This chapter examines the integration of sustainability into the executive remuneration contracts in large non-financial listed companies in France, Germany, and Italy. Drawing upon the stakeholder-agency theoretical lens, it explores how sustainability-related criteria are integrated into the executive remuneration design (e.g. time horizon, weight, method of payment, number of KPIs, and nature of KPIs) as well as the process that led to this design and implementation (involvement of remuneration committee, sustainability-related committee, external consultant, and independent assurance). The findings reveal a wide use of sustainability-related criteria in executive remuneration contracts. These criteria exhibit a high level of relevance and actionability, and a varying degree of independent verification. It also emerges that the interest allocated to each stakeholder group is unbalanced among companies in all three countries. This remuneration practice also differs across countries, industries, and incentive plans’ time horizon. In conclusion, this chapter sheds light on the evolving practice of integrating sustainability criteria in executive remuneration contracts and its potential to align CEO interest with targeted stakeholders’ welfare.

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Exploring the Integration of Sustainability in Executive Remuneration Design: Evidence from Large Non-financial Listed Companies in France, Germany, and Italy

  • Andrea Melis,
  • Carla Gravellu,
  • Nouha Wasli

摘要

This chapter examines the integration of sustainability into the executive remuneration contracts in large non-financial listed companies in France, Germany, and Italy. Drawing upon the stakeholder-agency theoretical lens, it explores how sustainability-related criteria are integrated into the executive remuneration design (e.g. time horizon, weight, method of payment, number of KPIs, and nature of KPIs) as well as the process that led to this design and implementation (involvement of remuneration committee, sustainability-related committee, external consultant, and independent assurance). The findings reveal a wide use of sustainability-related criteria in executive remuneration contracts. These criteria exhibit a high level of relevance and actionability, and a varying degree of independent verification. It also emerges that the interest allocated to each stakeholder group is unbalanced among companies in all three countries. This remuneration practice also differs across countries, industries, and incentive plans’ time horizon. In conclusion, this chapter sheds light on the evolving practice of integrating sustainability criteria in executive remuneration contracts and its potential to align CEO interest with targeted stakeholders’ welfare.