Publication detail

Social stigma and executive compensation

Author(s): Jiří Novák M.Sc., Ph.D., Deloitte Corporate Chair, Pawel Bilinski
Type: Articles in journals with impact factor
Year: 2018
Number: 96
ISSN / ISBN: 0378-4266
Published in: Journal of Banking & Finance
Publishing place:
Keywords: Executive compensation; social stigma
JEL codes: G30; G43; D71
Suggested Citation:
Grants: GACR 15-13040S Accounting Earnings Quality, Insider Trading Profitability and Stock Price Informativeness GAČR 18-02513S Meta-Analyses of Stock Return Determinants
Abstract: We document that executives working at firms perceived negatively in light of social norms, such as tobacco, gambling and alcohol, earn a significant compensation premium. The premium compensates for personal costs executives bear due to their employer's negative public perception and include: (i) a reduced likelihood these CEOs will serve as directors on other firms’ boards, which associates with lower executives’ social status, and (ii) impaired job mobility as employers shun stigmatized executives. The compensation premium is not explained by higher managerial skill required in firms we investigate, higher employment contract risk, political capital, litigation risk, or differences in corporate governance quality, and robust to endogeneity concerns. Our results highlight the significant impact job-related social stigma has on executive compensation.

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