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The Choice Of Peers For Relative Performance Evaluation In Executive Compensation, Zhichuan Li, John Bizjak, Swaminathan Kalpathy, Brian Young
The Choice Of Peers For Relative Performance Evaluation In Executive Compensation, Zhichuan Li, John Bizjak, Swaminathan Kalpathy, Brian Young
Business Publications
Relative performance (RPE) awards have become an important component of executive compensation. We examine whether RPE awards, particularly the peer group, are structured in a manner consistent with economic theory. For RPE awards using a custom peer group, we find that the custom group is significantly more effective than four plausible alternative peer groups at filtering out common shocks, lowering the cost of compensation, and increasing managerial incentives. For RPE awards using a market index, we find some evidence that firms could have selected a custom set of peers with better filtering properties at a lower cost with similar incentives. …
The Role Of Mutual Funds In Corporate Social Responsibility, Zhichuan Li, Saurin Patel, Srikanth Ramani
The Role Of Mutual Funds In Corporate Social Responsibility, Zhichuan Li, Saurin Patel, Srikanth Ramani
Business Publications
This paper examines the role of mutual funds in corporate social responsibility (CSR). Using a fund-level, holdings-based CSR score, we find that CSR-friendly mutual funds improve firms’ CSR standings. This effect is more pronounced for firms with higher mutual fund ownership and stronger corporate governance. We further show that while CSR-friendly mutual funds have influence on almost all CSR categories, they focus on increasing CSR strengths rather than reducing CSR concerns. We also discover that CSR-friendly funds are more likely to vote in favor of CSR proposals, and that firms owned by CSR-friendly funds are more likely to link their …
Csr-Contingent Executive Compensation Contracts, Zhichuan Li
Csr-Contingent Executive Compensation Contracts, Zhichuan Li
Business Publications
Firms have increasingly started tying their executives’ compensation to CSR-related objectives. In this paper, we attempt to understand why firms offer CSR-contingent compensation and the conditions under which such compensation improves corporate social performance. Using hand-collected data from proxy statements, we find that this emerging compensation practice varies significantly across industries and across different CSR categories. Further, well-governed firms are more likely to offer CSR-contingent compensation, and such compensation does lead to higher corporate social standing. Such firms are more likely to offer formula-based, Objective CSR-contingent compensation. However, our results suggest that non-formulaic, Subjective CSR-contingent compensation also helps improve companies’ …