CEO and ethical reputation: visionary or mercenary?

Abstract

This study examines the relationship between ethical reputation, CEO compensation and firm performance for the top corporate citizens as rated by Business Ethics magazine. The results show that there was not a direct relationship between CEO compensation and firm performance, that a high level of CEO compensation combined with a high ethical reputation did not impact the financial performance of the firm, and firms with a high ethical reputation had only average financial results, while firms with low ethical reputations displayed both high and low financial performance. Furthermore, CEOs of unfirms had, on average, higher compensation levels than firms that were profitable. These findings bring useful inputs for CEO on how they can justify high levels of compensation even during periods when the firm is not profitable or has a low level of profitability. An interesting sidelight of the study is that three CEOs in the sample whose firms were profitable did not accept any compensation during 2002, probably because the financial performance was below expectations.

Citation

Stanwick, P.A. and Stanwick, S.D. (2003), "CEO and ethical reputation: visionary or mercenary?", Management Decision, Vol. 41 No. 10, pp. 1050-1057. https://doi.org/10.1108/00251740310509571