TY - JOUR

T1 - Sustainability-oriented targets in executive compensation.

T2 - Symbolic measures or significant catalyst for a sustainable transition?

AU - Hofer, Alexander

AU - Aschauer, Ewald

AU - Velte, Patrick

PY - 2024

Y1 - 2024

N2 - Purpose:This study analyses the motivations and underlying assumptions of decision-makers driving the adoption of sustainability-oriented targets in executive compensation (SCTs) to better understand SCTs’ impact on sustainability performance.Design/methodology/approach:Through a qualitative approach, 15 in-depth interviews are conducted in a two-tier governance setting. Participants include management and supervisory board members, compensation consultants, and other stakeholders involved in proxy voting.Findings:SCT implementation is primarily determined by meeting shareholders’ expectations rather than those of other stakeholders. Decision-makers react in a differentiated way to increased expectations by implementing either primarily symbolic or substantive measures and encounter different implementation challenges like insufficient data quality and a lack of experience within supervisory boards, both of which potentially contribute to decoupling.Implications:The study offers valuable insights for companies in designing SCTs and emphasises the significance of addressing decoupling to effectively enhance sustainability performance through SCTs and provides a foundation for future studies aimed at analysing this phenomenon.Originality:Using a neo-institutional-theory (NIT) lens, this study marks one of the first interview-based investigations to distinguish between symbolic and substantial SCTs. It delves deeply into the role of decoupling and the associated challenges, offering fresh perspectives within the under-researched framework of a two-tier corporate governance structure. Moreover, this study aims to meticulously capture the real-world design practices and implementation processes of SCTs through experts, an aspect that was emphasised as a limitation in previous studies.

AB - Purpose:This study analyses the motivations and underlying assumptions of decision-makers driving the adoption of sustainability-oriented targets in executive compensation (SCTs) to better understand SCTs’ impact on sustainability performance.Design/methodology/approach:Through a qualitative approach, 15 in-depth interviews are conducted in a two-tier governance setting. Participants include management and supervisory board members, compensation consultants, and other stakeholders involved in proxy voting.Findings:SCT implementation is primarily determined by meeting shareholders’ expectations rather than those of other stakeholders. Decision-makers react in a differentiated way to increased expectations by implementing either primarily symbolic or substantive measures and encounter different implementation challenges like insufficient data quality and a lack of experience within supervisory boards, both of which potentially contribute to decoupling.Implications:The study offers valuable insights for companies in designing SCTs and emphasises the significance of addressing decoupling to effectively enhance sustainability performance through SCTs and provides a foundation for future studies aimed at analysing this phenomenon.Originality:Using a neo-institutional-theory (NIT) lens, this study marks one of the first interview-based investigations to distinguish between symbolic and substantial SCTs. It delves deeply into the role of decoupling and the associated challenges, offering fresh perspectives within the under-researched framework of a two-tier corporate governance structure. Moreover, this study aims to meticulously capture the real-world design practices and implementation processes of SCTs through experts, an aspect that was emphasised as a limitation in previous studies.

KW - Management studies

KW - Sustainability Science

M3 - Journal articles

JO - Qualitative Research in Accounting & Management

JF - Qualitative Research in Accounting & Management

SN - 1176-6093

ER -