“Paychecks with a Purpose: Evaluating the Effectiveness of CEO Equity and Cash Compensation for the Triple Bottom Line”  (with Dennis Bams and Bart Frijns)

Abstract: This study evaluates the effectiveness of the equity and cash component of CEO compensation for the triplebottom-line objective. Our study delves deeper into which compensation attributes effectively enhance substantial sustainability strategies. By distinguishing between the equity and cash components of CEO compensation, we examine their relationship with CSR intentions and outcomes. We argue that the market tends to appreciate CSR intentions in the presence of information asymmetry and opacity. In contrast, CSR outcomes investments may not immediately be recognized as value-enhancing. We discover equity compensation indeed does not motivate enhanced environmental outcomes. Equity compensation does exhibit positive associations with other initiatives characterized by short-term horizons and moderate costs. In contrast, we find a positive relationship between cash compensation and environmental outcomes, which particularly concern long-term, resource-intensive investments. This relationship becomes stronger when the influence of the market is further diminished by a higher percentage of non-executive board members. 

“Cultural Anchors: Exploring the Relationship between CEO Long-Term Orientation and Environmental Performance”  (with Dennis Bams and Bart Frijns)

Abstract: This study explores the relationship between CEO ancestry and corporate sustainability practices. While prior research reports differences in sustainability strategies between cultures, many external factors could drive this effect. We focus on firms located in the US to get a within-country view and thereby keep external factors like laws and regulations as stable as possible. By focusing on the dimension of long-term orientation, which stands for “the extend to which a society prioritizes future-oriented values, such as perseverance, thrift, and delayed gratification, over short-term considerations, like immediate success, tradition, and social obligations“, we examine its relationship with environmental intentions and outcomes. We find long-term orientation positively relates to environmental outcomes, which particularly concern long-term, resource-intensive investments. This is robust when using CO2 emissions instead of an aggregated score. Furthermore, we employ an instrumental variable to instrument for long-term orientation. The contribution of this research is twofold. First, it advances the understanding of corporate decision-making based on the decision-maker's cultural ancestry, contributing to the Upper Echelons Theory. In particular, we consider the case of a multi-criteria trade-off which is integral to the triple bottom-line principle. Second, using granular environmental information instead of aggregate ESG ratings enables us to distinguish between environmental intentions and outcomes.