Over the past two decades, firms in OECD countries have increasingly tended to incorporate social and environmental responsibility (CSR) criteria into executive remuneration, through an incentive scheme known as a ‘CSR contract’.
The adoption of these programmes, when implemented in firms with a partnership-based governance model (in which the various stakeholders are involved in the firm’s governance), is associated with better social, environmental performance and respect for human rights, but is not significantly associated with financial performance.
Conversely, in the case of firms with a governance model focused primarily on creating value for shareholders, the adoption of these CSR contracts is negatively correlated with their financial performance and is unrelated to their non-financial performance.
