CEO Risk Taking Equity Incentives and Workplace Misconduct

61 Pages Posted: 16 Jan 2020 Last revised: 10 Apr 2020

See all articles by Justin Chircop

Justin Chircop

Lancaster University Management School

Monika Tarsalewska

University of Exeter Business School

Agnieszka Trzeciakiewicz

Hull University Business School

Date Written: December 30, 2019

Abstract

We examine the relation between CEO risk taking equity incentives, as captured by CEO vega, and workplace misconduct. Workplace misconduct includes health and safety violations, non-compliance with labor laws, and other violations broadly related to labor exploitation. Using regression analysis, matched sample tests, and a quasi-natural experiment we find a positive relation between CEO vega and workplace misconduct. We identify a reduction in discretionary expenses and increased pressure on employees to perform as potential channels through which CEO vega affects workplace misconduct. Finally, we find evidence that the negative consequences of workplace misconduct are outweighed by increased earnings. These results suggest that CEO risk taking equity incentives not only influence investment and financial decision making, but also affect operational decision making.

Keywords: Workplace Misconduct, Executive Compensation, Risk taking Equity Incentives

JEL Classification: G30, G32, G34

Suggested Citation

Chircop, Justin and Tarsalewska, Monika and Trzeciakiewicz, Agnieszka, CEO Risk Taking Equity Incentives and Workplace Misconduct (December 30, 2019). Available at SSRN: https://ssrn.com/abstract=3511638 or http://dx.doi.org/10.2139/ssrn.3511638

Justin Chircop (Contact Author)

Lancaster University Management School ( email )

Lancaster University
Lancaster, Lancashire LA1 4YX
United Kingdom

Monika Tarsalewska

University of Exeter Business School ( email )

XFI building, Streatham Campus
Rennes Drive
Exeter, Devon EX4 4ST
United Kingdom

Agnieszka Trzeciakiewicz

Hull University Business School ( email )

Cottingham Road
Hull, Great Britain HU6 7RX
United Kingdom

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