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All Hat and No Cattle? ESG Incentives in Executive Compensation

Author

Listed:
  • Matthias Efing

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

  • Stefanie Ehmann

    (Eberhard Karls Universität Tübingen = University of Tübingen)

  • Patrick Kampkötter

    (Eberhard Karls Universität Tübingen = University of Tübingen)

  • Raphael Moritz

    (Eberhard Karls Universität Tübingen = University of Tübingen)

Abstract

This paper examines the integration of ESG performance metrics into executive compensation using a detailed panel dataset of European executives. Despite becoming more widespread, most ESG metrics are largely discretionary, carry immaterial weights in payout calculations, and contribute little to executive pay risk. Such ESG metrics with arguably weak incentive power are common in financial firms and large companies, particularly for their most visible executives, which seems consistent with greenwashing. In contrast, binding ESG metrics with significant weights, which have potential to influence incentives, are only found in sectors with a large environmental footprint.

Suggested Citation

  • Matthias Efing & Stefanie Ehmann & Patrick Kampkötter & Raphael Moritz, 2024. "All Hat and No Cattle? ESG Incentives in Executive Compensation," Working Papers hal-04754859, HAL.
    • Handle: RePEc:hal:wpaper:hal-04754859
    DOI: 10.2139/ssrn.4974204
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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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