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Agency problems are more severe for multinational corporations (MNCs) and multinational enterprises compared to their domestic counterparts. As companies develop diversified operations, their managers face more challenges. An incentive compensation structure has been designed to align the benefits of managers with those of shareholders. Additionally, corporate social responsibility (CSR) has become increasingly crucial for companies. MNCs must gain the trust of more investors to improve their corporate reputation and financial performance. CSR enables MNCs with a high sense of social responsibility to expand their investor base, reduce perceived risks, and decrease information asymmetry. Our empirical findings reveal that Taiwanese MNCs can enhance their performance by implementing cash-based compensation and pursuing CSR activities.

Given the serious question raised by the subprime of the 2008 global financial crisis over the rising practices of excessive rewarding of executives in the USA and European firms, the executive pay-performance nexus has emerged as a popular topic of debate in the contemporary corporate finance research. Conducted mostly on the Anglo-Saxon contexts, research outcomes have been inconclusive and dichotomous. Considering this backdrop, this study aims to investigate the endogenous relationship between executive compensation and risk taking in the context of the USA.

Using a large sample of non-financial firms from 2010 to 2020 based on panel data and two-stage least square regression. In this study, the riskier corporate decision is measured as book leverage and ratio of R&D expense to total assets. Chief executive officers’ (CEO) experience and age are used as instrumental variables, and these are expected to influence compensation incentives and, hence, affect firm riskiness indirectly. Firm size, return on assets and CEO turnover are reported to affect compensation and corporate decisions, therefore, included as control variables. Given that higher executive compensation is related to riskier corporate decision in firms, this study incorporates total wealth (i.e. accumulated equity related compensation) as an additional proxy of compensation, and this selection is justifiable by the perfect contracting notion of the agency theory.

The results of this study show a significant positive and increasing nexus among compensation and riskier corporate decisions. Besides, the compensation level proxied through the percentage of each form of compensation in total compensation is very important as greater equity and greater salary diminishes risk taking.

The outcomes of this study have useful implications for firm stakeholders and policymakers.

The level of pay measured by the percentage of each type of compensation in total compensation is of utmost importance as it can increase or decrease risk taking in corporate decisions.

The authors analyze the association between the functional background of the compensation committee chair and CEO compensation. The analysis is motivated by the continuing debate about the reasonableness of executive pay patterns and the growing emphasis on the role of compensation committees.

The authors define three expert categories—accounting, finance, and generalist—and collect data on the compensation committee (CC) chairs of the S&P 500 firms from 2008 to 2018. The authors run an ordinary least square model and regress CEO total and cash compensation on the three expert categories.

The authors find that firms in which the CC chair has expertise in accounting, finance, and general business favor performance measures that are more aligned with accounting, finance, and general business, respectively. There is little evidence that CC chairs who are CEOs of other firms endorse more generous pay for the host CEO; the authors find some evidence that CC chairs tenure relative to the host CEO's is negatively associated with the level of the CEO's pay.

This study suggests that firms and regulators should consider the background of the compensation committee chair to understand the variations in top executive.

Companies desiring to link executive compensation to particular areas of strategy must also consider matching the functional background of the compensation committee chair with the target strategy areas. From regulatory standpoint, requiring compensation committees to operate independent of inside directors can reduce attempts by inside directors to skim the process, but a failure to also consider the impact of compensation committees' discretion over the pay-setting process can distort the executives' pay-performance relation.

This is the first study to examine the effects of the functional background of the compensation committee chair on CEO compensation.

The authors examine the association between corporate social responsibility (CSR) and abnormal executive compensation. The authors hypothesize that socially responsible firms are more likely to pay their executives at a level that is in line with economic determinants.

Using the expected compensation model developed by Core et al. (2008), the authors test our hypothesis using a large sample of US public companies.

The authors find that CSR performance is negatively associated with how much executive compensation deviates from the expected level. The authors further examine whether CSR performance is associated with excess compensation or inadequate compensation and find that socially responsible firms are less likely to pay their executives either excessively or inadequately.

This study provides evidence on the association between CSR performance and abnormal executive compensation, especially how CSR is associated with inadequate compensation, an area that has been largely overlooked by the literature.

The authors extend the recent research using the risk component of human resource’s (HR’s) compensation plans to examine the effects of risk components on two strategic outcomes: within-firm temporal change, or strategic variation, and firm strategic divergence from the industry, or strategic deviation. In addition, the authors examine the role of previous financial performance as a boundary moderator condition of the effects of risk components in the compensation plan and firm strategic outcomes.

To examine the effects of low- and high-risk components of executive compensation on strategic variation and deviation over time, the authors collected data from 2,510 companies listed in the Standard and Poor’s 500 index in a panel data format of a 12-year period. The authors gathered financial and other firm-level data from COMPUSTAT, and executive compensation and executive-level data from ExecuComp.

The findings support the main effects of risk components on strategic change, while both high- and low-risk components act on strategic deviation contingent on the moderating role of total shareholder return (TSR). In the theoretical framework, the authors test the moderating role of total shareholder return (TSR) as a boundary condition of the effects of risk components in the compensation plan. In doing so, the authors provide a fine-grained understanding of the influence of compensation plan risk components on outcomes proximal to executives, such as the maintenance of the status quo and the search for financial gains.

New studies can explore a three-way moderating effect on performance indicators, such as TSR, Tobin’s Q and return on asset. The authors addressed this limitation and did a comparative analysis, but the authors did not include additional moderating mechanisms in these interactive effects.

By disaggregating the executive’s compensation based on the risk components, boards of directors can mitigate any possible unwanted biases in the relationship between principal and agent.

By considering the influence of both low- and high-risk components of compensation plans on strategic outcomes –instead of firm performance – this study expands strategy literature supporting the influence of compensation schema on a firm’s outcomes. This path is new because it offers a moderating perspective to understand the strategic deviations and changes that chief executive officers imprint in their firms.

Los autores amplían la investigación reciente usando el componente de riesgo de los planes de compensación de RH para examinar los efectos de los componentes de riesgo en dos resultados estratégicos: cambio temporal dentro de la empresa, o variación estratégica, y divergencia estratégica de la empresa de la industria, o desviación estratégica. Además, examinamos el papel del desempeño financiero anterior como una condición moderadora límite de los efectos de los componentes de riesgo en el plan de compensación y los resultados estratégicos de la empresa.

Para examinar los efectos de los componentes de alto y bajo riesgo de la compensación ejecutiva en la variación y desviación estratégica a lo largo del tiempo, recopilamos datos de 2510 empresas que figuran en el índice Standard & Poor's 500 en un formato de datos de panel de un período de 12 años. Los autores recopilaron datos financieros y de otro tipo a nivel de empresa de COMPUSTAT, y compensación de ejecutivos, y datos a nivel ejecutivo de EXECUCOMP.

Nuestros hallazgos respaldan los efectos principales de los componentes de riesgo en el cambio estratégico, mientras que los componentes de alto y bajo riesgo actúan sobre la desviación estratégica dependiendo del papel moderador del rendimiento total del accionista. En el marco teórico, los autores prueban el papel moderador del Retorno Total del Accionista como condición límite de los efectos de los componentes de riesgo en el plan de compensación. Al hacerlo, brindamos una comprensión detallada de la influencia de los componentes de riesgo del plan de compensación en los resultados próximos a los ejecutivos, como el mantenimiento del statu quo y la búsqueda de ganancias financieras.

al considerar la influencia de los componentes de bajo y alto riesgo de los planes de compensación en los resultados estratégicos, en lugar del desempeño de la empresa, este estudio amplía la literatura de estrategia que respalda la influencia del esquema de compensación en los resultados de una empresa. Este camino es nuevo porque ofrece una perspectiva moderadora para entender las desviaciones y cambios estratégicos que los CEOs imprimen en sus firmas.

los nuevos estudios pueden explorar un efecto moderador de tres vías en los indicadores de rendimiento, como TSR, Tobin's Q y ROA. Abordamos esta limitación e hicimos un análisis comparativo, pero no incluimos mecanismos moderadores adicionales en estos efectos interactivos.

al desagregar la compensación del ejecutivo en función de los componentes de riesgo, las juntas directivas pueden mitigar cualquier posible sesgo no deseado en la relación entre el principal y el agente.

Os autores estendem a pesquisa recente usando o componente de risco dos planos de remuneração de RH para examinar os efeitos dos componentes de risco em dois resultados estratégicos: mudança temporal dentro da empresa, ou variação estratégica, e divergência estratégica da empresa do setor, ou desvio estratégico. Além disso, examinamos o papel do desempenho financeiro anterior como uma condição moderadora dos efeitos dos componentes de risco no plano de remuneração e nos resultados estratégicos da empresa.

Para examinar os efeitos dos componentes de baixo e alto risco da remuneração executiva na variação e desvio estratégico ao longo do tempo, coletamos dados de 2.510 empresas listadas no índice Standard & Poor's 500 em um formato de dados de painel de um período de 12 anos. Os autores coletaram dados financeiros e de outros níveis da empresa da COMPUSTAT, remuneração executiva e dados de nível executivo da EXECUCOMP.

Nossos resultados suportam os principais efeitos dos componentes de risco na mudança estratégica, enquanto os componentes de alto e baixo risco atuam no desvio estratégico contingente ao papel moderador do Retorno Total ao Acionista. No referencial teórico, os autores testam o papel moderador do Total Shareholder Return como condição limite dos efeitos dos componentes de risco no plano de remuneração. Ao fazer isso, fornecemos uma compreensão refinada da influência dos componentes de risco do plano de remuneração nos resultados próximos aos executivos, como a manutenção do status quo e a busca por ganhos financeiros.

ao considerar a influência dos componentes de baixo e alto risco dos planos de remuneração nos resultados estratégicos -em vez do desempenho da empresa- este estudo expande a literatura de estratégia que apoia a influência do esquema de remuneração nos resultados de uma empresa. Esse caminho é novo porque oferece uma perspectiva moderadora para entender os desvios e mudanças estratégicas que os CEOs imprimem em suas empresas.

Novos estudos podem explorar um efeito moderador de três vias em indicadores de desempenho, como TSR, Q de Tobin e ROA. Abordamos essa limitação e fizemos uma análise comparativa, mas não incluímos mecanismos moderadores adicionais nesses efeitos interativos.

Ao desagregar a remuneração do executivo com base nos componentes de risco, os conselhos de administração podem mitigar possíveis vieses indesejados na relação entre principal e agente.

This study investigates the empirical association between environmental, social and corporate governance (ESG) performance and top executive compensation in the US financial services industry. Considering that financial firms can inflict systemic shocks across the economy, it has been argued that they must conduct ethical and sustainable business in accordance with ESG principles. This study examines whether ESG efforts are beneficial to managers.

The authors use CEO compensation and ESG performance ratings data for all US financial firms (SIC 6000–6799) from 2015 to 2019. Employing fixed effects regressions, the authors test whether lagged ESG performance is related to CEO compensation, after controlling for other firm characteristics such as size, financial performance, leverage and CEO stock ownership.

The authors find that lagged ESG ratings are strongly associated with all forms of compensation. An increase of one standard deviation in the composite ESG rating is associated with a 14%–16% increase in the total pay. Among the three ESG pillars, only S (social) and G (governance) exhibit persistent and significant associations with both short- and long-term executive pay. The authors also document the significant moderating effects of ESG on the relationships among firm performance, size, leverage, ownership and executive pay, identifying how ESG is associated with compensation.

The authors conclude that managers receive ESG incentives implicitly and explicitly. The novel finding of direct and indirect associations between ESG and top executive compensation contributes to the growing ESG literature on the financial sector and ongoing debate about the explicit inclusion of ESG targets in compensation design.

This paper aims to review empirical research on the relationship between institutional ownership (IO) and board governance (85 studies).

Based on agency and upper echelons theory, the heterogeneous monitoring function of specific types and the nature of institutional investors on board composition, compensation and chief executive officer (CEO) characteristics will be focused.

The author found that most studies have referred to archival studies, analyzed the impact of board governance on IO, focused on CEO characteristics, neglected IO heterogeneity and advanced regression models to address endogeneity concerns. In line with the theoretical framework, the relationship between total IO and board governance is heterogeneous. However, specific types such as foreign, dedicated and pressure-resistant institutions represent active monitoring tools and push for increased board governance.

The author provided useful recommendations for future research from a content and methodological perspective, e.g. the need for analyzing the impact of IO on sustainable board governance and other characteristics of top management team members, e.g. the chief financial officer.

As many regulatory bodies implemented regulations to promote shareholder rights and board governance, this literature review highlights the connections of both corporate governance mechanisms. Managers should conduct a careful and timely investor analysis and change the composition and compensation of the board of directors in line with institutional investors’ preferences.

This analysis makes useful contributions to prior research by focusing on IO and board governance, whereas the author structured the heterogeneous variables and results within the structured literature review. The authors guides researchers, regulatory bodies and business practice in this corporate governance topic.

This paper contributes to the literature as follows. First, it examines if option and stock compensations raise creditor's risk, and which one is more important than the other. Second, it explores if CEO's compensation interacts with CEO overconfidence to raise creditor's risk. Third, it investigates how banks use different loan terms to alleviate their credit risk.

This study used advanced regression analysis and use of generalized methods of moment methodology.

The results show that option compensation is more important than stock compensation in raising credit risk; option compensation interacts with CEO overconfidence, giving rise to a much higher credit risk; and covenant usage is more important than other loan contract terms in mitigating credit risk given that covenant use could not be substituted away by using other loan contract terms such as increasing interest rate, reducing principal or shortening loan duration. This paper has practical implications for credit markets.

The main implication is that hand-collect data are available up to 2010.

It informs creditors the potential sources of loan risk emanating from option rather than stock incentives; it informs creditors that option incentive interacts with CEO overconfidence rendering the credit risk bigger than expected, and it informs creditors the importance of using covenants vis-à-vis other loan contract terms for mitigating compensation and overconfidence risk.

Banks are alerted to the risk due to the interaction between overconfidence and compensations, implying that overconfident managers remunerated with options compensations are more risky than overconfident managers who are not remunerated as such.

This paper is original: (1) The authors show that option compensation is more risky than stock compensation from viewpoint of creditors. This has not been assessed. (2) Interaction between managerial compensation and managerial overconfidence has not been assessed before. (3) Use of different loan contract terms to alleviate risk from overconfident managers (who are prone to over investment but who are innovative according to the literature) has not been evaluated.

This paper aims to investigate whether executive compensation, corporate social responsibility (CSR)-based incentives, environmental social and governance (ESG) performance and firm performance are the significant predictors of CSR committees, in addition to CEO, firm and corporate governance characteristics, from the tenet of stakeholder and managerial power theories.

Switzerland is an exemplary country from the perspective of corporate governance and executive compensation. This empirical study includes a panel data set of listed Swiss companies, so fixed-effect logistic regression has been used.

It has been found that the companies that offer CSR-based incentives and higher compensation to their CEOs and have better ESG performance are more likely to have CSR committees.

This empirical paper fills the gap in the literature, guides practitioners about the factors that influence the creation and efficiency of CSR committees, and inspires regulatory bodies to ponder on a mandatory CSR committee to form resilient and sustainable organizations worldwide.

COVID-19 has re-emphasized the prominence of sustainability and the stakeholder approach. Thus, this paper indicates that CSR committees require the adaption and implementation of a holistic sustainability policy that integrates both external and internal factors and thereby provides a whole process for sustainability issues.

The impact of CSR committees on corporate social performance (CSP) has already been investigated. However, the predictors of CSR committees have been less scrutinized in the literature.

In this paper, the impact of stock-based compensation and further the joint effects of stock-based compensation and investor sentiment on pension discount rate choice is examined.

The hypotheses is tested using fixed effects models and instrumental variable analysis where pension discount rate is the dependent variable, and stock-based compensation and investor sentiment are our variables of interest.

It was found that pension discount rate is negatively associated with managers' stock-based compensation. Further analysis indicates that managers with larger stock-based compensation tend to adjust down their pension discount rates in higher (smaller) degree, responding to high (low) investor sentiment.

The findings provide important insights into how managers use pension discount rates to engage in earnings management. Understanding these relationships has implications for interpreting pension numbers reported in the financial statements and designing pension accounting rules that minimize the possibility that managers take advantage of the complexity associated with pension accounting to influence the reported earnings and executive compensation. Moreover, the findings suggest the need for increased attention from boards of directors, auditors and regulators to reported pension liabilities and service costs, especially for firms paying higher proportion of stock-based compensation to managers and during periods of high investor sentiment.

The findings contribute to the extant literature by identifying the joint impacts of stock-based compensation and investor sentiment as incentives for pension discount rate manipulation. The empirical results of this study also have important implications for corporate governance and regulation.