CEO Incentive Horizon and Employee Workplace Safety

Abstract

This study examines the effect of the CEO incentive horizon (captured by CEO pay duration) on workplace safety, a critical aspect of employee welfare. Using establishment-level data on workplace safety, we find CEO incentive horizon is negatively associated with workplace injuries and illnesses. This relation is stronger when CEOs have more career concerns or lower ability and weaker when the firm’s workers’ compensation premiums are more sensitive to injury claims or there is a greater union presence. Further, increased investments in safety and decreased employee workload are two possible channels through which the incentive horizon–injury/illness relation operates. Overall, our results suggest that increasing the CEO incentive horizon promotes employee welfare by fostering a safer work environment. Show more