Executive Compensation Tied to ESG Performance: International Evidence

61 Pages Posted: 8 Nov 2022

See all articles by Shira Cohen

Shira Cohen

San Diego State University

Igor Kadach

University of Navarra, IESE Business School

Gaizka Ormazabal

University of Navarra, IESE Business School; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Stefan Reichelstein

University of Mannheim - Business School; University of Mannheim - Mannheim Institute for Sustainable Energy Studies; ZEW – Leibniz Centre for European Economic Research; Stanford Graduate School of Business

Multiple version iconThere are 5 versions of this paper

Date Written: 2022

Abstract

This paper examines the reliance on ESG metrics in executive compensation contracts. In our sample of international publicly traded firms, a rapidly growing fraction incorporate ESG metrics in the compensation schemes of their top executives. Our analysis links the reliance on these metrics to firm fundamentals, the geographic location of firms, as well as the influence of institutional shareholders. Our findings also suggest that the adoption of ESG variables in managerial performance measures is accompanied by improvements in ESG performance and meaningful changes in the compensation of executives.

Keywords: ESG metrics, Executive compensation, Institutional ownership

JEL Classification: M12, M41, Q54

Suggested Citation

Cohen, Shira and Kadach, Igor and Ormazabal, Gaizka and Reichelstein, Stefan, Executive Compensation Tied to ESG Performance: International Evidence ( 2022). ZEW - Centre for European Economic Research Discussion Paper No. 22-051, Available at SSRN: https://ssrn.com/abstract=4271016 or http://dx.doi.org/10.2139/ssrn.4271016

Shira Cohen

San Diego State University ( email )

San Diego, CA 92182-0763
United States

Igor Kadach

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

Gaizka Ormazabal (Contact Author)

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Stefan Reichelstein

University of Mannheim - Business School ( email )

University of Mannheim - Mannheim Institute for Sustainable Energy Studies ( email )

Mannheim
Germany

ZEW – Leibniz Centre for European Economic Research ( email )

Stanford Graduate School of Business ( email )

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