ESG-based remuneration in the wave of sustainability
Location:
Teaching Room 3,
Old College
Date/time
Wed 25 October 2023
16:30-17:30
Dr Longjie Lu presenting her new article, "ESG-based remuneration in the wave of sustainability". This article is available here. The presentation will be followed by discussion
By investigating ESG-based remuneration in the UK FTSE 350 companies, this article finds that in practice, ESG-based remuneration may depart from its expected role in promoting corporate sustainability, whereas being adopted as a tactic for impression management or managerial rent extraction. Due to the unmeasurable effects of most ESG factors on shareholder value and their subjective nature, ESG-based remuneration is vulnerable to exploitation for symbolic and self-serving purposes. For companies aiming to promote long-term shareholder value, extending the assessment period of financial performance is a less costly and risky option compared to ESG-based remuneration. Differently, for companies oriented by a stakeholder purpose, ESG-based remuneration may play a part in incentivising executives to achieve plural stakeholder interests. To mitigate the risk of exploitation, this article proposes rule tightening in the current disclosure and monitoring frameworks for executive remuneration.
About the speaker: Dr Longjie Lu is a Lecturer in Banking, Corporate and Financial Law, and the Director of the Center for Commercial Law at Edinburgh Law School
This event is in person only.