Tournament Incentives and Corporate Social Responsibility Performance
Abstract
Management incentives for engaging and excelling in corporate social responsibility (CSR) performance is an important theme as business sustainability gains momentum. We examine the role of tournament incentives, which are created by competition among non-CEO (chief executive officer) senior executives (vice presidents [VPs]) for promotion to the CEO position, in firms’ CSR performance. Using a sample of U.S. Standard & Poor (S&P) 1500 firms from 1993 to 2014, we find that tournament incentives proxied by pay gaps between CEOs and VPs are negatively associated with CSR performance, suggesting that competition for promotion could be detrimental for CSR performance. We further show that such association is more pronounced when the perceived probability of promotion increases prior to CEO turnover. This article provides policy, practical, and education implications and contribute to the literature on the integration of CSR into the business culture and strategic management processes.
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Article first published online: June 22, 2021
Issue published: October 2023
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