Abstract This study uses agency theory as a framework to examine how board size, compensation committee, and CEO duality align the relationship between CEO compensation and firm sustainability performance. We examined 100 non-financial Asian companies with highest sustainability scores between 2010 and 2019. The findings support the pay-performance relationship proposed by agency theory by demonstrating a positive association between CEO compensation and firm sustainability performance. Our study claimed that, the compensation committee has a major impact on how closely CEO compensation is correlated with company sustainability performance, but board size has no discernible impact. This alignment is negatively impacted by CEO duality since improved performance offers a more realistic picture of the company. Furthermore, CEO compensation is significantly impacted by firm size which is justified by the complexity and the increased responsibilities associated with managing larger firms. Conclusively this investigation suggest that CEO compensation can be utilized effectively in the presence of effective governance practices. This study advances knowledge of agency theory and the connection between sustainability performance and compensation.
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Nee et al. (2024) studied this question.
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