Research article — Are brands re-evaluated when consumers learn about brand origin misperceptions? Outcomes, processes, and contingent effects

Article by Timo Mandler
Publised in Journal of Business Research

This paper examines the influence of stakeholder orientation on the design of managerial incentives. Our tests exploit the quasi-natural experiment provided by the staggered adoption of directors’ duties laws (i.e., state-level laws that explicitly expand board members’ duties to act in the best interests of all stakeholders).

We find that the enactment of these laws results in a significant decrease in the sensitivity of CEO wealth to the stock price. This decrease is mostly driven by firms most exposed to pressures to maximize short-term stock price. Our results suggest that the decrease in the sensitivity of CEO compensation to the stock price is an important channel boards use to internalize stakeholder orientation.