Substance and symbol in ESG-linked executive compensation: evidence from Italian listed companies


  • Nicola Cucari Sapienza University of ROME
  • Eugenio D'angelo
  • Domenico Sardanelli
  • Francesco Surace
  • Simone Di Silvestre



ESG, ESG indicators;, QCA, Compensation;


Framing of the research. A very recent development in corporate governance studies is about how to integrate environmental, social and governance (ESG) indicators in executive compensation plans. Particularly, the debate is no longer about whether the use of ESG indicators in executive compensation makes sense, but how to do it in the most effective way.

Purpose of the paper.  Based on the Neo-Institutional Theory (NIT) and on the substantive vs. merely symbolic inclusion of ESG criteria in executive compensation plans, we describe the spread and frequency (of use) of ESG indicators in CEOs’ compensation plans designed by Italian listed companies, verifying, at the same time, the quantitative diversification of such indicators and the progress made by selected companies in recent years. In addition, our aim is to provide configurations that enable firms to give a higher weight of ESG indicators in their compensation plans.

Methodology.  Our sample covers all Italian listed companies in FTSE Mib during the last 5 years (2017-2021). To analyze data and define the specific configurations mentioned above, we employed the Fuzzy-set qualitative comparative analysis (Fs/QCA).

Results. In an overall context that shows a relevant progress in the adoption of ESG indicators as part of the compensation plan metrics, three configurations emerged, which achieve the highest ESG weights, and which correspond, according to our interpretation, to different levels of substantiality in ESG implementation.

Research limitations. Firstly, we did not consider other conditions that could have helped to identify cases of symbolic adoption. Secondly, we have not delved into the type of ESG indicators that firms adopt.

Managerial implications. Sustainability-oriented investors might look for cues in the bundle of characteristics of the remuneration policy to infer whether it corresponds to a more or less substantial implementation of the ESG activities.

Originality of the paper. To the best of our knowledge, our database is the first longitudinal database of ESG indicators on CEO’s compensation.


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