The Role of GHG Emissions and Energy Consumption Disclosures in Determining Performance-Based CEO Compensation - A Panel Data Approach

This paper aims to empirically examine whether the negative impact of greenhouse gas emissions and energy use disclosures alleviates or exacerbates the positive impact of an overall Environmental, Social and Governance (ESG) disclosure while determining the performance-based CEO pay. A total of 67 companies listed in the NSE Nifty 100 ESG index spanning six years from 2014 to 2019 have been taken as the data sample. As a baseline methodology, the Panel Corrected Standard Errors model is applied and a further two-step system GMM model has been considered for robustness check. ESG disclosure scores show a significant positive effect on the pay-performance relationship, while its interaction with the emissions/energy use disclosure index gives a negative impact. The results indicate that the significant positive effect of ESG disclosure scores cannot reinforce the negative impact of emissions or energy use while ascertaining the performance-based CEO compensation.