How does CEO pay slice influence corporate social responsibility? US-Canadian versus Spanish-French listed firms

Considering specific contextual differences (in laws, governance attributes, and CEO pay policies) found between the Anglo-American and the European corporate governance models and controlling for institutional attributes, ownership structures, and firm's features characterizing the two settings, we aim to explore if there is a link between CEO pay slice (CPS) and corporate social responsibility (CSR). We follow Bebchuk et al. () to measure CPS. We consider sustainability indicators as proxy to capture CSR. Sustainability indicators are gathered from Global Reporting Initiative of sustainability standards (GRI's) report. Data cover the period 2010-2017 and consist of 1,440 U.S.-Canadian and Spanish-French firm-year observations. American and Canadian (Spanish and French) firms are considered as to refer to the Anglo-American (European) corporate governance model. Durbin-Wu-Hausman test is ruled to address endogeneity problem of dual variables and supports consistent null hypotheses of fixed effects model. Under the agency theory's bright side paradigm, univariate and multivariate cross-country analysis supports that CPS is positively associated with firm's initiatives to engage in CSR and that sustainability is more pronounced under stronger investor protection, strict law enforcement, and higher corporate governance quality. Robustness checks reveal that (a) the deferred CPS-CSR causal effect seems higher for option-based compensation than that for stock-based compensation and (b) within the options (stocks) rewards, unvested options (restricted stocks) are the most effective to enhance firm's CSR practices.