ESG contracting and managerial incentives

Patricia Crifo and Aymeric Guidoux

Chapter 4 in Handbook of ESG Investing, 2026, pp 58-79 from Edward Elgar Publishing

Abstract: This chapter examines the impact of managerial compensation on corporate social responsibility (CSR) and the relationship between the board of directors and the chief executive officer (CEO). It first develops a theoretically optimal compensation scheme that combines monetary incentives with external rewards from their environment. Using empirical evidence on executive pay, the model is then applied to the CEO–board relationship. Findings show that the optimal scheme depends on external factors tied to CSR effort and internal factors linked to adaptive capacity, based on cooperation and team learning. The empirical analysis indicates that monetary incentives for CSR are more effective in firms with high adaptive capacity than in those with low adaptive capacity. The study thus provides useful insights for policymakers seeking to strengthen the legitimacy of executive rewards tied to ESG criteria and demonstrates how such programs can enhance firms’ ability to manage complex tasks and teams.

Keywords: ESG rewards and performance management; Teamwork; Executive compensation and motivation; Non-monetary incentives; Corporate social responsibility (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035322770
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