How COVID-19 reshapes businesses and executive pay for sustainability

Abstract

The purpose of this paper is to answer the research question of how to design a fair and resilient compensation scheme according to stakeholder theory and the sustainability concept. The first finding of this paper is the framework for the sustainable, fair, resilient, scientific, simple, and practical compensation schemes — pay for sustainability (P4S). P4S has been developed after reviewing the literature and obtaining insights from the compensation consultants in Switzerland. It is also a useful tool in COVID-19 and will be for future crises. As a second finding, this theory-adaptation-based conceptual and commentary paper criticizes the conventional executive compensation structure and introduces the business lessons learned from the COVID-19 crisis. As a contribution to both the literature and practice, this research advances the novel knowledge in the field by conceptualizing a reliable and scientific framework and explaining the advantages and disadvantages of the four methods of the P4S framework. During COVID-19, environmental, social, and governance (ESG) based performances and compensation schemes have gained more importance. Finally, these proposed methods contribute to the adaptation of ESG-based compensation schemes while considering the local and individual differences of organizations.

Keywords: COVID-19 (Coronavirus Disease 2019), Pay for Sustainability, Stakeholder Theory, ESG-Based Executive Compensation

Authors’ individual contribution: Conceptualization – H.J.S.; Methodology – M.A.E. and H.J.S.; Resources – M.A.E.; Writing – Original Draft – M.A.E. and H.J.S.; Writing – Review & Editing – M.A.E.; Visualization – M.A.E. and H.J.S.; Funding Acquisition – H.J.S.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

Acknowledgements: The University of Wisconsin-La Crosse (UWL) has provided Mehtap A. Eklund with summer research support to compensate for her research time dedicated to this project. The authors are also thankful to Chris Engert for language editing and proofreading the manuscript.

JEL Classification: M14, G34, M12, Q56

Received: 31.07.2020
Accepted: 09.04.2021
Published online: 12.04.2021

How to cite this paper: Eklund, M. A., & Stern, H. J. (2021). How COVID-19 reshapes businesses and executive pay for sustainability [Special issue]. Corporate Governance and Sustainability Review, 5(1), 107-119. https://doi.org/10.22495/cgsrv5i1sip2