The use of non-financial performance metrics in determining directors’ remuneration: The case of listed companies in South Africa

Abstract

Despite the increasing importance of environmental, social and governance (ESG) factors, it is not fully understood whether companies consider these factors when designing compensation plans for their directors. This study investigated the extent to which directors’ remuneration integrates ESG factors. The study sample is made up of JSE-listed companies for the period 2015 to 2021. The estimated generalised least squares regression technique was used to analyse the data. The results show the shift towards the integration of ESG factors in directors’ compensation plans. It should be established which ESG factors are pertinent in the South African context.

Environmental, social and governance and financial performance nexus in South African listed firms

“…Another strain of ESG literature focuses on the social pillar of the ESG model, a component that is even more important for South African setting, a developing economy that is beset by poverty, unemployment, inequality and other social ills emanating from decades of colonialism and apartheid (Matemane et al 2023). The debates are launched from CSR perspective and one such study is by Nollet, Fillis and Mitrokostas (2016) who examined the association between corporate social performance (CSP) and corporate financial performance (CFP).…”