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We examine the impact of corporate social responsibility on the responsiveness of chief executive officers’ (CEO) cash compensation to firm performance. Compensation research finds that CEO cash compensation is positively related to positive earnings, but is not related to negative earnings. These results imply CEOs are protected from the adverse effect of firm losses. We find that socially responsible firms are more likely to reduce CEO cash compensation when the firm reports negative earnings than are less socially responsible firms. These results suggest that socially responsible firms are more likely to implement a cash compensation policy where the CEOs of socially responsible firms benefit from firm profits and are held responsible for firm losses.
Xianjing Bordere, University of Alabama-Tuscaloosa
Linda M Parsons, University of Alabama-Tuscaloosa
Gary K Taylor, University of Alabama-Tuscaloosa