David Bourget (Western Ontario)
David Chalmers (ANU, NYU)
Rafael De Clercq
Ezio Di Nucci
Jack Alan Reynolds
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Journal of Business Ethics 69 (4):317 - 329 (2006)
This paper divides firms in the Standard and Poor’s 500 (S&P 500) into two groups based on inclusion in or exclusion from the Domini Social Index (DSI). Inclusion in the DSI is interpreted as a positive indicator of ethical status. Using data for the 1992–2003 period, I provide evidence that chief executive officer (CEO) compensation, other executive compensation, and director compensation tend to be lower in DSI firms than in other firms in the S&P 500. This applies to the unconditional group averages (and medians) and is particularly striking given that DSI firms as a group had better financial performance than the other firms. This finding is also true in a regression framework that controls for other influences on compensation, including firm size and financial performance. In a regression context, the estimated discount for CEOs of DSI firms is approximately 12% for both current compensation (salary and bonuses) and total compensation (including the value of options). These results are consistent with the expectation that some senior executives require a “compensating differential” to accept positions in firms with less attractive ethical status. It is also consistent with the expectation that some firms with positive ethical status might use more restraint in setting executive compensation.
|Keywords||compensating differential corporate social responsibility Domini Social Index ethical funds executive compensation|
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References found in this work BETA
Mel Perel (2003). An Ethical Perspective on CEO Compensation. Journal of Business Ethics 48 (4):381-391.
Lorne S. Cummings (2000). The Financial Performance of Ethical Investment Trusts: An Australian Perspective. [REVIEW] Journal of Business Ethics 25 (1):79 - 92.
Donald Nichols & Chandra Subramaniam (2001). Executive Compensation: Excessive or Equitable? [REVIEW] Journal of Business Ethics 29 (4):339 - 351.
Citations of this work BETA
Christophe Revelli & Jean‐Laurent Viviani (2015). Financial Performance of Socially Responsible Investing : What Have We Learned? A Meta‐Analysis. Business Ethics: A European Review 24 (2):158-185.
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