In this article, we examine how firms design executive compensation in light of their risk environment. Prior literature shows that corporate environmental responsibility (CER) of a firm inversely affects firm risk. We argue that firms with better CER performance benefit from the reduced firm risk, and therefore are more likely to provide greater managerial risk‐taking incentives to encourage the risk‐averse managers to undertake risk‐increasing but positive net present value (NPV) investments. Consistent with our hypotheses, we find that a firm’s CER rating is positively associated with its CEO risk‐taking incentives (vega) in the following year. We also document cross‐sectional variations in the CER‐vega relationship, that is, a weaker association in the controversial industries. This study contributes to the literature by investigating the role of CER on executive compensation design from the perspective of risk management.

中文翻译：

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企业环境责任和高管薪酬：风险管理视角

在本文中，我们研究了公司如何根据其风险环境设计高管薪酬。先前的文献表明，公司的企业环境责任 (CER) 对公司风险有负面影响。我们认为，具有更好 CER 绩效的公司受益于降低的公司风险，因此更有可能提供更大的管理冒险激励，以鼓励规避风险的经理进行风险增加但净现值 (NPV) 为正的投资。与我们的假设一致，我们发现公司的 CER 评级与其来年的 CEO 冒险激励（vega）呈正相关。我们还记录了 CER-vega 关系的横截面变化，即在有争议的行业中关联较弱。