“Executive Compensation Tied to ESG Performance: International Evidence” (2023), by Shira Cohen et al. Business and Management research paper. Original abstract below, unchanged. No free PDF was found.

Executive Compensation Tied to ESG Performance: International Evidence

Shira Cohen, Igor Kadach, Gaizka Ormazábal et al. · March 30, 2023 · Business and Management

Abstract

Using a wide sample of international publicly traded firms, this paper studies the rapidly increasing practice of incorporating Environmental, Social, and Governance (ESG) metrics in executive compensation contracts. Our evidence suggests that this compensation practice varies at the country, industry, and firm levels in ways that are consistent with efficient incentive contracting. We also observe that reliance on ESG metrics in executive compensation arrangements is associated with engagement, voting, and trading by institutional investors, which suggests that firms could be adopting this practice to align their management's objectives with the preferences of certain shareholder groups. Finally, we find that the adoption of ESG Pay is accompanied by improvements in key ESG outcomes, but not by improvements in financial performance.

Source page DOI: 10.1111/1475-679x.12481