs of compliance on financial performance, denoted by FJ CSR companies (FNJ CSR companies) in the text. Consistent with the proposed framework, I find that a lower degree of concern about the negative effect of the costs of compliance on financial performance is associated with a lower likelihood to include a TRIR incentive in the Chief Executive Officer's (CEO) compensation contract. Also, I find that while the changes in safety performance of FJ CSR companies that include safety performance incentives in the compensation contacts of their CEOs does not differ from that of those without such incentives, the likelihood of improving safety performance for the former group is lower than that of the latter group, which is a finding that supports the proposed theoretical framework.In summary, this study suggests that boards of directors (BOD) are concerned about corporate social responsibilities and the negative consequences of not fulfilling those responsibilities. Thus, when the BODs perceive a simultaneous negative CSP-CFP correlation, they provide CSP incentives in CEOs' compensation contracts, encouraging CEOs to take on social responsibilities even though it reduces short-term financial performance." --
Book Synopsis Corporate Governance and Executive Compensation for Corporate Social Responsibility by : Bryan Hong
Download or read book Corporate Governance and Executive Compensation for Corporate Social Responsibility written by Bryan Hong and published by . This book was released on 2015 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: We link the corporate governance literature in financial economics to the agency cost perspective of Corporate Social Responsibility (CSR) to derive theoretical predictions about the relationship between corporate governance and the existence of executive compensation incentives for CSR. We test our predictions using novel executive compensation contract data, and find that firms with more shareholder-friendly corporate governance are more likely to provide compensation to executives linked to firm social performance outcomes. Also, providing executives with direct incentives for CSR is an effective tool to increase firm social performance. The findings provide evidence identifying corporate governance as a determinant of managerial incentives for social performance, and suggest that CSR activities are more likely to be beneficial to shareholders, as opposed to an agency cost.
Book Synopsis Pay Without Performance by : Lucian A. Bebchuk
Download or read book Pay Without Performance written by Lucian A. Bebchuk and published by Harvard University Press. This book was released on 2004 with total page 308 pages. Available in PDF, EPUB and Kindle. Book excerpt: The company is under-performing, its share price is trailing, and the CEO gets...a multi-million-dollar raise. This story is familiar, for good reason: as this book clearly demonstrates, structural flaws in corporate governance have produced widespread distortions in executive pay. Pay without Performance presents a disconcerting portrait of managers' influence over their own pay--and of a governance system that must fundamentally change if firms are to be managed in the interest of shareholders. Lucian Bebchuk and Jesse Fried demonstrate that corporate boards have persistently failed to negotiate at arm's length with the executives they are meant to oversee. They give a richly detailed account of how pay practices--from option plans to retirement benefits--have decoupled compensation from performance and have camouflaged both the amount and performance-insensitivity of pay. Executives' unwonted influence over their compensation has hurt shareholders by increasing pay levels and, even more importantly, by leading to practices that dilute and distort managers' incentives. This book identifies basic problems with our current reliance on boards as guardians of shareholder interests. And the solution, the authors argue, is not merely to make these boards more independent of executives as recent reforms attempt to do. Rather, boards should also be made more dependent on shareholders by eliminating the arrangements that entrench directors and insulate them from their shareholders. A powerful critique of executive compensation and corporate governance, Pay without Performance points the way to restoring corporate integrity and improving corporate performance.
Book Synopsis CSR-Contingent Executive Compensation Incentive and Earnings Management by : Zhichuan Frank Li
Download or read book CSR-Contingent Executive Compensation Incentive and Earnings Management written by Zhichuan Frank Li and published by . This book was released on 2019 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper empirically studies the connection between earnings management and corporate social performance, conditional on the existence of CSR-contingent executive compensation contracts, an emerging practice to link executive compensation to corporate social performance. We find that executives are more likely to manipulate earnings to achieve their personal compensation goals when CSR rating is low, as well as their CSR-contingent compensation. Because of public pressure on their excessive total compensation, corporate executives see no need to manipulate earnings to increase compensation when their CSR-contingent compensation is already high. Our results suggest that earnings management and CSR-contingent compensation are substitute tools to serve the interests of executives, which is an agency problem that was never previously studied. Additionally, we explore how managerial characteristics affect earnings management, driven by the incentive effects of CSR-linked compensation.
Book Synopsis Executive Compensation and Earnings Management Under Moral Hazard by : Bo Sun
Download or read book Executive Compensation and Earnings Management Under Moral Hazard written by Bo Sun and published by DIANE Publishing. This book was released on 2010-08 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Analyzes executive compensation in a setting where managers may take a costly action to manipulate corporate performance, and whether managers do so is stochastic. Examines how the opportunity to manipulate affects the optimal pay contract, and establishes necessary and sufficient conditions under which earnings management occurs. The author¿s model provides a set of implications on the role earnings management plays in driving the time-series and cross-sectional variation of executive compensation. In addition, the model's predictions regarding the changes of earnings management and executive pay in response to corporate governance legislation are consistent with empirical observations. Charts and tables.
Download or read book Pay for Results written by Mercer, LLC and published by John Wiley & Sons. This book was released on 2009-03-17 with total page 288 pages. Available in PDF, EPUB and Kindle. Book excerpt: The numerous incentive approaches and combinations and their implications can be dizzying even to the compensation professional. Pay for Results provides a road map for developing and implementing executive incentives that drive business needs and strategy. It is filled with specific analytic tools, including tables, exhibits, forms, checklists. In addition, it uncovers myths in performance measurement strategy and design. Timely and thorough, this book expertly shows businesses how to drive their specific needs and strategy. Human resources and compensation officers will discover how to apply performance metrics that align with shareholder investment.
Book Synopsis CEO's Compensation by : Abbas Salimi
Download or read book CEO's Compensation written by Abbas Salimi and published by . This book was released on 2017 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we used components of executive compensation namely bonus, value of options granted, and value of pension accumulated for executives from Wharton Research Database to drive conclusion regarding implications of how such short term (bonus) and long term (value of options granted and value of pension accumulated) incentives play a role in determining the level of Corporate Social Responsibility (CSR) ratings among firms. Our results suggested that contracting executive compensation schemes based on long term incentives would tend to favor firms' level of Corporate Social Responsibility while designing optimal contracts based on short term incentives could be more of an agency cost to firm in terms of level of CSR ratings.
Book Synopsis Too Much Is Not Enough by : Robert W. Kolb
Download or read book Too Much Is Not Enough written by Robert W. Kolb and published by Oxford University Press. This book was released on 2012-08-02 with total page 428 pages. Available in PDF, EPUB and Kindle. Book excerpt: The scholarly literature on executive compensation is vast. As such, this literature provides an unparalleled resource for studying the interaction between the setting of incentives (or the attempted setting of incentives) and the behavior that is actually adduced. From this literature, there are several reasons for believing that one can set incentives in executive compensation with a high rate of success in guiding CEO behavior, and one might expect CEO compensation to be a textbook example of the successful use of incentives. Also, as executive compensation has been studied intensively in the academic literature, we might also expect the success of incentive compensation to be well-documented. Historically, however, this has been very far from the case. In Too Much Is Not Enough, Robert W. Kolb studies the performance of incentives in executive compensation across many dimensions of CEO performance. The book begins with an overview of incentives and unintended consequences. Then it focuses on the theory of incentives as applied to compensation generally, and as applied to executive compensation particularly. Subsequent chapters explore different facets of executive compensation and assess the evidence on how well incentive compensation performs in each arena. The book concludes with a final chapter that provides an overall assessment of the value of incentives in guiding executive behavior. In it, Kolb argues that incentive compensation for executives is so problematic and so prone to error that the social value of giving huge incentive compensation packages is likely to be negative on balance. In focusing on incentives, the book provides a much sought-after resource, for while there are a number of books on executive compensation, none focuses specifically on incentives. Given the recent fervor over executive compensation, this unique but logical perspective will garner much interest. And while the literature being considered and evaluated is technical, the book is written in a non-mathematical way accessible to any college-educated reader.
Book Synopsis Industrial Organization in Japan by : Richard E. Caves
Download or read book Industrial Organization in Japan written by Richard E. Caves and published by Washington : Brookings Institution. This book was released on 1976 with total page 200 pages. Available in PDF, EPUB and Kindle. Book excerpt: Monograph on industrial policy and the organization of business and industry in Japan - analyses the distinctive features of the Japanese industrial structure (e.g. Industrial monopolys, permanent employment, prevalence of small enterprises, market structure, etc.), and compares it with the industrial system in the USA, etc. References and statistical tables.
Book Synopsis CSR-Contingent Executive Compensation Contracts by : Atif Ikram
Download or read book CSR-Contingent Executive Compensation Contracts written by Atif Ikram and published by . This book was released on 2019 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Firms have increasingly started tying their executives' compensation to CSR-related objectives. In this paper, we attempt to understand why firms offer CSR-contingent compensation and the conditions under which such compensation improves corporate social performance. Using hand-collected data from proxy statements, we find that this emerging compensation practice varies significantly across industries and across different CSR categories. Further, well-governed firms are more likely to offer CSR-contingent compensation, and such compensation does lead to higher corporate social standing. Such firms are more likely to offer formula-based, Objective CSR-contingent compensation. However, our results suggest that non-formulaic, Subjective CSR-contingent compensation also helps improve companies' social performance when firm outcomes are more volatile and unpredictable, and therefore executives' effort and performance are harder to evaluate, and when firms have better corporate governance.
Book Synopsis The Handbook of the Economics of Corporate Governance by : Benjamin Hermalin
Download or read book The Handbook of the Economics of Corporate Governance written by Benjamin Hermalin and published by Elsevier. This book was released on 2017-09-18 with total page 762 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Handbook of the Economics of Corporate Governance, Volume One, covers all issues important to economists. It is organized around fundamental principles, whereas multidisciplinary books on corporate governance often concentrate on specific topics. Specific topics include Relevant Theory and Methods, Organizational Economic Models as They Pertain to Governance, Managerial Career Concerns, Assessment & Monitoring, and Signal Jamming, The Institutions and Practice of Governance, The Law and Economics of Governance, Takeovers, Buyouts, and the Market for Control, Executive Compensation, Dominant Shareholders, and more. Providing excellent overviews and summaries of extant research, this book presents advanced students in graduate programs with details and perspectives that other books overlook. Concentrates on underlying principles that change little, even as the empirical literature moves on Helps readers see corporate governance systems as interrelated or even intertwined external (country-level) and internal (firm-level) forces Reviews the methodological tools of the field (theory and empirical), the most relevant models, and the field’s substantive findings, all of which help point the way forward
Book Synopsis Corporate Social Responsibility Performance-Based Incentives by : S. Leanne Keddie
Download or read book Corporate Social Responsibility Performance-Based Incentives written by S. Leanne Keddie and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Structured around three essays, this dissertation investigates the use of Corporate Social Responsibility (CSR) performance-based incentives through the lens of corporate governance. Toward that end, it relies on both quantitative and qualitative research methodologies. The key data was hand collected from the proxy statements of S&P 500 firms for the fiscal year 2014 while the remaining data was obtained from various databases. Semi-structured interviews were also conducted with key executives and directors and add context to the quantitative results reported in the first paper. Findings reported in the first essay suggest that short-term view institutional shareholders are associated with less use of CSR performance-based incentives while long-term view institutional shareholders, according to the qualitative data only, appear to be working towards greater use. Furthermore, imitation appears to underlie greater use of CSR performance-based incentives. Within the second essay, results are consistent with the notion that when the top management team has power, the use of these incentives is associated with excess compensation beyond what they would normally be expected to receive. Finally, in the third essay, knowledge transfer vis-à-vis directors' experience on CSR committees as well as in environmentally sensitive industries appears to induce firms to expand their use of particular subcategories of quantitative CSR performance-based incentives. This work contributes to the literatures in executive compensation, CSR, knowledge transfer and to the emerging literature on CSR-driven corporate governance. It will be of interest to boards of directors, regulators, shareholders and other stakeholders interested in understanding more about who is influencing the use of CSR performance-based incentives and how these come into use in a firm.
Book Synopsis Corporate Social Responsibility and the Impact of Executive Compensation on Corporate Social Responsibility Performance by : Stefanie Ott
Download or read book Corporate Social Responsibility and the Impact of Executive Compensation on Corporate Social Responsibility Performance written by Stefanie Ott and published by . This book was released on 2017 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, I identify the types of firms that have the highest corporate social responsibility(CSR) ratings overall and across the six categories of CSR to determine if the same types of firms have the highest performance across all six measures. Based on my results, I find that different types of firms have the highest CSR ratings across different CSR measures. Additionally, I use existing literature to examine the relationship between firm performance and CSR performance, and perform a regression using ROA as a measure of overall firm financial performance. Using a unique dataset of executive compensation CSR contracting data, I also explore the relationship between CSR contracting and aggregate CSR ratings using a sample of socially responsible firms. My findings indicate that the use of CSR contracting results in a significantly larger mean aggregate CSR rating for socially responsible firms. Thus, this study provides evidence that, on average, incentivizing CSR with executive compensation is an effective means of improving overall CSR performance.
Book Synopsis A Principled Approach to CEO Compensation and Contracts by : Michael Dennis Graham
Download or read book A Principled Approach to CEO Compensation and Contracts written by Michael Dennis Graham and published by Lulu.com. This book was released on 2019-01-09 with total page 354 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this book we make the case for the genesis of the problem being that many CEOs are not operating under a ?fair and reasonable value exchange? with the organization that they work for, and that there are very clear reasons why that is the case. We know you will gain insight from this book finding new ways to view, consider, and reframe your approach to CEO (and other executive) employment relationships consisting of compensation programs and contracts using the all-important concept of value exchange. This book reveals a Principled Approached developed by consultants of Grahall, LLC, guiding the reader through the use of appropriate tools and well thought out processes, for a uniquely effective result.
Book Synopsis The New Standards by : Richard N Ericson
Download or read book The New Standards written by Richard N Ericson and published by John Wiley & Sons. This book was released on 2010-05-20 with total page 336 pages. Available in PDF, EPUB and Kindle. Book excerpt: Make the most of the new standards Every year companies spend millions of dollars on executive incentives. All too often, however, these programs provide a very weak link between pay and performance, with executives potentially rewarded as much for bad decisions as they are for good ones. Packed with examples, The New Standards insightfully discusses: How to link pay with business results that create long-term value Why incentive structures can discourage management from reasonable risk-taking, in some cases, and can enocourage imprudent risks in others The full range of inputs that should guide proper incentive policy Why performance measures must reflect both the quality and quantity of earnings Risk, executive behavior, and the cost of capital How to use valuation criteria when choosing metrics The pros and cons of common approaches to stock-based incentive pay Written by noted compensation expert Richard Ericson, this innovative book is a must-read for directors and management concerned with executive compensation design or financial performance measurement and forecasting. Get the guidance and concrete solutions you need to thoroughly reexamine your executive compensation policies and practices with the principles and financial maxims found in The New Standards.
Book Synopsis Three Essays in Mergers and Acquisitions and Executive Compensation by : Nada El-Hassan
Download or read book Three Essays in Mergers and Acquisitions and Executive Compensation written by Nada El-Hassan and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Several studies in the finance literature (and other fields) focus on how compensation contracts of CEOs shape incentives and affect risk-taking behaviour. We examine how CEOs with varying risk appetites approach merger and acquisition (M&A) deals differently due to incentives driven by their compensation structure. Relying on VEGA, the sensitivity of executive's portfolio to a one percent change in volatility of stock returns, we document that acquirers and targets behave differently vis-à-vis their compensation. We show that a longer time to completion is related to the target VEGA (and not bidder VEGA). We also find that a more risk-taking CEO (as encouraged by VEGA) selling his firm would delay completing a deal by a significant three weeks. We conjecture that target CEOs choose to delay deal completion to look for better bids that tally their need to change their portfolio of company holdings. Next, we link executive compensation, mergers and acquisitions, and environmental, social and governance in one framework that produces new insights into how CEO's incentives yield sub-optimal investment decisions. Our sample consists of 1,280 mergers (M&A) from the period of 1993-2018 and uses the CEO's wealth sensitivity to stock price volatility (VEGA) as a proxy for risk-taking behaviour. We establish that there is a shift in the relation between CSR rating and cumulative abnormal announcement returns of M&As deals. After 2008, the market for corporate control no longer rewards more commitment to CSR activities. We examine the performance of our sample of mergers in comparison with that of a matched sample of non-bidding firms vis-à-vis their environmental, social and governance (ESG) profiles over the long term. Our results indicate that more CSR commitment does not translate into better long-term returns for shareholders and stakeholders if the firms participate in M&As. Moreover, we investigate how the bidder and target CSR ratings, as well as management risk-taking incentives (proxied by VEGA), affect deals total synergy estimated around the announcement day. Our results show that firms with lower CSR ratings yield more synergy gains, which are not related to both bidder and target risk-taking incentives. Finally, we provide new evidence related to the debate whether corporate social responsibility (CSR) strategies intrinsically benefit organizations and contribute to wealth creation after controlling for CEO compensation. We utilize a sample of M&A deals spanning the period 1993 to 2018 of target firms with different CSR ratings and investigate the effect of CEOs' executive compensation driven incentives. Our main finding is that Low CSR firms becoming targets of M&A contests in the subperiod post-2008 record the highest cumulative average abnormal returns (compared to High CSR over the same period and other subsamples). We report that Low CSR firms with High VEGA target CEOs specifically perform better in corporate control contests in later years. We justify this as Low CSR firms are characterized by lower governance and more agency costs where management seeks benefit its own interests instead of being considerate for the stakeholders at large.
Book Synopsis Link Executive Compensation to Social Performance by : Susan Williams
Download or read book Link Executive Compensation to Social Performance written by Susan Williams and published by . This book was released on 2001 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:
