The Value of Good Corporate Citizenship
Companies considered to be good social performers are more likely to limit the levels of pay for their executives than similar firms within their industries, according to University of Maine researchers.
However, the top executives at the large firms examined in the study are not being penalized. The average compensation package in the sample was about $8 million, and additional pay above this level is not likely to generate additional motivation, say Maine Business School faculty members Patti Miles and Grant Miles, who conducted the study.
In their findings, published in Social Responsibility Journal, the researchers suggest that executives for the good social performers may be willing to “sacrifice at least a piece of financial compensation for the intangible rewards of being seen as good corporate citizens.”
A review by the journal publisher congratulated the researchers for their study findings that relate to “wider debates that have gone on around corporate ethics.”
Their findings were based on an examination of data from a sample of 57 firms identified as possessing “good corporate social responsibility,” which were compared to 57 firms of similar size and in the same industries. All of the firms included in the study were drawn from the Fortune 1000 list, and most rank within the Fortune 500.
The companies were selected as good social performers based on criteria such as inclusion in Fortune’s list of most admired and most accountable companies, or by filing reports with the Global Reporting Initiative and United Nations Global Compact. Overall, 33 industry segments were represented, with the greatest number coming from pharmaceuticals and petroleum refining.
Executive compensation data were drawn from public reports from 2005–07. The researchers examined both CEO pay and average compensation for the company’s top management team. In both cases, there was a significant correlation between corporate social responsibility and lower levels of executive pay.
Contact: Margaret Nagle, 207.581.3745