Twenty-fourth International Conference on Knowledge, Culture, and Change in Organizations

Abstract

This study empirically examines whether Corporate Social Responsibility (CSR) affects the remuneration of bank and other financial executives. Specifically, we test whether CSR performance directly impacts executive compensation or indirectly moderates it. To test the proposed hypotheses, we employed the lagged regression analysis. Our initial sample includes all U.S. banks and financial institutions (SIC 6000–6799) listed on COMPUSTAT. Our final sample consists of 1,425 firm-year observations for the 5-year period from 2014 to 2018, immediately prior to COVID. The results show that CSR performance significantly and positively impacts bank and financial executives’ cash compensation (salary and bonus). As expected, CSR performance significantly and positively moderates and interacts with market performance (stock price) and cash compensation, CSR performance also significantly and positively moderates the relationship between firm size and cash compensation, Contrary to expectations, CSR performance has a significant but negative moderating effect on the relationship between accounting performance (ROE) and executive pay. The results of additional studies suggest that CSR performance does not influence the long-term and total compensation of bank and financial executives, which accounts for a major portion of executive compensation. Our research is significant and important because it represents a new line of study examining the moderating effect of CSR performance on the remuneration of bank and financial executives. Prior research on this relationship has been limited and, at best, shows mixed results. Our study provides additional insights into the pay-for-performance relationship between bank and financial executives.