Abstract
This paper investigates a critical and unexplored topic which is the extent to which firm-level climate change risk exposure (CCE) influence outside directors’ pay and consequently ascertains whether the firm-level CCE-outside directors’ pay nexus is moderated by CEO power. Using a large sample of 17,021 observations from US listed firms over a period of 14 years, our baseline results suggest that firms with high climate change risk exposure tend to pay their outside directors low pay packages. Furthermore, our evidence indicates that the association between firm-level CCE and outside directors’ pay is moderated/explained largely by CEO power. Our findings have important implications to policymakers, regulatory bodies, government, and other stakeholders, as well as informing future policies relating to linking outside directors pay to firm non-financial performance. Our findings are robust to the usage of alternative climate-change risk exposure measures, endogeneities and alternative estimation techniques.