Corporate social responsibility
There has been done much research about corporate social responsibility and the effects of this for the firm. Friedman (1970) first defines CSR as follows: ‘‘CSR is to conduct the business in accordance with shareholders’ desires, which generally will be to make as much money as possible while conforming to the basic rules of society, both those embodied in law and those embodied in ethical custom.’’ If a firm is socially responsible, it takes into account all the positive and negative effects it has on the society (Marsden, 2001). Decisions about CSR are mostly long-term decisions, it is an investment in the future. If firms are focused more on the long run, these firms will have a longer profitability and …show more content…
Socially responsible firms will focus on the welfare of their employees, the local community, customers, the environment and the society. If managers are aware that they have to operate in the interests of all these stakeholders , managers of the firm are conscious of their influence on all these stakeholders and this can lead to a better collaboration between managers and stakeholders. Consequently, agency costs may decrease (John and Senbet (1998)). Under this assumption it is possible that executive compensation will decrease. Another reason why CEOs in socially responsible firms will accept lower compensation is fairness. The difference between salaries in companies is becoming greater. An executive that is socially responsible will take the employee relations into account, and thereby endavour for a fair wealth distribution(Cai, Jo & Pan, …show more content…
The study of Waddock and Graves (1997) find a link between social responsibility and profitability, this supports the theory that corporate social performance and slack resource availability are positively related. Hillman and Keim (2001) used shareholder value as performance measure and they find a similar link.
Firms that are socially responsible may also have better employee practices. These employee policies tend to have low costs, but can increase the loyalty and motivation of the employees and this may lead to higher productivity. The model of Stigler (1962) says that firms that take employee satisfaction into consideration may attract better applicants.
The study of Cai, Jo en Pan (2011) investigated the impact of corporate social responsibility on executive compensation. They found that CSR is adversely related to the CEOs total compensation, as well as cash compensation, after the controlling for various firm and board characteristics. CEOs in socially responsible firms receive a significant lower pay than socially irresponsible firms that are otherwise similar firms. They also found that higher levels of CSR is associated with lower CEO compensation in the next
There has been done much research about corporate social responsibility and the effects of this for the firm. Friedman (1970) first defines CSR as follows: ‘‘CSR is to conduct the business in accordance with shareholders’ desires, which generally will be to make as much money as possible while conforming to the basic rules of society, both those embodied in law and those embodied in ethical custom.’’ If a firm is socially responsible, it takes into account all the positive and negative effects it has on the society (Marsden, 2001). Decisions about CSR are mostly long-term decisions, it is an investment in the future. If firms are focused more on the long run, these firms will have a longer profitability and …show more content…
Socially responsible firms will focus on the welfare of their employees, the local community, customers, the environment and the society. If managers are aware that they have to operate in the interests of all these stakeholders , managers of the firm are conscious of their influence on all these stakeholders and this can lead to a better collaboration between managers and stakeholders. Consequently, agency costs may decrease (John and Senbet (1998)). Under this assumption it is possible that executive compensation will decrease. Another reason why CEOs in socially responsible firms will accept lower compensation is fairness. The difference between salaries in companies is becoming greater. An executive that is socially responsible will take the employee relations into account, and thereby endavour for a fair wealth distribution(Cai, Jo & Pan, …show more content…
The study of Waddock and Graves (1997) find a link between social responsibility and profitability, this supports the theory that corporate social performance and slack resource availability are positively related. Hillman and Keim (2001) used shareholder value as performance measure and they find a similar link.
Firms that are socially responsible may also have better employee practices. These employee policies tend to have low costs, but can increase the loyalty and motivation of the employees and this may lead to higher productivity. The model of Stigler (1962) says that firms that take employee satisfaction into consideration may attract better applicants.
The study of Cai, Jo en Pan (2011) investigated the impact of corporate social responsibility on executive compensation. They found that CSR is adversely related to the CEOs total compensation, as well as cash compensation, after the controlling for various firm and board characteristics. CEOs in socially responsible firms receive a significant lower pay than socially irresponsible firms that are otherwise similar firms. They also found that higher levels of CSR is associated with lower CEO compensation in the next