Equity portfolio Incentives to CEOs for Downsizing: Differential impacts on survivors vs. victims in three countries

Abstract

Although downsizing research has examined victims' and survivors' reactions and justice perceptions, few studies have examined perceptions of corporate social responsibility (CSR). We examine the impact of CEO compensation for downsizing on CSR perceptions of downsizing decisions made by CEOs in three countries, France, India, 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 that influence the CEO’s downsizing decision. Results suggest that downsizing resulting in loss of human capital is negatively related to CSR perceptions. Downsizing motivated by deferred compensation and decline in performance linked bonuses are negatively related to survivor commitment, but not to victims’ perceptions of fairness. We also find support for convergence across the three countries, with some divergence as a result of power distance. We provide a discussion of the results, limitations, and directions for future research.