Journal article

Stakeholder Agency Relationships: CEO Stock Options and Corporate Tax Avoidance

Leon Zolotoy, Don O'Sullivan, Geoffrey P Martin, Robert M Wiseman

Journal of Management Studies | Wiley | Published : 2021


Infusing stakeholder agency theory with insights from behavioural agency theory, we describe a frame‐dependent relationship between CEO stock option incentives and tax avoidance. Our theoretical framework highlights the role of competing shareholder demands in providing a salient reference point for a CEO contemplating the implications of tax avoidance for their stock option wealth. In a study of 2,573 publicly listed U.S. firms between 1993 and 2014, we show that the implications of CEO stock option incentives are contingent on whether the firm’s effective tax rate is anticipated to be below or above the tax rate of peer firms – an outcome that the CEO can cast as balancing stakeholder dema..

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