Introduction
Background Literature and Hypotheses
Incentives and CSR Performance: Performance Measurement Assumptions in the CSR Setting
Experience in Using CSR-Linked Executive Compensation and Effects on CSR Performance
The Moderating Effect of CSR-Focused Governance Systems
Research Design
Data and Sample Collection
Number of firm-years | Number of distinct firms | |
---|---|---|
All firm-year observations with CSR-focused governance information from ASSET4 database | 10336 | 996 |
Less | ||
Observations not covered by MSCI ESG database | − 1684 | − 114 |
Other observations not covered by: ASSET4 database + Compustat Execucomp database + Datastream annual file + Observations below the minimum firm-size parameters | − 3582 | − 34 |
Sample | 5070 | 848 |
Industry | Freq. | Percent. |
---|---|---|
Industrial goods and services | 171 | 20.17 |
Automobiles and parts | 13 | 1.53 |
Chemicals | 22 | 2.59 |
Construction and material | 18 | 2.12 |
Food and beverage | 27 | 3.18 |
Personal and household goods | 50 | 5.90 |
Financials | 170 | 20.05 |
Basic resources | 22 | 2.59 |
Oil and gas | 61 | 7.19 |
Healthcare | 65 | 7.67 |
Media | 30 | 3.54 |
Retail | 68 | 8.02 |
Technology | 93 | 10.97 |
Telecommunications | 9 | 1.06 |
Travel and leisure | 29 | 3.42 |
Total | 848 | 100 |
Measurement of Dependent and Independent Variables
CSR-Linked Executive Compensation
Experience in Using CSR-Linked Executive Compensation
CSR-Focused Governance Systems
CSR Score
Measurement of Control Variables
Empirical Models
Descriptive Statistics
Variables | Obs. | Mean | SD | Min | P25 | Median | P75 | Max |
---|---|---|---|---|---|---|---|---|
CSR SCOREt | 4472 | 10.01 | 3.39 | 0.00 | 8.00 | 9.00 | 12.00 | 26.00 |
ENV STRENGTHSt | 4472 | 0.67 | 1.09 | 0.00 | 0.00 | 0.00 | 1.00 | 5.00 |
SOC STRENGTHSt | 4472 | 2.51 | 2.78 | 0.00 | 0.00 | 2.00 | 4.00 | 17.00 |
ENV CONCERNSt | 4472 | 0.46 | 0.96 | 0.00 | 0.00 | 0.00 | 0.00 | 5.00 |
SOC CONCERNSt | 4472 | 1.79 | 1.71 | 0.00 | 1.00 | 1.00 | 3.00 | 12.00 |
CSR COMPt−1 | 4472 | 0.22 | 0.41 | 0.00 | 0.00 | 0.00 | 0.00 | 1.00 |
CSR COMPEXPt−1 | 4472 | 0.69 | 1.43 | 0.00 | 0.00 | 0.00 | 1.00 | 11.00 |
CSR COMMITTEEt−1 | 4472 | 0.19 | 0.39 | 0.00 | 0.00 | 0.00 | 0.00 | 1.00 |
CSR REPORTt−1 | 4472 | 0.78 | 1.91 | 0.00 | 0.00 | 0.00 | 0.00 | 1.00 |
CSR AUDITt−1 | 4472 | 0.21 | 0.41 | 0.00 | 0.00 | 0.00 | 0.00 | 1.00 |
LT COMPt−1 | 4472 | 0.66 | 0.20 | 0.00 | 0.56 | 0.71 | 0.80 | 0.99 |
BOD TENUREt−1 | 4472 | 13.41 | 9.20 | 0.00 | 8.33 | 12.50 | 18.18 | 60.00 |
BOD INDt−1 | 4472 | 44.55 | 24.78 | 0.00 | 30.77 | 50.00 | 62.50 | 94.12 |
BOD FEMALEt−1 | 4472 | 9.23 | 3.63 | 0.50 | 6.86 | 8.82 | 11.05 | 26.57 |
SALESt−1 ($ million) | 4472 | 13,000 | 31,000 | 24 | 2000 | 4600 | 12,000 | 470,000 |
ROEt−1 | 4472 | 0.15 | 0.21 | − 0.66 | 0.08 | 0.15 | 0.22 | 1.02 |
LEVt−1 | 4472 | 0.58 | 0.21 | − 0.48 | 0.45 | 0.59 | 0.73 | 1.59 |
MTBt−1 | 4472 | 3.17 | 2.94 | − 1.80 | 1.50 | 2.30 | 3.66 | 18.09 |
Variables | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
1 | Ln(1 + CSR SCOREt) | 1 | ||||||||||||
2 | CSR COMPt−1 | 0.120*** | 1 | |||||||||||
3 | CSR COMMITTEEt−1 | 0.165*** | 0.253*** | 1 | ||||||||||
4 | CSR REPORTt−1 | 0.339*** | 0.321*** | 0.396*** | 1 | |||||||||
5 | CSR AUDITt−1 | 0.252*** | 0.247*** | 0.249*** | 0.461*** | 1 | ||||||||
6 | Ln(1 + CSR COMPEXPt−1) | 0.165*** | 0.825*** | 0.342*** | 0.382*** | 0.330*** | 1 | |||||||
7 | LT COMPt−1 | 0.198*** | 0.131*** | 0.149*** | 0.224*** | 0.117*** | 0.154*** | 1 | ||||||
8 | Ln(1 + BOD INDt-1) | 0.100*** | 0.160*** | 0.117*** | 0.200*** | 0.107*** | 0.190*** | 0.194*** | 1 | |||||
9 | Ln(1 + BOD TENUREt−1) | 0.005 | − 0.016 | − 0.051*** | − 0.038** | − 0.027* | − 0.005 | − 0.102*** | − 0.149*** | 1 | ||||
10 | Ln(1 + BOD FEMALEt−1) | 0.310*** | 0.109*** | 0.176*** | 0.237*** | 0.132*** | 0.141*** | 0.128*** | 0.087*** | − 0.094*** | 1 | |||
11 | Ln(SALESt−1) | 0.163*** | 0.160*** | 0.324*** | 0.386*** | 0.250*** | 0.230*** | 0.142*** | 0.071*** | − 0.097*** | 0.304*** | 1 | ||
12 | ROEt−1 | 0.100*** | 0.030** | 0.036** | 0.066*** | 0.055*** | 0.028* | 0.078*** | − 0.005 | − 0.019 | 0.070*** | 0.128*** | 1 | |
13 | LEVt−1 | 0.010 | 0.039*** | 0.090*** | 0.089*** | 0.038*** | 0.068*** | − 0.102*** | 0.050*** | − 0.083*** | 0.204*** | 0.292*** | 0.024*** | 1 |
14 | MTBt-1 | 0.096*** | − 0.054*** | − 0.050*** | − 0.009 | 0.002 | − 0.074*** | 0.094*** | − 0.076*** | − 0.046*** | 0.082*** | − 0.033*** | 0.476*** | 0.094*** |
Results
CSR-Linked Executive Compensation and CSR Performance
DV = Ln(1 + CSR SCOREt) | (1) | (2) | (3) | |||
---|---|---|---|---|---|---|
b | se | b | se | b | se | |
Independent variables | ||||||
CSR COMPt−1 | 0.035*** | (0.013) | − 0.019 | (0.018) | 0.024 | (0.019) |
Ln(1 + CSR COMPEXPt−1) | 0.090*** | (0.022) | ||||
CSR COMPEXPt−1 = 1 | − 0.007 | (0.024) | ||||
CSR COMPEXPt−1 = 2 | 0.038 | (0.027) | ||||
CSR COMPEXPt−1 = 3 | 0.070** | (0.031) | ||||
CSR COMPEXPt−1 = 4 | 0.112*** | (0.038) | ||||
CSR COMPEXPt−1 = 5 | 0.214*** | (0.051) | ||||
CSR COMPEXPt−1 = 6 | 0.226*** | (0.059) | ||||
CSR COMPEXPt−1 = 7 | 0.223*** | (0.077) | ||||
CSR COMPEXPt−1 = 8 | 0.257** | (0.118) | ||||
CSR COMPEXPt−1 = 9 | 0.566*** | (0.146) | ||||
CSR COMPEXPt−1 = 10 | 0.778*** | (0.251) | ||||
CSR COMPEXPt−1 = 11 | 0.801*** | (0.191) | ||||
CSR-specific control variables | ||||||
CSR COMMITTEEt−1 | 0.044** | (0.021) | 0.035* | (0.021) | 0.032 | (0.021) |
CSR REPORTt−1 | 0.077*** | (0.017) | 0.072*** | (0.016) | 0.070*** | (0.016) |
CSR AUDITt−1 | 0.064** | (0.029) | 0.048* | (0.028) | 0.031 | (0.028) |
Corporate governance-specific control variables | ||||||
LT COMPt−1 | 0.044* | (0.024) | 0.041* | (0.023) | 0.045** | (0.023) |
BOD INDt−1 | − 0.004 | (0.003) | − 0.004 | (0.003) | − 0.003 | (0.003) |
BOD TENUREt−1 | 0.009 | (0.028) | 0.007 | (0.028) | 0.016 | (0.026) |
BOD FEMALEt−1 | 0.023*** | (0.008) | 0.024*** | (0.008) | 0.025*** | (0.007) |
Other firm-specific control variables | ||||||
Ln(SALESt−1) | 0.004 | (0.021) | 0.013 | (0.020) | 0.028 | (0.021) |
ROEt−1 | 0.000 | (0.001) | 0.000 | (0.001) | 0.000 | (0.001) |
LEVt−1 | − 0.145*** | (0.052) | − 0.142*** | (0.051) | − 0.158*** | (0.051) |
MTBt-1 | 0.007*** | (0.002) | 0.007*** | (0.002) | 0.007*** | (0.002) |
Industry-year FE | Yes | Yes | Yes | |||
State-year FE | Yes | Yes | Yes | |||
Firm FE | Yes | Yes | Yes | |||
Number of observations | 4472 | 4472 | 4472 | |||
Number of distinct firms | 746 | 746 | 746 | |||
R2 | 0.784 | 0.786 | 0.793 |
Inferring Causality via the Timing of Incentive Adoption
DV = | Ln(1 + CSR SCOREt) | |
---|---|---|
b | se | |
Independent variables | ||
CSR_COMPt−1 | 0.022 | (0.019) |
CSR_COMP adoptiony + 3 | 0.009 | (0.015) |
CSR_COMP adoptiony + 2 | 0.007 | (0.018) |
CSR_COMP adoptiony + 1 | 0.015 | (0.024) |
CSR_COMP adoptiony | 0.018 | (0.027) |
CSR_COMP adoptiony − 1 | 0.011 | (0.038) |
CSR_COMP adoptiony − 2 | 0.058 | (0.042) |
CSR_COMP adoptiony − 3 | 0.092** | (0.047) |
CSR_COMP adoptiony − 4 | 0.136** | (0.054) |
CSR_COMP adoptiony − 5 | 0.240*** | (0.066) |
CSR_COMP adoptiony − 6 | 0.255*** | (0.075) |
CSR_COMP adoptiony − 7 | 0.261*** | (0.093) |
CSR_COMP adoptiony − 8 | 0.289** | (0.131) |
CSR_COMP adoptiony − 9 | 0.599*** | (0.158) |
CSR_COMP adoptiony − 10 | 0.814*** | (0.258) |
CSR_COMP adoptiony − 11 | 0.838*** | (0.203) |
CSR-specific control variables | ||
CSR_COMMITTEEt-1 | 0.032 | (0.020) |
CSR_REPORTt-1 | 0.068*** | (0.017) |
CSR_AUDITt-1 | 0.032 | (0.028) |
Corporate governance-specific control variables | Included | |
Other firm-specific control variables | Included | |
Industry-year FE | Yes | |
State-year FE | Yes | |
Firm FE | Yes | |
Number of observations | 4472 | |
Number of distinct firms | 746 | |
R2 | 0.793 |
Analysis Based on Strengths and Concerns
DV = | Ln(1 + ENV CONCERNSt) | Ln(1 + ENV STRENGTHSt) | Ln(1 + SOC CONCERNSt) | Ln(1 + SOC STRENGTHSt) | ||||||
---|---|---|---|---|---|---|---|---|---|---|
(1) | (2) | (3) | (4) | |||||||
b | se | b | se | b | se | b | se | |||
CSR COMPt−1 | − 0.021 | (0.022) | − 0.061** | (0.027) | 0.044 | (0.031) | − 0.011 | (0.038) | ||
Ln(1 + CSR COMPEXPt−1) | − 0.059*** | (0.022) | 0.101*** | (0.027) | − 0.097*** | (0.035) | 0.047 | (0.035) | ||
CSR-specific control variables | ||||||||||
CSR COMMITTEEt−1 | − 0.018 | (0.024) | 0.052 | (0.032) | − 0.072** | (0.035) | 0.053 | (0.04) | ||
CSR REPORTt−1 | 0.017 | (0.019) | 0.184*** | (0.028) | 0.027 | (0.032) | 0.108*** | (0.033) | ||
CSR AUDITt−1 | − 0.057* | (0.033) | 0.091* | (0.048) | − 0.033 | (0.047) | − 0.037 | (0.056) | ||
Corporate governance-specific control variables | ||||||||||
LT COMPt−1 | − 0.049* | (0.027) | 0.005 | (0.037) | 0.028 | (0.049) | 0.101* | (0.056) | ||
Ln(1 + BOD TENUREt−1) | 0.001 | (0.004) | 0.002 | (0.005) | 0.014** | (0.007) | − 0.001 | (0.007) | ||
Ln(1 + BOD INDt−1) | 0.026 | (0.025) | − 0.018 | (0.040) | 0.023 | (0.051) | 0.063 | (0.051) | ||
Ln(1 + BOD FEMALEt−1) | 0.002 | (0.008) | 0.006 | (0.011) | − 0.073*** | (0.015) | 0.021 | (0.015) | ||
Other firm-specific control variables | ||||||||||
Ln(SALESt−1) | 0.106*** | (0.025) | 0.090*** | (0.03) | 0.063 | (0.039) | 0.178*** | (0.048) | ||
ROEt−1 | − 0.001 | (0.000) | 0.000 | (0.000) | − 0.001** | (0.001) | 0.000 | (0.001) | ||
LEVt−1 | 0.117* | (0.068) | 0.087 | (0.079) | 0.277** | (0.115) | − 0.412*** | (0.127) | ||
MTBt−1 | − 0.008*** | (0.003) | − 0.002 | (0.004) | − 0.007 | (0.005) | 0.008* | (0.004) | ||
Industry-year FE | Yes | Yes | Yes | Yes | ||||||
State-year FE | Yes | Yes | Yes | Yes | ||||||
Firm FE | Yes | Yes | Yes | Yes | ||||||
Number of observations | 4472 | 4472 | 4472 | 4472 | ||||||
Number of distinct firms | 746 | 746 | 746 | 746 | ||||||
R-squared | 0.860 | 0.779 | 0.743 | 0.828 |
The Moderating Effect of CSR-Focused Governance Systems
DV = | Ln(1 + CSR SCOREt) | Ln(1 + ENV CONCERNSt) | Ln(1 + ENV STRENGTHSt) | Ln(1 + SOC CONCERNSt) | Ln(1 + SOC STRENGTHSt) |
---|---|---|---|---|---|
(1) | (2) | (3) | (4) | (5) | |
Independent variables | |||||
CSR COMPt−1 | − 0.003 | − 0.032 | − 0.065** | 0.021 | 0.001 |
(0.190) | (1.421) | (2.401) | (0.641) | (0.011) | |
Ln(1 + CSR COMPEXPt−1) | 0.019 | 0.005 | 0.160*** | − 0.025 | 0.011 |
(0.810) | (0.151) | (3.931) | (0.481) | (0.191) | |
CSR-specific control variables | |||||
CSR COMMITTEEt−1 | − 0.016 | 0.003 | 0.065 | 0.013 | 0.008 |
(0.700) | (0.130) | (1.630) | (0.330) | (0.170) | |
CSR REPORTt−1 | 0.043** | 0.042** | 0.184*** | 0.063* | 0.103*** |
(2.350) | (2.101) | (5.750) | (1.701) | (2.701) | |
CSR AUDITt-1 | 0.012 | − 0.016 | 0.106 | 0.032 | − 0.082 |
(0.003) | (0.310) | (1.640) | (0.410) | (1.021) | |
Ln(1 + CSR COMPEXPt-1)*CSR COMMITTEEt−1 | 0.080*** | − 0.034 | − 0.027 | − 0.130*** | 0.072 |
(3.050) | (1.030) | (0.690) | (3.060) | (1.580) | |
Ln(1 + CSR COMPEXPt−1)*CSR REPORTt−1 | 0.062*** | − 0.054* | 0.000 | − 0.077* | 0.013 |
(2.600) | (1.880) | (0.001) | (1.731) | (0.280) | |
Ln(1 + CSR COMPEXPt−1)*CSR AUDITt−1 | 0.004 | − 0.021 | − 0.018 | − 0.017 | 0.029 |
(0.130) | (0.461) | (0.301) | (0.270) | (0.440) | |
Corporate governance-specific control variables | Included | Included | Included | Included | Included |
Other firm-specific control variables | Included | Included | Included | Included | Included |
Industry-year FE | Yes | Yes | Yes | Yes | Yes |
State-year FE | Yes | Yes | Yes | Yes | Yes |
Firm FE | Yes | Yes | Yes | Yes | Yes |
Number of observations | 4472 | 4472 | 4472 | 4472 | 4472 |
Number of distinct firms | 746 | 746 | 746 | 746 | 746 |
R-squared | 0.7904 | 0.7904 | 0.797 | 0.844 | 0.833 |