Incentive

Engineering

Psychoanalysis

Stock (firearms)

Microeconomics

Public relations

Accounting

Executive compensation

Stock options

Economics

Business

Corporate governance

Mechanical engineering

Psychology

Political science

Corporate social responsibility

Finance

Compensation (psychology)

Journal of Corporate Finance

We examine how firms adjust CEO risk-taking incentives in response to risk environments associated with their corporate social responsibility (CSR) standing. We find strong evidence that as a firm's CSR status improves (declines), increasing (decreasing) its risk-taking capacity, the firm responds by adjusting compensation contracts to increase (decrease) CEO risk-taking incentives (Vega). One channel of the adjustment is through stock option grants. Further analyses indicate that the positive CSR-Vega association is stronger in firms with better corporate governance and in industries where riskiness is more important. Our evidence indicates that firms are not passive in response to changes in CSR status and firm risk.

CEO risk-taking incentives and corporate social responsibility