ESG and Executive Remuneration

Inês Serrano Matos ()
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Inês Serrano Matos: Universidade de Coimbra

Chapter Chapter 15 in The Palgrave Handbook of ESG and Corporate Governance, 2022, pp 287-303 from Springer

Abstract: Abstract The combination of a fixed remuneration with a variable component is a suitable means to align the interests of directors with the company’s corporate purpose, also in what concerns ESG factors, given that both are linked to the pursuit of a sustainable, long-term interest. However, in order to achieve the intended effect, the design of remuneration packages must be duly adjusted. The banking sector is subject to special attention in this regard: banks are in a privileged position to carry out the promotion of ESG factors with high impact, due to its relative position in the economic system. That circumstance might demand a redefinition of the bank’s corporate purpose. In this chapter we show that clear, sustainable and non-financial indicators (Key purpose indicators) and metrics are crucial to strengthen the link between additional remuneration benefits and the promotion of sustainability and the long-term interests of the company. Some practical difficulties are also addressed in matters where a certain degree of scepticism still exists, namely: (i) the alignment of the various interests at stake; (ii) the enlargement of directors’ duties and (iii) the establishment of comprehensive metrics, and key performance indicators on sustainability.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-99468-6_15

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DOI: 10.1007/978-3-030-99468-6_15

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