No. 103: Executive compensation tied to ESG performance: International evidence

Year: 2022

Type: Working Paper

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.

Publication Information

TRR 266 researchers

Stefan Reichelstein, University of Mannheim

Stefan Reichelstein is the chairholder of the endowed chair in business administration at University of Mannheim. He is also Professor Emeritus in Accounting and faculty research director at Steyer-Taylor Center for Energy Policy and Finance at Stanford University. His research focuses on cost-analysis, decentralization, internal pricing and success management. He is Research Associate of the Leibniz – Zentrum für Europäische Wirtschaftsforschung (ZEW) and Research Fellow at CESifo Institute in Munich. In addition, he is managing editor of Foundations and Trends in Accounting as well as editor for the Review of Accounting Studies and department editor of the Management and Business Review. He is also member of several editorial boards like the German Economic Review, Journal für Betriebswirtschaft and Review of Managerial Science. He is member of the Academic Advisory Board at the University of Cologne and founded the newly-endowed research institute, The Mannheim Institute for Sustainable Energy Studies (MISES) at Mannheim University.

External researchers

Shira Cohen

Igor Kadach

Gaizka Ormazabal

DOI

DOI Link

To cite this article

Cohen, S., Kadach, I., Ormazabal, G., & Reichelstein, S. (2022). Executive compensation tied to ESG performance: International evidence. TRR 266 Accounting for Transparency Working Paper Series No. 103. https://dx.doi.org/10.2139/ssrn.4237665

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