Corporate Social Responsibility and CEO Power

In this paper I explore the relationship between firms’ Corporate Social Responsibility (CSR) ratings and the power of the CEOs. According to the classical agency theory, powerful CEOs have the potential motivation to invest more on Corporate Social Responsibility activities to enhance their own private benefits. On the other side, the contrary literature view indicates that powerful CEOs may intend to reduce CSR investments considering the firm value. Based on those hypothesis, this paper use the CEO Pay Slice (Bebchuck et al. 2011), CEO Pay Gap and Gap between CEO and employee to measure CEO power. The results show that the CEO power is actually negatively correlated with the firm CSR ratings. In addition, this paper also research the effect of firm age on both CSR ratings and CEO power as an innovation point.