ESG-Linked Pay Around the World -Trends, Determinants, and Outcomes

54 Pages Posted: 15 Apr 2023

See all articles by Sonali Hazarika

Sonali Hazarika

Zicklin School of Business, Department of Economics and Finance, Baruch College - The City University of New York

Aditya Kashikar

University of Massachusetts

Lin Peng

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Ailsa Röell

Columbia University, School of International and Public Affairs

Yao Shen

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Date Written: December 28, 2022

Abstract

We conduct a large-scale global study of ESG-linked pay for major firms that make up 85% of the market capitalization across 59 countries. We find that the pay adoption is higher for firms in extractive and utility industries, in countries that value individualism and femininity, have stronger shareholder protections, and are of civil legal origin, and for large firms or firms with high return to assets. The adopters experience better future social and financial performances. Exploiting a regulatory shock that mandates corporate ESG disclosure, we show that the effect of ESG-linked pay on performances is likely causal and suggest employee satisfaction as a channel.

Keywords: ESG-linked pay, Executive Compensation, Corporate Governance, Managerial Incentives, Corporate Social Responsibility, ESG Disclosure, Employee Satisfaction

JEL Classification: G15, G18, G34, G38, J33, J53, J83, J88, K32, K33

Suggested Citation

Hazarika, Sonali and Kashikar, Aditya and Peng, Lin and Röell, Ailsa A. and Shen, Yao, ESG-Linked Pay Around the World -Trends, Determinants, and Outcomes (December 28, 2022). Available at SSRN: https://ssrn.com/abstract=4410068 or http://dx.doi.org/10.2139/ssrn.4410068

Sonali Hazarika (Contact Author)

Zicklin School of Business, Department of Economics and Finance, Baruch College - The City University of New York ( email )

17 Lexington Avenue
New York, NY 10010
United States

HOME PAGE: http://https://zicklin.baruch.cuny.edu/faculty-profile/sonali-hazarika/

Aditya Kashikar

University of Massachusetts

Lin Peng

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

17 Lexington Avenue
New York, NY 10010
United States

Ailsa A. Röell

Columbia University, School of International and Public Affairs ( email )

3022 Broadway
New York, NY 10027
United States
(212) 854-9289 (Phone)

Yao Shen

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

55 Lexington Ave
New York, NY 10010
United States

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