Research On The Impact Of Executive Compensation On Corporate Social Responsibility

With the continuous development of the number and scale of listed firms,people pay more and more attention to corporate social responsibility.The social responsibility behavior is of great significance for maintaining the needs of stakeholders,promoting the harmonious and stabling the development of the whole society.Existing literatures have discussed the influencing factors of corporate social responsibility.However,based on the incentive mechanism of executive compensation,the discussion on the impact of executive compensation on social responsibility still has some limitations.Based on the existing research and the social comparison theory,tournament theory and principal-agent theory,this paper analyzes the incentive mechanism of executive compensation and explores how to stimulate executives’ enthusiasm for social responsibility;analyze the company’s risk decisions,and find the path for the company to balance risk bearing and social responsibility;analyze the strategic adjustment strategy of the company under the uncertain environment and analyze the incentive mechanism to promote the sustainable development of the company.This paper uses two sub-studies to explore the influencing factors of listed companies’ social responsibility.Sub study 1analyzes the driving mechanism of social responsibility of listed companies,and examines the impact of executive compensation incentive mechanisms in different dimensions on the performance of social responsibility of listed companies.Through theoretical deduction and empirical test,it is found that executive compensation plays a role in promoting social responsibility of listed companies.This paper examines the role of executive compensation incentive mechanism on social responsibility of listed companies from three perspectives: external pay gap,internal pay gap and pay stickiness.It is found that the three kinds of salary incentive mechanisms can effectively promote the social responsibility of listed companies.thus we put forward the research questions: first,how to further enhance the enthusiasm of corporate social responsibility.To some extent,social responsibility is contrary to the firm’s economic goals.The most fundamental goal of listed firms is to maximize the interests.However,social responsibility requires a certain cost,but it can not bring accurate measured benefits to the firms.This paper attempts to explore how to motivate executives’ enthusiasm of social responsibility from the perspective of executive compensation incentive.Second,how should the company weigh the risks,responsibilities and performance.Risk-taking and social responsibility are relatively complementary strategic decisions.Risk preference managers are more willing to invest in projects with higher risks and greater future performance.Thus,it encroaches on the resources necessary for the company to fulfill its social responsibility.On the other hand,corporate social responsibility can help firm add social capital,which can help the firm spread risks and improve investment efficiency.This paper attempts to find a way to balance risk-taking and social responsibility,so as to provide an effective way for companies to achieve stable performance improvement.Third,how should the firms make strategic planning in the face of environmental uncertainty.The external environment plays a vital role in the survival and development of a firm.In an uncertain environment,firms have to choose investment projects more carefully.Corporate social responsibility is conducive to helping establish friendly cooperative relations with suppliers and consumers,so as to resist the impact of external changes.Therefore,it is important for the sustainable development to explore the strategic adjustment strategies that the company may adopt in the face of uncertain external environment.This article attempts to explore the incentive factors that promote the social responsibility of listed companies,and examines the impact of executive compensation on social responsibility from the perspective of executive compensation incentive.The main innovation lies in: First,salary incentive can effectively safeguard the interests of stakeholders.Through theoretical deduction and empirical test,this paper finds that multi-dimensional salary incentive mechanism can improve executives’ satisfaction with the company.In order to further consolidate and enhance their reputation,senior executives prefer to enhance the degree of social recognition of the company by fulfilling their social responsibilities.Second,it is of great significance for the long-term development of the company to moderately reduce the level of risk bearing.Although the executive compensation incentive mechanism has increased the managers’ risk aversion behavior to a certain extent,and restrained the company’s risk bearing level.However,the decline in the level of risk taking has a positive effect.Properly reducing risks can help the company avoid losses and better safeguard the rights of stakeholders,which has a positive impact on the development of the company.Third,effective salary incentive mechanism can disperse the risk of uncertain environment.The uncertain environment will hinder the development of the company.However,in the face of environmental uncertainty,reasonable strategic planning can enhance the dynamic capabilities of the company.When the environmental uncertainty is high,the inhibition of the executive compensation incentive mechanism on the level of corporate risk bearing can further stimulate corporate social responsibility behavior.In this way,the company can obtain more external support through the improvement of reputation,so as to disperse the risks brought to the company by the uncertain external environment.From the perspective of executive compensation incentive,this paper explores the incentive factors for listed companies to fulfill their social responsibilities.Try to find a suitable salary incentive mechanism,at the same time,investigate the role played by the company’s risk bearing capacity,and find a new way to encourage executives to implement sustainable development strategies in an uncertain environment.The main theoretical values include: first,it broadens the application scope of social comparison theory.According to the social comparison theory,when the executive compensation is superior to that of other companies in the industry,managers are more likely to get the joy from "fairness".In the process of research,this paper finds that when managers feel that they are treated fairly,they not only improve the company’s performance,but also strive to improve the external evaluation of the company.Secondly,it further determines the role of tournament theory in the process of executive motivation.A higher internal pay gap can make managers have higher salary expectations.When there is a pay gap among senior executives,senior executives will obtain promotion by performing social responsibilities.Thirdly,it strengthens the discussion on the principal-agent problem.Although the "heavy reward and light punishment" system of sticky compensation is regarded as the consequence of managers’ excessive power,it may worsen the agency problem of the company.The sticky compensation obtained by the managers increases the managers’ tolerance for failure to a certain extent,which is conducive to the corporate social responsibility and the sustainable development strategy.According to the theoretical deduction and empirical results,the paper gets some management enlightenment: first,from the perspective of managers.A certain salary incentive mechanism can drive executives to fulfill their social responsibilities.Managers need to realize that in the information age,meeting the needs of stakeholders plays an important role in maintaining the sustainable development of the company and improving their own performance.In addition,managers need to find a good way to resist the loss of interest caused by uncertainty.The proper implementation of social responsibility will help shareholders and managers achieve a win-win situation.Second,from the perspective of shareholders.Although shareholders and managers have different interests.In order to reduce the loss caused by agency problems to shareholders,shareholders can give executives more salary incentives to a certain extent.Motivated managers will improve job satisfaction and run the company more effectively.At the same time,shareholders should also pay attention to encouraging managers to take more risks.Formulating a reasonable salary incentive mechanism and weighing the risk-taking level and social responsibility behavior of managers play an important role in safeguarding shareholders’ rights and interests and realizing sustainable development.