Do stock options influence CSR activity?

Abstract

This paper investigates the impact of stock option of board of directors on Corporate Social Responsibility (CSR) activities using 336 of Korean firms in 2013. Stock options are the most typical form of long-term incentive compensation and are contingent on the value of the stock in the future. We develop and analyze hypothesis, based on stakeholder theory. We find a significant relationship between the stock option and CSR activities, after controlling for various firm characteristics. Our findings are that long-term compensation for executives is positively associated with CSR activities and it attempts to focus executives' efforts on optimizing the longer term. It also implies that the structure of executive compensation could be used as an effective tool to encourage management to undertake socially responsible actions, therefore resulting in more socially responsible firms.