Prevalence of Sustainability Metrics within Executive Compensation Schemes in Large US Companies

This study is a descriptive qualitative assessment that examines the inclusion and extent of sustainability metrics into executive compensation packages among Dow Jones Industrial Average (DJIA) firms based on 2023 proxy statements. With growing stakeholder pressure, companies increasingly link executive pay to environmental, social, and governance (ESG) goals, which has been linked to improved corporate social responsibility, firm value, and lending accountability to strategic goals. Enhanced sustainability disclosures have been shown to be beneficial for most firms, yet challenges remain in balancing financial and ESG objectives. While the prevalence and form of sustainability metrics differ by industry, most DJIA firms include sustainability metrics in short-term incentive pay, even though sustainability practices are associated with achieving long-term success. Furthermore, recent political and corporate shifts have led some firms to scale back diversity, equity and inclusion (DEI) and sustainability efforts, raising concerns about the future of ESG-linked incentives. Given the rapid growth of ESG-related compensation and evolving regulations, this analysis provides timely insights into the role of executive incentives in driving corporate sustainability.