Effects of Managers Compensation Structure on ESG Performance

Abstract

Recently, ESG, which affects corporate capital raising, has become important. The board of directors will encourage ESG management to increase corporate value from a long-term perspective. One way for boards to direct executive decision-making is to consider adjusting executive compensation. If executives have incentive compensation to induce ESG management, it will be possible to match the ESG performance of the company with the performance of the executive(Bebchuk et al., 2002；Marens, 2002；Zalewski, 2003). Therefore, the purpose of this study is to study the relationship between executive compensation and ESG performance using the ESG evaluation score of the KCGS. Specifically, we will analyze the impact of executive compensation on ESG performance, and verify through empirical analysis how the executive compensation composition affects ESG performance. The analysis results are as follows. First, it was verified that the higher the executive compensation, the higher the ESG performance of the company. Second, it was verified that the higher the stock compensation ratio of the manager, the higher the ESG performance of the company. These analysis results can be judged that executive compensation is made in connection with ESG performance. In addition, as a method of incentive compensation to enhance ESG performance, it can be judged that the stock compensation ratio among executive compensation components is increased. The contribution of this study is that by identifying the relationship between ESG performance and the compensation of the manager, which is not the main goal of corporate management, the motivation of the manager to perform ESG management is identified, and the incentive to induce ESG management for corporate sustainability management That is, the reward system was identified.