The ‘S’ in ESG and its moderating role in determining the performance-based CEO compensation

This paper aims to empirically examine the moderating role of the social disclosure aspect in determining the performance-based CEO pay. Further, we have also tested whether women directors on board and academic qualification of CEOs reinforce the effect of social scores while ascertaining the pay–performance relationship. Taking 67 companies listed in NSE Nifty 100 ESG Index spanning six years from 2014 to 2019, the PCSE model is applied as a baseline methodology. Our findings are also robust to results obtained in propensity score matching and two-step system GMM model methods. The results indicate that although overall ESG disclosures are consistently significant, the social disclosure scores can affect the compensation paid to the CEOs only in the case of gender-diverse boards. The pay– performance relationship remains unaffected by CEO’s academic degree, but is significant to the ownership structure and certain social-oriented policies employed by the firm.