Reprint of: Heterogeneity in the integration of ESG measures in executive compensation: Determinants, contracting details and outcomes

Shilin Hou, Jianfeng Shen, Chuan Yu and Shan Zhou

The British Accounting Review, 2025, vol. 57, issue 1

Abstract: Corporate social responsibility (CSR) contracting incorporates environmental, social, and governance (ESG) related measures in executive compensation plans. Current research on this practice is limited to a US setting, despite global adoption. We investigate heterogeneity in CSR contracting using data from 59 countries between 2002 and 2019. We find that besides firm-level past ESG performance and the industry-level adoption rate, country-level ESG regulations have significant explanatory power in firms’ tendencies to adopt CSR contracting. Hand-collected data reveal significant cross-country differences in CSR contracting details. Finally, CSR contracting is positively associated with subsequent financial performance only in countries with more stringent ESG regulations and stronger legal enforcement. In contrast, CSR contracting is associated with subsequent ESG performance regardless of country-level factors.

Keywords: Executive compensation; ESG integration; Cross-country heterogeneity; Contracting details; ESG performance (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:bracre:v:57:y:2025:i:1:s0890838925000095

DOI: 10.1016/j.bar.2025.101559

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