Department of Management Seminar: Dr Leanne Keddie, Carleton University What's the Link? Linking-Pin Directors as Bridges for Social and Environmental Incentive Setting

This research presents a pilot study from my dissertation which investigates whether knowledge transfer from the board of directors may affect a firm's use of social and environmental (S&E) performance-based incentives (S&E incentives). The current aim is to update the sample to include multiple years and enhance the analysis for publication. Three possible knowledge transfer scenarios in the pilot study are put forward:

1) ‘linking pin' directors who sit on both the sustainability committee to the compensation committee within the same firm
2) ‘linking pin' directors who sit on the compensation committee at the firm of interest and a sustainability committee elsewhere
3) directors with previous board-level experience at firms in environmentally sensitive industries

Relying on hand collected compensation data for the year 2015 from S&P 500 firms as well as on governance and financial data, results show that directors who sit on both the sustainability committee and the compensation committee within the same firm are associated with increased use of hard (more effective) social performance-based metrics in the determination of executive incentives. When directors sit on the compensation committee at the target firm and on the sustainability committee at another firm, there is an increased use of hard social and environmental performance-based incentives. Finally, it appears that directors with more experience in environmentally sensitive industries are associated with firms that use S&E incentives. This research contributes to the executive compensation, sustainability and knowledge transfer literatures by further clarifying the determinants of the use of S&E incentives and the role of the board of directors in this regard. Boards of directors and other stakeholders will be interested in this research to better understand the corporate governance features that are associated with the use of such incentives. Feedback on proposed methods to update the study are welcome.