CEO Pay Sensitivity (Delta and Vega) and Corporate Social Responsibility

We use CEO pay sensitivity to stock performance (delta) and stock volatility (vega) to provide empirical evidence that CEO compensation structure influences firm Corporate Social Responsibility (CSR) performance. We find that delta has no significant effect on CSR, while vega has a strong, causal re...

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Bibliographic Details
Published inSustainability Vol. 12; no. 19; p. 7941
Main Authors Ikram, Atif, Li, Zhichuan (Frank), MacDonald, Travis
Format Journal Article
LanguageEnglish
Published Basel MDPI AG 01.10.2020
Subjects
Compensation
Corporate structure
Decision making
Equity
Executive compensation
Expected utility
Incentives
Investments
Net present value
Power
Put & call options
Research & development expenditures
Sensitivity
Social responsibility
Stock options
Stockholders
Sustainability
Volatility
Wages & salaries
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Summary:We use CEO pay sensitivity to stock performance (delta) and stock volatility (vega) to provide empirical evidence that CEO compensation structure influences firm Corporate Social Responsibility (CSR) performance. We find that delta has no significant effect on CSR, while vega has a strong, causal relationship with CSR. Our findings suggest that CEOs do not view CSR as value enhancing, but as a way to increase their own compensation through vega. Firms that want to improve their social performance should consider vega as an important compensation incentive for executives.
ISSN:2071-1050
2071-1050
DOI:10.3390/su12197941