TY - JOUR

T1 - Sustainability-oriented targets in executive compensation – symbolic measures or significant catalyst for a sustainable transition?

AU - Hofer, Alexander

AU - Aschauer, Ewald

AU - Velte, Patrick

N1 - Publisher Copyright: © 2024, Alexander Hofer, Ewald Aschauer and Patrick Velte.

PY - 2024/11/19

Y1 - 2024/11/19

N2 - Purpose: This study aims to analyse 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. Research limitations/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/value: Using a neo-institutional theory 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 aims to analyse 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. Research limitations/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/value: Using a neo-institutional theory 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 - Decoupling

KW - Executive compensation

KW - Legitimacy

KW - Neo-institutional theory

KW - Sustainable corporate governance

KW - Management studies

UR - http://www.scopus.com/inward/record.url?scp=85202841796&partnerID=8YFLogxK

UR - https://www.mendeley.com/catalogue/0179b418-eb30-3110-bbcf-2ea0e2161983/

U2 - 10.1108/QRAM-06-2023-0105

DO - 10.1108/QRAM-06-2023-0105

M3 - Journal articles

AN - SCOPUS:85202841796

VL - 21

SP - 465

EP - 493

JO - Qualitative Research in Accounting & Management

JF - Qualitative Research in Accounting & Management

SN - 1176-6093

IS - 5

ER -