From shareholder to stakeholder engagement: How regular and irregular corporate social responsibility affects CEO compensation

The present study aims to uncover the role of regular and irregular CSR in CEO compensation contracts. Taking sample of non-financial Chinese listed firms from 2010 to 2020, this study employed a panel data regression model. According to traditional agency theory, CSR can increase shareholder wealth. This theory is not supported by the actual findings of the study, which indicate a negative relationship between CSR and CEO compensation. In further analysis, we disintegrate CSR and finds that regular CSR is positively associated with CEO compensation, showing that CEOs are compensated for maintaining an optimal level of CSR. In contrast, irregular CSR has a negative relationship with CEO compensation, indicating that when CSR investments deviate from their optimal level, they may have a negative impact on shareholders wealth by transferring wealth from shareholder to stakeholder; resulting in a decrease in CEO compensation. We conclude by establishing an inverted U-shaped relationship between CEO compensation and CSR. The present study's conclusions are supportive and provide vital insights for future research and business operations. Moreover, policymakers can utilize our findings while negotiating CEO compensation contracts.