Stakeholder Management and CEO Compensation: Main Effects and Interactions

This study examines the relationship between an organization’s reputation for stakeholder management and CEO compensation. A monolithic perspective on stakeholder management dominates extant research. In contrast, this study theorizes that organizations develop distinct reputations for “doing good” and “avoiding harm”. The current study finds that a reputation for “do good” stakeholder management is positively associated with CEO compensation while a reputation for “avoid harm” stakeholder management is negatively associated with CEO compensation for a sample of S&P-500 companies over a 9-year period. The study also explains and finds partial support for the role of financial performance, board independence, and information uncertainty as moderators of the relationship between stakeholder management reputation and CEO compensation. This study contributes to both the compensation and stakeholder management literatures by providing a more nuanced view of the relationship between stakeholder management and executive compensation.