Executive Compensation in Socially Responsible Firms

10 Pages Posted: 17 Sep 2006

See all articles by Edward Nelling

Edward Nelling

Drexel University - Department of Finance

Melissa B. Frye

University of Central Florida - College of Business Administration

Elizabeth Webb

Federal Reserve Bank of Philadelphia

Abstract

This study examines chief executive officer (CEO) compensation and turnover in socially responsible (SR) firms. We compare characteristics of SR firms with a matched sample of firms based on industry and size. Analysis of CEO compensation indicates that the link between CEO pay and firm performance is weaker for SR firms than for non-SR firms. CEO turnover tests indicate that SR firms are more likely to experience CEO turnover following poor performance. Stock option grants to CEOs of SR firms do not appear to result in future risk-taking behaviour, whereas such grants are significantly related to future risk at non-SR firms.

Suggested Citation

Nelling, Edward F. and Frye, Melissa and Webb, Elizabeth, Executive Compensation in Socially Responsible Firms. Corporate Governance: An International Review, Vol. 14, No. 5, pp. 446-455, September 2006, Available at SSRN: https://ssrn.com/abstract=930768 or http://dx.doi.org/10.1111/j.1467-8683.2006.00517.x

Edward F. Nelling (Contact Author)

Drexel University - Department of Finance ( email )

LeBow College of Business
Philadelphia, PA 19104
United States
215.895.2117 (Phone)
215.895.2955 (Fax)

Melissa Frye

University of Central Florida - College of Business Administration ( email )

P.O. Box 161400
Department of Finance
Orlando, FL 32816
United States
407-823-3097 (Phone)

Elizabeth Webb

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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