City Research Online

Social stigma and executive compensation

Novak, J. & Bilinski, P. ORCID: 0000-0002-0499-6429 (2018). Social stigma and executive compensation. Journal of Banking and Finance, 96, pp. 169-184. doi: 10.1016/j.jbankfin.2018.09.003


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.

Publication Type: Article
Additional Information: © 2018. This manuscript version is made available under the CC-BY-NC-ND 4.0 license
Publisher Keywords: Executive compensation; Social stigma
Subjects: H Social Sciences > HD Industries. Land use. Labor
Departments: Bayes Business School > Finance
SWORD Depositor:
[thumbnail of Bilinski Novak manuscript_full_accepted.pdf]
Text - Accepted Version
Available under License Creative Commons Attribution Non-commercial No Derivatives.

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