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Not all stakeholders are created equal: executive vertical pay disparity and firms’ choice of internal and external CSR

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Abstract

This study explores the role of executive vertical pay disparity in explaining firms’ choice of CSR activities (internal vs. external CSR). Based on tournament theory and the attention-based view, we first propose that vertical pay disparity leads executives to increase CSR activities, but in this process, compared to external CSR activities, executives are more likely to increase internal CSR activities. We then propose that the effect of executive vertical pay disparity on the choice of CSR activities will be moderated by three situational cues: state-owned enterprises (SOEs), litigation risk, and slack resources. Empirical analyses based on unbalanced panel data of China’s listed manufacturing firms from 2010 to 2018 show that our hypotheses are largely supported. Our results show that vertical pay disparity drives executives to increase CSR activities that contribute to the long-term interests of shareholders; however, in the process, executives focus on certain stakeholders over others.

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Data availability

The data that support the findings of this study are available on request from the corresponding author. The data are not publicly available due to privacy or ethical restrictions.

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Acknowledgements

The authors appreciate all the editors and the anonymous reviewers for their insightful comments and suggestions. This work was supported by the National Social Science Foundation Project of China (Grant No. 20BGL103).

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Authors and Affiliations

  1. School of Management, Guangdong University of Technology, 161 Yinglong Road, Tianhe District, Guangzhou, Guangdong, China

    Xi Zhong & XiaoJie Wu

  2. School of Business Administration, South China University of Technology, 381 Wushan Road, Tianhe District, Guangzhou, Guangdong, China

    Ge Ren

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Zhong, X., Ren, G. & Wu, X. Not all stakeholders are created equal: executive vertical pay disparity and firms’ choice of internal and external CSR. Rev Manag Sci 16, 2495–2525 (2022). https://doi.org/10.1007/s11846-021-00502-8

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