Advancing understanding of ESG score and executive compensation relationships in the Indian context

Abstract

This study examines the impact of environmental, social, and corporate governance (ESG) performance metrics on executive compensation in India using a sample of top-listed firms from 2007 to 2021 and controls for various firm-level characteristics. Findings show that a higher ESG score is associated with higher executive compensation. The subsample analyses examines how business-group affiliations and environmental sensitivity affect executive compensation. Results reveal that business-group affiliated firms with higher ESG scores tend to have higher executive compensation than nonaffiliated firms. Moreover, environmentally sensitive firms with higher governance pillar scores, which represent better governance practices, show higher executive compensation. Finally, high ESG scores and executive compensation is associated with better firm performance.