ABSTRACT
This chapter addresses the issue by discussing challenges that emerges when attempting to include social criteria in executive appraisal and incentive alignment systems, and how some of these difficulties might be overcome. Despite the wealth of research on executive compensation, the link between corporate social performance (CSP) and executive pay remains limited at best. The relationship between financial performance and managerial pay has pervaded the field of executive compensation since its inception. It is important to note that corporate responses to social claims should not be exclusively assessed in terms of their instrumental value, since financial performance is not the final arbiter of issues that implicate moral values and ethical concerns. The stakeholder approach is tied closely to the concept of social responsibility and entails the notion of CSP. Firms that attend the needs of consumers, employees, nongovernmental organizations, government, and societal groups are considered to perform in a socially responsible fashion, which reflects a broader orientation of the firm.
