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Rewarding responsibility? The complexities of incorporating ESG metrics in executive compensation contracts

Assistant Professor Mariya Ivanova shares insights from her research in executive compensation.

An increasing number of firms are linking executive compensation to the achievement of specific Environmental, Social, and Governance (ESG) key performance indicators (KPIs). Advocates for incorporating ESG KPIs into executive pay argue that such targets can create a business environment that aligns managerial incentives with societal expectations, enhancing a firm's reputation among its stakeholders and contributing to long-term value creation. However, the subjective nature of setting and measuring ESG targets, along with a lack of standardization, raises significant concerns about whether these compensation metrics can effectively promote a company's ESG performance. Indeed, there are concerns that opportunistic executives might take advantage of the subjective nature of measuring ESG and welcome the inclusion of ESG metrics in bonus schemes as a means to increase their pay without necessarily adding value for stakeholders or attracting public scrutiny.


To further explore these complex issues, Mariya Ivanova, Assistant Professor at the Department of Accounting and Affiliated Researcher at Mistra Center for Sustainable Markets, will discuss the latest academic findings on the use of ESG metrics in executive compensation and share insights from her own research on how firms are adopting ESG-related targets in executive annual bonuses to respond to industry-wide ESG risks.


Breakfast served from 7:30.


Dept. of Accounting Misum