Essays on Executive Compensation, Corporate Social Responsibility, and Firm Performance

Using a large sample of 1301 US firms for the period of 1993 to 2013, the associations between Corporate Social Responsibility (CSR), Executive Compensation, and Firm Performance are revisited. This study contributes to the literature on executive compensation structure, CSR, and firm performance, by examining the moderating effect of the Golden Parachute (GP) on these associations. The findings in essay1 suggest that there exists an inverse relationship between current (long-term) compensation and firms’ CSR performance. While the direct association between the GP and CSR is negative, the test for a moderating effect reveals that the GP and long-term compensation jointly and positively increase firms’ CSR performance. This is consistent with the expectation that executives with a GP clause seek to maximize their long-term wealth by approving of mostly value-enhancing CSR projects that positively enhance firm financial performance. Furthermore, the results in this essay also suggest that female executives are more likely than their male counterparts to promote CSR engagements. Older executives are less willing to engage in CSR even with the GP clause, and current compensation increases CSR concerns at a greater magnitude than long-term compensation. vi The findings in essay 2 suggest that the association between CSR and firm performance, ROA, is positive. The test to examine the moderating effect of the GP produced empirical evidence to suggest that the GP amplifies the positive association between CSR and ROA. That is, CEOs that have the GP clause in their executive compensation contract, to a greater extent, engage in more value-enhancing CSR projects than their counterparts who do not have the GP clause. The results in this essay also suggest that CEOs with a GP clause do not especially invest in external CSR projects like they do in internal CSR projects. That is, CEOs that are endowed with a GP clause project a preferential inclination towards internal CSR projects. Lastly, this essay provided empirical evidence that lends credence to the argument that the uncertainty surrounding the financial payoffs CSR investments could actually increase the volatility of the