Executive Compensation Tied to ESG Performance: International Evidence

Cohen, Shira; Kadach, Igor; Ormazábal, Gaizka; Reichelstein, Stefan

doi:10.1111/1475-679x.12481

Cited by 136 publications

(15 citation statements)

References 57 publications

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“…, 2018; Velte, 2020a, b and c). An example might be found in a recent study conducted by Cohen et al. (2023), which examines the increasing integration of ESG criteria into executive compensation frameworks across international publicly traded firms.…”

Section: Theoretical Background and Hypotheses Developmentmentioning

confidence: 99%

“…The existing body of literature has separately addressed the relationship between ESG practices and CEO compensation, as well as the role of institutional ownership in executive compensation (Berrone and Gomez-Mejia, 2009;Cohen et al, 2023;Dong and Ozkan, 2008;Hartzell and Starks, 2003;Jang et al, 2022;Khan et al, 2005;Ozkan, 2007;Velte and Obermann, 2021). However, there is a notable gap in studies that consider these elements in conjunction.…”

Section: Introductionmentioning

confidence: 99%

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From profits to purpose: ESG practices, CEO compensation and institutional ownership

Nasta,

Magnanelli,

Ciaburri

2024

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PurposeBased on stakeholder, agency and institutional theory, this study aims to examine the role of institutional ownership in the relationship between environmental, social and governance practices and CEO compensation.Design/methodology/approachUtilizing a fixed-effect panel regression analysis, this research utilized a panel data approach, analyzing data spanning from 2014 to 2021, focusing on US companies listed on the S&P500 stock market index. The dataset encompassed 219 companies, leading to a total of 1,533 observations.FindingsThe analysis identified that environmental scores significantly impact CEO equity-linked compensation, unlike social and governance scores. Additionally, it was found that institutional ownership acts as a moderating factor in the relationship between the environmental score and CEO equity-linked compensation, as well as the association between the social score and CEO equity-linked compensation. Interestingly, the direction of these moderating effects varied between the two relationships, suggesting a nuanced role of institutional ownership.Originality/valueThis research makes a unique contribution to the field of corporate governance by exploring the relatively understudied area of institutional ownership's influence on the ESG practices–CEO compensation nexus.

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Section: Theoretical Background and Hypotheses Developmentmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

From profits to purpose: ESG practices, CEO compensation and institutional ownership

Nasta,

Magnanelli,

Ciaburri

2024

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“…Extensive research has also been conducted on the relationship between internal governance features, such as board diversity (Katmon et al, 2017;McGuinness et al, 2017), and executive compensation (Cohen et al, 2023). Kaymak and Bektas (2017) demonstrated that board independence and board size are strongly positively related to several social and sustainable practices by investigating the multinational corporations that are facing increasing pressure on transparency demand and need to implement good corporate governance practices.…”

Section: Literature Review and Hypothesis Development 21 Related Rese...mentioning

confidence: 99%

“…Since managers are entrusted with the task of devising corporate strategies, including corporate sustainability efforts (Waldman et al, 2006), the incentives provided to them may impact their decisions regarding the allocation of funds for firm social responsibility and sustainability. Most recent studies, such as Cohen et al (2023) have discussed the rapidly increasing practice of relying on ESG metrics in executive compensation contracts and they found that these compensation practices are aligned with efficient incentive contracting.…”

Section: Literature Review and Hypothesis Development 21 Related Rese...mentioning

confidence: 99%

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Shaping corporate ESG performance: role of social trust in China's capital market

Tang,

Yang

2023

CFRI

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PurposeThis study investigates the influence of social trust on the attainment of corporate environmental, social and governance (ESG) objectives.Design/methodology/approachThis study conducts panel regression analysis on a distinctive dataset for 2009–2017 on Chinese firms.FindingsThe analysis reveals a significant positive association between social trust and firm-level ESG practices. Moreover, the impact of social trust on shaping ESG outcomes is further amplified by factors such as economic growth, corporate governance standards and institutional quality. This relationship remains statistically positive when the authors employ alternative measures and methodologies, such as the instrumental variables, propensity score matching and difference-in-differences approaches. Notably, the results of heterogeneity tests indicate that the Trust–ESG nexus is more prominent for state-owned enterprises and firms with substantial market capitalization, superior profitability and higher leverage.Originality/valueThis study expands the comprehension of the determinants of ESG and underscores the influential role of social trust as an informal institution in enhancing a firm's ESG performance.

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Is national economic growth associated with environmental social and governance performance of firms?

Biju,

Jayachandran,

Thomas

et al. 2024

Bus Strat Dev

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This study delves into the effect of environmental, social and governance (ESG) indicators on economic growth trajectory of an emerging economy. A sample of firms listed on the ESG index of the National Stock Exchange (NSE) was examined. The findings reveal a positive and statistically significant relationship between ESG performance indicators and economic growth represented as gross domestic product (GDP) per capita. The sample is further segregated into energy and non‐energy sectors, where the aggregate ESG scores exhibited a statistically significant influence on economic growth in both sectors. However, upon a closer examination of the individual ESG pillars, the governance pillar is observed to exert a negative influence on economic performance in non‐energy firms. In contrast, the environment and social pillars show no significant influence. The analysis then employs a unique approach by applying a Difference‐in‐differences estimator to assess the impact of Business Responsibility and Sustainability Reporting (BRSR) regulations, which confirms a positive impact on economic growth after regulations but exclusively within the non‐energy sector. This study underscores the substantial impact of ESG aggregate and individual scores on GDP per capita, which translates to economic growth.

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Executive Compensation Tied to ESG Performance: International Evidence

Abstract: are grateful to Regina Wittenberg Moerman (editor), an anonymous associate editor, and an anonymous reviewer. We also appreciate comments from seminar participants

Cited by 136 publications

References 57 publications

From profits to purpose: ESG practices, CEO compensation and institutional ownership

From profits to purpose: ESG practices, CEO compensation and institutional ownership

Shaping corporate ESG performance: role of social trust in China's capital market

Is national economic growth associated with environmental social and governance performance of firms?

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