Date of Award
CEO Compensation, Incentives, ESG
Benefits and Compensation
This paper examines the impact of environmental, social, governance (ESG) disclosure scores on chief executive officer (CEO) compensation. I analyze the S&P 500 from 2011 – 2021 utilizing the within estimation method for fixed effects regression models to find that a one point increase in a firm’s ESG disclosure score is associated with a 0.49% increase in CEO compensation, ceteris paribus. However, certain S&P 500 industries have an advantage in boosting their ESG disclosure score relative to other industries. After including interaction terms between industry and ESG disclosure score, I find that, for the median industry, a one point increase in a firm’s ESG disclosure score is associated with a 0.22% decrease in CEO compensation, ceteris paribus. When compared to alternative executive compensation packages (chief financial officer, chief operations officer, etc.), I find that a one point increase in a firm’s ESG disclosure score is associated with a 0.37% decrease in the average executive compensation for the median industry. Based on my findings, CEOs can gain a better overall understanding of how ESG disclosure effects CEO compensation within the S&P 500.
Rankin, Zane M., "ESG Disclosure Scores and CEO Compensation" (2023). Honors Thesis. 286.