CEO incentive pay and corporate social performance: Evidence from French companies

Drawing on stakeholder and legitimacy theories, this study investigates the influence of CEO incentive pay on corporate social performance (CSP) and the moderating effect of the economic crisis on this relationship within the French context. Using a sample of 460 firm-year observations of listed French firms, we provide new empirical evidence of a positive relationship between CEO incentive pay and CSP, as well as each of the process dimensions governing this construct (Leadership, Implementation, and Results). However, this relationship is altered by the economic crisis, which affects only one dimension of CSP (Leadership). These findings indicate that due to economic concerns, CEOs may shift efforts toward communicating rather than implementing CSP; however, they also might reflect defensive strategies intended to reassure stakeholders in a strained global economic context marked by declining of the financial performance. On a managerial level, this study provides evidence for executives, analysts, and policymakers that CEO incentive pay can serve as a potent strategic lever to enhance CSP. Nevertheless, our findings urge various stakeholders involved in corporate social responsibility (CSR) to strengthen their control over the effectiveness of the firm's social performance rather than merely accepting the firm's declarations that might be amplified in times of crises without a real commitment to CSP activities.