Corporate Social Responsibility And Executive Compensation...

Corporate Social Responsibility and Executive Compensation with Firm Performance Introduction The last two decades has seen a significant increase in firm’s investment on corporate social responsibilities (CSR). Jo and Harjoto (2011) propose that a social responsible firm cares about how its operating affects stakeholders, community and environment in the ways that is beyond the legal requirement. The increasing importance of CSR has raised many debates on its influence on firm’s performance, shareholder value, and whether it increase the agency costs of management and shareholders. Executive compensation serves as an important tool in corporate governance. As CSR is a long-term investment with immediate cost showed in financial report in current period and uncertain payoff in the future, the managers may be unwilling to invest in CSR, even though it benefits the shareholders and increases firm value in the long term. While executive compensation is critical in aligning the interests of shareholders and managers, the decision of CSR commitment can be influenced by the management compensation. The area of CSR and executive compensation related to firm’s financial performance has been extensively studied, however, the perspective of CSR with firm’s executive compensation has not been widely researched. This study is aimed to explore the links between the CSR and executive compensation in terms of firm performance. In this paper, the focus is on how CSR-linked executiveShow MoreRelatedCorporate Governance Of A Company1306 Words   |  6 Pagesâ€Å"Corporate governance, according to the Organisation for Economic Cooperation and Development (OECD), is ‘the system by which businesses are directed and controlled.’† (cited in Britton Waterston, 2010, p.235) Corporate governance of a company maintains the welfare of the stakeholders in an organisation. 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