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Linking Societal Trust and CEO Compensation

Author

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  • Kiridaran Kanagaretnam

    (York University)

  • Abdul-Rahman Khokhar

    (Saint Mary’s University)

  • Amin Mawani

    (York University)

Abstract

We examine the association between societal trust and the levels of CEO compensation and the proportion of equity-based compensation of 897 firm-years from 18 countries over the 2007–2013 period. We find both the levels of CEO compensation as well as the proportion of equity-based compensation to be lower in countries with higher levels of societal trust. This suggests that costly regulations on CEO compensation may not be as necessary in jurisdictions with higher levels of societal trust. We also examine the association between pay disparity and societal trust. Consistent with our finding of lower pay at the CEO rank, we find pay disparities are lower in countries with higher levels of societal trust.

Suggested Citation

  • Kiridaran Kanagaretnam & Abdul-Rahman Khokhar & Amin Mawani, 2018. "Linking Societal Trust and CEO Compensation," Journal of Business Ethics, Springer, vol. 151(2), pages 295-317, August.
    • Handle: RePEc:kap:jbuset:v:151:y:2018:i:2:d:10.1007_s10551-016-3211-x
    DOI: 10.1007/s10551-016-3211-x
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    References listed on IDEAS

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    5. Julija Winschel & Martin Stawinoga, 2019. "Determinants and effects of sustainable CEO compensation: a structured literature review of empirical evidence," Management Review Quarterly, Springer, vol. 69(3), pages 265-328, September.
    6. Kanagaretnam, Kiridaran & Mawani, Amin & Shi, Guifeng & Zhou, Zejiang, 2020. "Impact of social capital on tone ambiguity in banks’ 10-K filings," Journal of Behavioral and Experimental Finance, Elsevier, vol. 28(C).
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