Beyond ESG: Executive Pay Metrics and Shareholder Support

Using a novel global dataset on executive compensation metrics for 10,636 firms across 34 countries, we show that these metrics are used to appease shareholders rather than to direct managerial attention toward neglected objectives. Consistent with this view, firms introduce metrics following periods of high say-on-pay dissent and often add them in areas of existing strength, especially in the case of ESG metrics. Exploiting variation in metric adoption induced by compensation consultants’ idiosyncratic practices, we find that ESG metrics do not improve overall ESG performance. Instead, new metrics of any type increase say-on-pay approval, reduce shareholder proposals, and lower dissent on management proposals, without improving the firm’s information environment.