Title: Corporate social responsibility engagement, corporate financial performance and CEO characteristics

Authors: Chao Bian; Christopher Gan; Zhaohua Li; Baiding Hu

Addresses: Faculty of Agribusiness and Commerce, Lincoln University, Ellesmere Junction, Road/Springs Road, Canterbury, PO Box 85084, New Zealand ' Faculty of Agribusiness and Commerce, Lincoln University, Ellesmere Junction, Road/Springs Road, Canterbury, PO Box 85084, New Zealand ' Faculty of Agribusiness and Commerce, Lincoln University, Ellesmere Junction, Road/Springs Road, Canterbury, PO Box 85084, New Zealand ' Faculty of Agribusiness and Commerce, Lincoln University, Ellesmere Junction, Road/Springs Road, Canterbury, PO Box 85084, New Zealand

Abstract: The current study examines the effect of corporate social responsibility (CSR) engagement on corporate financial performance (CFP). Prior studies document a positive CSR-CFP association without considering the moderating effects of chief executive officer (CEO) characteristics such as compensation incentives and tenure. Our results show evidence of a positive association between CSR and CFP only in the firms managed by short-tenured, high-cash paid CEOs and particularly during an industry's cooling-off period. The results imply that the incentives embedded in the current CEO pay are not effective and CEOs use CSR as a compensation management tool to increase their share-based pay. To encourage a CEO to implement CSR engagement, particularly during an industry's boom period, the board of directors should decrease common-share payments and increase the CEO's option payments. In addition, the proportion of cash compensation in the CEO's total compensation should not be reduced.

Keywords: corporate social responsibility; CSR; corporate financial performance; CFP; Chief Executive Officer; CEO characteristics; tenure; industry cycles; firm performance; compensation incentives; CEO tenure; compensation management; share-based pay; common-share payments; option payments; cash compensation.

DOI: 10.1504/IJBGE.2016.081639

International Journal of Business Governance and Ethics, 2016 Vol.11 No.3, pp.243 - 265

Received: 24 Oct 2015
Accepted: 17 Oct 2016
Published online: 18 Jan 2017 *

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