Incentivizing CEOs to Build Customer- and Employee-Firm Relations for Higher Customer Satisfaction and Firm Value
Journal of the Academy of Marketing Science, 40(6), 745-58, 2012
15 Pages Posted: 4 May 2013
Date Written: 2012
Abstract
This research reveals customer- and employee-firm relations to be two routes by which firms can leverage executive incentive structures to create customer and firm value. Analyses of a unique dataset with multiple archival sources show that (1) increases in the proportion of CEOs’ long-term equity-based compensation positively influence actions that build customer- and employee-firm relations as measured by the Kinder, Lydenberg, Domini & Co. (KLD) data source, (2) such effects are stronger in unstable markets, and (3) customer and employee relationship-building actions affect firm value both directly and indirectly via the mediator of customer satisfaction as measured by the American Customer Satisfaction Index (ACSI) data source. The findings have implications for the improvement of customer satisfaction, the role of marketing in the organization, and the design of CEO incentive packages leading to higher customer satisfaction and firm value.
Keywords: CEO compensation, Customer-firm relations, Employee-firm relations, Customer satisfaction, Firm value
JEL Classification: M21, M31, G00, G12, L86, M00, M30, M14
Suggested Citation: Suggested Citation
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