Remunerazione e Incentivazione del top management. Meccanismi ESG based.

Translated title of the contribution: [Autom. eng. transl.] Remuneration and incentives of top management. ESG based mechanisms.

Laura Zoni, Giovanni Battista Derchi

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

[Autom. eng. transl.] Derchi and Zoni address the issue of the dissemination (and effectiveness) of the incentive mechanisms of top management linked to sustainability results. In general, if the potential effectiveness of using monetary incentive systems in order to obtain results does not seem doubtful (pay for performance), several studies in the literature warn, highlighting critical issues that could reduce their real effectiveness (Bebchuk et al. . 2000; Bebchuk and Fried 2003). In particular, according to Derchi et al. (2020) the main causes of a potentially negligible or negative effect on ESG results in response to the use of ESG based incentives are related to: i) the main purposes for which the monetary incentives are used (motivational or informative), ii) the possible crowding-out effect that monetary incentives can exert on the intrinsic motivation to achieve sustainability results, iii) some critical issues in the design of the ESG-based incentive mechanism, including the measurability of the performance indicators used to assess the efforts and results of top management in ESG matters, as well as the multiplicity of tasks / objectives assigned to the managers assessed . Furthermore, in a more general context, the issue of complementarity or substitutability between governance systems has always been an inexhaustible source of debate. In essence, in the case of the use of ESG based incentive systems, it is a question of establishing whether the fundamental and positive relationship between the use of ESG based incentive systems and the ESG results is amplified (complementary relationship) or amplified (substitutability relationship) in the presence of other mechanisms, governance oriented towards sustainability, such as the adoption and communication of non-financial reports and the presence of a sustainability committee reporting directly to the Board of Directors. With these premises and in the theoretical context outlined, some empirical evidence was collected of the diffusion of governance systems oriented to sustainability performance in a sample of Italian companies that stand out for their sustainability results and therefore included in the STOXX ITALY 45 ESG-X. The observation highlights that the spread of ESG-based remuneration systems is volatile over time compared to the dissemination of non-financial reports and the presence of the Sustainability Committee at the Board of Directors, the latter being more "popular" governance mechanisms. Due to the limited observations it is difficult to measure the effectiveness of ESG based incentives. However, empirical observation allows us to highlight that within the sample, companies that opt for ESG-based incentive systems are on average more structured to manage ESG performance than those that have not formalized the "pay for ESG performance" link. Specifically, companies that adopt ESG-based incentive systems on average have more frequently formalized corporate policies, quantified and communicated ESG results objectives, and other sustainability-oriented management and control mechanisms / systems. Although the interpretation of the data requires great caution, it can be assumed that the adoption and effectiveness of ESG-based incentive systems takes place in a corporate and organizational context permeated by an orientation towards sustainability, by virtue of the availability of policies and operationally prepared for the management of ESG performance.
Translated title of the contribution[Autom. eng. transl.] Remuneration and incentives of top management. ESG based mechanisms.
Original languageItalian
Title of host publicationIl valore della sostenibilità. Modelli emergenti di rendicontazione non finanziariatra le imprese italiane leader ESG
Pages157-185
Number of pages29
Volume2021
Publication statusPublished - 2021

Publication series

NameAccounting & Business Studies

Keywords

  • Incentivi
  • Risultati di sostenibilità e remunerazioni

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