The relationship between CEO governance and social responsibility of service firms

Abstract

Although it is widely accepted that corporate social responsibility (CSR) is key to obtaining business sustainability, there is a significant lack of empirical tests on the longer-term benefits of CSR in academic literature. The objective of our study was to examine the effects of chief executive officer (CEO) governance on CSR in service firms. We used CEO pay slice (CPS) to measure CEO governance and the Korea Economic Justice Institute Index (KEJI) to measure the level of CSR activities. CPS was measured using the compensation information of the board of directors in their business reports. The KEJI was obtained from the website of Citizens' Coalition for Economic Justice. The sample selected from listed firms consisting of 260 observations was collected from 2013 to 2015 at the TS-2000 and the FnGuide. The results showed that the CPS has a significant negative impact on the level of CSR activities in service firms. Specifically, CPS has a significant negative impact on the level of CSR activities in the areas of human, environment, and society at a significant level of one percent. Based on these results, higher CEO governance is expected to mean lower CSR in service firms. This paper contributes to the field of research in that it is the first research on the relationship between CEO governance and the level of CSR activities in service firms.