What is the relationship between executive pay regulation and corporate social responsibility
(CSR)? Currently, CSR is neither sufficiently included in economic research on executive pay,
nor is pay regulation considered as a potential instrument in the growing body of CSR
legislation. The successful proliferation of CSR in business practice and the attention
policymakers and legislators now pay to it, however, have raised the importance of answering
these questions. Thus, this blind spot in corporate governance—the relationship between
compensation, CSR, and law—is the topic of this thesis.
The dissertation approaches these issues in two subsequent research question: first, the role of
executive pay regulation as an institutional determinant of CSR engagement is identified. From
the results of this, the second research question arises: should legislators promote CSR
engagement and—if so—how? Lastly, a case study is conducted to map how the influence of
index funds as an important driver of CSR in corporate governance should be accommodated
in the design of CSR legislation.
The research project shows that pay regulation is part of the institutional determinants of CSR
and, depending on its design, can incentivise or discourage different forms of CSR engagement.
As a form of private self-regulation, CSR is closely interconnected with legal rules and the
result of complex underlying drivers inside and outside the firm. The study develops a
differentiation of CSR activities to accommodate this complexity, which is applied in an
analysis of pay regulation. Together, these inquiries form a comprehensive picture of the ways
in which pay regulation sets incentives for CSR engagement. Finally, the thesis shows how
CSR-oriented pay regulation is consistent with the conventional goals of corporate governance
and eventually provides a prospect for the integration of CSR and corporate law in general.