Consequences of paying CEOs for Downsizing: A Four-Country Study of the Impacts on Survivors vs. Victims

Abstract

Downsizing is: a) motivated by incentive compensation of executives, and b) negatively related to corporate social responsibility (CSR) perceptions. Yet, the link between executive compensation and CSR perceptions in downsizing contexts has not been examined. We examine this issue in four countries, i.e. France, India, Turkey and Vietnam. We use a 2x2x2x2 (performance-linked bonuses, internal vs. institutional pressure, loss of human capital-yes/no, and role-victim/ survivor) between-subjects, experimental design to examine factors influencing CEOs’ downsizing decisions. We find that a) CEO compensation is unrelated to CSR and b) downsizing resulting in loss of human capital is negatively related to CSR perceptions. Downsizing motivated by deferred compensation and decline in performance-linked bonuses is negatively related to survivor commitment but not victims’ fairness perceptions. We find support for convergence across four countries, with some divergence because of power distance orientation. We provide a discussion of results, limitations and directions for future research.