Paying for Green: How CEO Compensation Shapes Environmental Performance in French Firms
Purpose: This paper aims to investigate the impact of CEO compensation structure on corporate environmental responsibility (CER). Design/methodology/approach: This study is based on a sample of 171 French firms listed on the SBF 250 shares index (1881 year-firm) from 2012 to 2022. Findings: Results show a positive relationship between the total CEO compensation and corporate environmental performance. Results also highlight that CEO equity-based compensation is positively associated with CEP. However, they show a positive but not significant association between CEO cash based compensation and CEP, implying that providing more cash incentives to CEOs does not necessarily motivate them to become more engaged in environmental activities. Practical implications: The results may be of interest to different stakeholders and policy-makers and regulatory bodies interested in improving corporate governance mecanisms to strengthen corporate environmental performance as it suggests that CEOs’ compensation components affect differently CEP. Therefore, attention should be paid to CEOs compensation structure when establishing CEP strategy Originality/value: Our study claims originality insofar as it investigates the association between CEP and the structure of CEO compensation using the intensity of each compensation component. Unlike most prior studies which focus on CEO total compensation, this study went further by examining the impact of each proportion of CEO compensation package providing thus a more in-depth analysis.