EGS metrics in CEO compensation: incentives and sustainability in the major EU economies

Federico Fornasari () and Nicolò Galasso ()
Additional contact information
Federico Fornasari: Bank of Italy
Nicolò Galasso: Ca' Foscari University of Venice

No 917, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: In recent years, ESG (environmental, social, and governance) metrics have been incorporated into CEOs' compensation plans, sparking a debate about their potential to enhance sustainability and the risks they pose to firms' financial performance. This paper provides a comparative analysis of the adoption of ESG-linked executive compensation in listed companies across the major EU economies—France, Germany, Italy and Spain—between 2018 and 2022. Using a hand-collected dataset, this paper illustrates how ESG-linked remuneration has become widespread, its proportion in terms of total compensation, the metrics it encompasses and how it is structured. Moreover, the paper shows that ESG (as well as financial) targets are almost always achieved by CEOs and that corporate economic performance has not worsened as ESG-related pay has increased. The analysis suggests that cherry-picking targets and greenwashing may be prevalent, casting doubt on the effectiveness of CEOs' pay in fostering sustainability, while this governance structure has not hindered economic performance so far.

Keywords: CEO remuneration; ESG; corporate governance (search for similar items in EconPapers)
JEL-codes: K22 M12 M52 (search for similar items in EconPapers)
Date: 2025-03
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.bancaditalia.it/pubblicazioni/qef/2025-0917/QEF_917_25.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_917_25

Access Statistics for this paper

More papers in Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area Contact information at EDIRC.
Bibliographic data for series maintained by ().