Executive compensation tied to ESG performance: international evidence
Keywords: 
ESG metrics
Executive compensation
Institutional ownership
Issue Date: 
2023
Publisher: 
Wiley
Project: 
info_eu-repo/granAgreement/AEI/Proyectos I+D/PID2020-115069GB-I00/[ES]/ANALISIS EMPIRICO DE LOS EFECTOS ECONOMICOS Y FINANCIEROS DE LA DIVULGACION DE INFORMACION PRIVADA DE LAS EMPRESAS
ISSN: 
1475-679X
Note: 
This is an open access article under the terms of the Creative Commons Attribution License
Citation: 
Cohen, S. (Shira); Kadach, I. (Igor); Ormazabal, G. (Gaizka); et al. "Executive compensation tied to ESG performance: international evidence". Journal of Accounting Research. 61 (3), 2023, 805 - 853
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.
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