Motivated by the rise of linking CEO compensation to corporate social responsibility (hereafter, CSR contracting), we examine the impact of CSR contracting on CEO performance-induced turnover. Using a sample of S&P 500 firms with hand collected information on the use and substantiveness of CSR contracting from proxy statements between 2004 and 2018, we find that CSR contracting firms are associated with reduced turnover–performance sensitivity. Furthermore, CSR contracting's effects hold regardless of CEO power, although the impact appears to be concentrated in observations both during and after the global financial crisis, in firms with superior CSR ratings, and in those managed by more able CEOs. Channel tests reveal that non-transient institutional ownership and shareholder voting support increase following CSR contracting. Jointly, these patterns are consistent with the notion that CSR contracting helps signal a firm's long-term strategies, attract investors for whom social returns are an issue, and build trust between a firm and its investors, thereby reducing the importance of short-term financial performance related to CEO dismissal decisions.

This study examines the sophistication of rating agencies in incorporating managerial risk‐taking incentives into their credit risk evaluation. We measure risk‐taking incentives using two proxies: the sensitivity of managerial wealth to stock return volatility ( vega ) and the sensitivity of managerial wealth to stock price ( delta ). We find that rating agencies impound managerial risk‐taking incentives in their credit risk assessments. Assuming other things equal, a one standard deviation increase in vega ( delta ) will lead to an approximately one‐notch (two‐notch) rating downgrade. In addition, we evaluate the significance of credit ratings in the design of CEO compensation. Our findings suggest that rating‐troubled firms will gear down managerial incentives of risk seeking. In particular, other things equal, a rating downgrade to the lower edge of the investment category (i.e., BBB−) in the immediate prior year will bring about an approximately 51 percent reduction of vega incentive from options newly granted to the CEO in the current year. However, we find no evidence that firms' rating concerns significantly affect delta . Given the significance of credit ratings in the marketplace and their close connection to accounting, the findings of the current study advance our understanding, not only of how sophisticated rating agencies are in incorporating forward‐looking information (i.e., vega and delta ) into risk assessments, but of how influential the raters are in changing firms' compensation policies. The findings also have implications on the role of accounting in constraining excessive managerial risk taking with improved disclosures on managerial compensation.

We investigate whether audit fees and auditors' opinions on internal controls are associated with whistleblowing allegations externally filed to regulatory agencies. We find that firms subject to whistleblowing allegations have significantly higher audit fees, regardless of the substance of these allegations, whereas an auditor is more likely to issue an adverse opinion on internal controls when the allegation is substantiated, rather than frivolous. Further, our findings suggest that auditors are involved in the auditing of whistleblowing when the allegation is still in an internal stage. We also show that firms subject to external whistleblowing allegations have a lower likelihood of restating financial statements prepared in the allegation year when greater audit effort is made in that year. Our study is among the first to demonstrate the role of auditors in the context of whistleblowing.

We examine whether a firm's strategic priorities influence its selection of a new CEO and what conditions enable such an appointment to add value to the firm. More specifically, this study investigates the value‐adding effect when prospector firms (i.e., those pursuing a prospector‐type strategy) select a CEO with high social capital. We argue that uncertainty, driven by a firm's strategy, will determine the decision to select a CEO with high social capital; such CEOs can use their networks to mitigate the uncertainty and thus can be valuable to the firm. However, prior research indicates that CEOs with high social capital can engage in behavior detrimental to firm value. To mitigate the potential for this to occur, we assess whether corporate governance can play a role in prospector firms who appoint CEOs with high social capital. Drawing on archival data of CEO successions over a 14‐year period, we find that prospector firms have greater incentives to appoint CEOs with high social capital. We also find that prospector firms who appoint a CEO with high social capital improve their performance. Furthermore, the value‐adding effect of this selection choice is stronger in prospector firms with good corporate governance.

We investigate whether CEO power influences a firm's decision to change its compensation system in response to regulatory and public pressure. In particular, we assess whether CEO power influences the choice of performance measures as a form of camouflage to minimize the impact of these reforms on their wealth. We examine one component of CEO pay, namely, the use of performance-vested stock option (PVSO) plans, and find that firms with powerful CEOs attach less challenging targets in the initial PVSOs granted to their CEOs. Such firms also appear to adopt PVSO plans early, and are more likely to do so when faced with public outrage over executive compensation. Our results suggest that powerful CEOs attempt to appease public outrage by quickly adopting PVSOs, but that adopting PVSOs early does not appear to be an optimal strategy for increasing shareholder value. Regulators intended that implementation of PVSOs would be beneficial to shareholders by improving the link between CEO pay and firm performance. However, our results indicate that powerful CEOs can negate some of the beneficial effect of PVSOs through their influence on adoption and choice of performance targets. Data Availability: All data used in this study are publicly available from the sources indicated in the paper.