Environmental, social, and governance metrics are receiving increasing attention as a measure of corporate performance. This column uses cross-sectional data to assess the prevalence and impact of including such metrics in executive compensation schemes. Usage of ‘ESG pay’ has grown rapidly in the past decade, with over 30% of firms including ESG metrics in their key performance indicators in 2021. It is more common in countries perceived to be sensitive to ESG concerns. Firms adopting ESG pay do receive more favourable ESG scores from rating agencies, but the impact on shareholder wealth is ambiguous.
Nothing contributes so much to the prosperity and happiness of a country as high profits