Boardroom Stewardship: Exploring Director Compensation, Integrity, and Social Responsibility

Abstract

Relying on data from Thai listed firms over the period of 2015–2020, we explore the effect of outside director compensation on corporate social responsibility (CSR) and integrity, as measured by the Anti-Corruption in Practice (ACRP) indicator, which captures the extent to which firms implement and disclose anti-corruption measures. We find a statistically significant positive impact of outside director compensation on both CSR and ACRP in all models, while inside director compensation has an opposite impact with statistical significance in some models. Consistent with the stewardship hypothesis, highly compensated outside directors provide stronger oversight and better balance stakeholder interests, contributing to enhanced integrity and CSR outcomes. A one standard deviation increase in the pay for independent (non-executive) directors increases CSR and ACRP by 17.85% (11.76%) and 14.65% (13.11%), respectively. In contrast, higher compensation for inside directors is associated with behavior aligned with the agency hypothesis. Our findings are robust after addressing endogeneity using panel fixed effects and two-stage least squares regression approaches.