Examines biodiversity risk affecting CEO compensation in firms, suggesting boards consider this risk.
We examine how firms adjust CEO compensation structures in response to biodiversity risk. We find that firms facing higher biodiversity risk tend to increase debt-based incentives in CEO compensation, while no significant changes are observed in terms of pay-performance sensitivity and risk-taking incentives. This association is stronger for financially constrained firms and those in highly competitive industries. These findings suggest that boards of directors actively consider biodiversity risk when designing CEO compensation to mitigate potential risks.
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Choi et al. (2026) studied this question.
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