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Executive compensation and non-financial risk: An empirical examination |
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| Authors: | Katherine Campbell Derek Johnston Stephan E. Sefcik Naomi S. Soderstrom |
| Affiliation: | 1. University of North Dakota, Department of Accountancy, College of Business and Public Administration, P.O. Box 8097, Centennial Drive, Grand Forks, ND 58202-8097, United States;2. Colorado State University, College of Business, Rockwell Hall, Room 256, Fort Collins, CO 80524, United States;3. University of Washington, Business School, Department of Accounting, Box 353200, Seattle, WA 98195-3200, United States;4. University of Colorado at Boulder, 419 UCB, Boulder, CO 80309-0419, United States |
| Abstract: | Executives face potentially severe (non-financial) personal risks if firm environmental performance is below industry best practice. We examine the relation between CEO compensation and the non-financial risk associated with environmental exposure, and how use of environmental performance as an explicit determinant of compensation affects this relation. We find evidence that CEOs are compensated for exposure to environmental risk, even after controlling for financial risk. We also find that this premium is reduced when the CEO has greater opportunities to improve the firm’s environmental performance. |
| Keywords: | Executive compensation Non-financial risk Environmental accounting |
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