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Sustainable compensation policies and its effect on environmental, social, and governance scores

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  • Elisa Baraibar‐Diez
  • María D. Odriozola
  • José Luis Fernández Sánchez

Abstract

The incorporation of sustainable compensation policies reflects the willingness of companies to manage the behavior of directors towards long‐term goals, responding to a large number of stakeholders with different demands. Analysis of compensation policies is biased to financial performance, so that the effectiveness of sustainable policies remains unexplored. This paper investigates whether having a sustainable compensation policy has a positive influence on environmental, social, and governance (ESG) and economic scores. These relationships are tested by estimating a fixed‐effects model for listed companies from Spain, France, Germany, and the United Kingdom in the period 2005–2015. According to the results, sustainable compensation policies affect ESG scores, but especially when firms have a corporate social responsibility committee acting as control mechanism and supporting the achievement of those objectives, triggering better nonfinancial performance. This paper contributes to literature by exploring the effect of sustainable incentives and expands the range and richness of results by including four different scores.

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  • Elisa Baraibar‐Diez & María D. Odriozola & José Luis Fernández Sánchez, 2019. "Sustainable compensation policies and its effect on environmental, social, and governance scores," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(6), pages 1457-1472, November.
    • Handle: RePEc:wly:corsem:v:26:y:2019:i:6:p:1457-1472
    DOI: 10.1002/csr.1760
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    6. Habiba Al-Shaer & Khaldoon Albitar & Jia Liu, 2023. "CEO power and CSR-linked compensation for corporate environmental responsibility: UK evidence," Review of Quantitative Finance and Accounting, Springer, vol. 60(3), pages 1025-1063, April.
    7. Maximilian Focke, 2022. "Do sustainable institutional investors influence senior executive compensation structures according to their preferences? Empirical evidence from Europe," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(5), pages 1109-1121, September.
    8. Patrick Velte & Martin Stawinoga, 2020. "Do chief sustainability officers and CSR committees influence CSR-related outcomes? A structured literature review based on empirical-quantitative research findings," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 31(4), pages 333-377, December.
    9. Charl de Villiers & Jing Jia & Zhongtian Li, 2022. "Corporate social responsibility: A review of empirical research using Thomson Reuters Asset4 data," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(4), pages 4523-4568, December.
    10. Marjan Petreski & Stefan Tanevski & Irena Stojmenovska, 2023. "Employment, labor productivity and environmental sustainability: Firm-level evidence from transition," Papers 2310.18989, arXiv.org.
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