Regular readers know I am working on a book entitled "The Profit Motive: Defending Shareholder Value Maximization." I just added this paragraph:
A study by law professor David Walker examined the compensation of CEOs who were current and recent members of the Business Roundtable’s board. Walker determined that the median percentage of CEO pay that was based on ESG metrics was just 0.2 percent of the value of the CEO’s shares, outstanding equity awards, and other forms of variable compensation. The median ESG-based compensation amounted to just 1.1 percent of the CEOs’ total incentive compensation. The trivial amount of ESG-based compensation is especially striking considering that the same companies devoted, on average, 10% of their proxy statements to ESG issues. Walker concluded that “ESG talk far outweighs ESG walk, at least as far as executive incentives go, and ESG based pay seems more like window dressing than a serious attempt to incentivize executive behavior.”
David I. Walker, The Economic (In) Significance of Executive Pay ESG Incentives, (February 14, 2022), https://ssrn.com/abstract=4034877.
