Articlegreen2019

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

Elisa Baraibar‐Diez · María Dolores Odriozola · Fernández Sánchez

126 citations0/0 files storedCorporate Social Responsibility and Environmental Management

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Corporate Social Responsibility Reporting Corporate Finance and Governance Corporate Governance and Financial Management

Abstract

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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References

1983The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields 1983The Iron Caged Revisited : Institutional Isomorphism and Collective Rationality in Organizational Fields 1999Corporate governance, chief executive officer compensation, and firm performance 2013Corporate social responsibility and access to finance 2003Corporate Governance, Board Diversity, and Firm Value 2003Boards of Directors and Firm Performance: Integrating Agency and Resource Dependence Perspectives 1995Executive compensation structure, ownership, and firm performance 2003Institutional Investors and Executive Compensation

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