The Impact of Environmental Management on CEO Compensation : Focusing on Institutional and Individual Investors

PurposeThis study aims to analyze the impact of ESG management, particularly carbon emission reduction performance, on CEO compensation and to empirically examine the differential impact by investor type. MethodologyThe study analyzed manufacturing firms listed on the Korea Exchange from 2013 to 2022, using financial and environmental data. Multivariate regression analysis was applied to understand the relationship between carbon emission performance and executive compensation, and to assess the differential impact between institutional and individual investors. FindingsThe study found that higher carbon emission performance is associated with higher CEO compensation, with a stronger positive relationship in firms with a higher proportion of institutional investors. ImplicationsIncorporating carbon emission reduction performance into CEO compensation can incentivize sustainable management, with institutional investors playing a crucial role in enhancing firms’ ESG performance and improving corporate sustainability.