Corporate Social Responsibility and Governance: The Role of Executive Compensation

This article examines the relationship between corporate governance and corporate sustainability by focusing on an essential component of companies' governance structure: executive compensation programs. We propose an original empirical strategy based on a large set of the biggest capitalizations in Organization for Economic Cooperation and Development (OECD) countries over the period 2004–2018, with explicit measures of how companies integrate into executive managers' remuneration precise criteria of corporate social responsibility, an incentive scheme called corporate social responsibility (CSR) contracting. Our results show that proposing executive compensation programs including CSR criteria has a negative impact on financial performance, and a large positive impact on extra-financial performance based on the following dimensions: relationship with customers and suppliers, and community involvement. Second, we explore the moderating role of the corporate governance model by distinguishing the impact between firms with a shareholder or stakeholder corporate governance model and reveal significant differences in the impact of CSR contracting. For firms with a stakeholder corporate governance model, CSR contracting is no longer associated with a fall of financial performance and has a large positive impact on human resources, environmental, and human rights performance. On the other hand, CSR contracting has a negative impact on financial performance but no impact on extra-financial performance for firms with a shareholder corporate governance model.     

Staring at the Abyss: a neurocognitive grounded agent-based model of collective-risk social dilemma under the threat of environmental disaster

Increasingly visible climate change consequences challenge carbon-based economies worldwide. While expert knowledge on climate change percolates through political initiatives and public awareness, its translation into large-scale policy actions appears limited. Climate change consequences unequally target regions, countries and social classes, a vital issue for social cooperation. When facing an imminent ecological collapse, in which conditions can self-interested agents gain environmental awareness and settle on a sustainable path of actions when their knowledge of the imminent collapse is bounded? This cooperation emerges from the interaction between individuals and the interaction of various cognitive processes within individuals. This article develops an agent-based model for this emergence of cooperation enriched with the Agent Zero neurocognitive grounded cognitive architecture. We investigate when agents endowed with deliberative, affective and social modules can settle on actions that safeguard their environment through numerical simulations. Our results show that cooperation on sustainable actions is the strongest when the system is at the edge of collapse. Policy measures that increase the environment’s resilience become internalized by the agents and undermine awareness of the ecological catastrophe. Depending on the cognitive channels activated, agent behaviors and reactions to specific interventions significantly vary. Our analysis suggests that taking different cognitive channels, deliberative, affective, social, and others into account, significantly impact results. The complexity of agent cognition deserves more attention to assess parameter sensitivity in social simulation models.