No. 917 - ESG metrics in CEO compensation: incentives and sustainability in the major EU economies
In recent years, ESG metrics have been incorporated into CEOs' compensation plans, sparking a debate about their potential to enhance sustainability and the risks they might pose to firms' economic performance. This paper provides a comparative analysis of the adoption of ESG-linked executive compensation in listed companies across the major EU economies between 2018 and 2022.
In the period under examination, it has become an increasingly common practice among larger companies to link CEO compensation to ESG objectives, which were almost always achieved by CEOs with no negative effects on corporate economic performance. However, the analysis suggests that an opportunistic selection of ESG targets and greenwashing may be widespread phenomena, raising doubts about the effectiveness of CEO remuneration in promoting sustainability.
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