Perceptions of the efficacy of sustainability-related performance conditions in executive pay schemes

This paper examines the efficacy of sustainability-related performance conditions in executive pay schemes at listed companies in the United Kingdom (UK) as perceived by the individuals involved in setting those conditions. It will be demonstrated that it is common practice in the UK for senior executives to receive part of their pay in the form of bonuses and share awards, the value of which awards will be determined by some degree of performance. The performance targets are generally related to financial performance but there is some evidence that performance conditions are increasingly being related to sustainability in some way. This paper considers a number of issues, including a key systemic issue of whether using incentive pay will have a material impact on the behaviour of UK listed companies regarding sustainability issues.