Sustainability performance and board compensation in Japan and ASEAN-5 countries

This study examines the association between sustainability performance in terms of the overall environmental, social, and governance (ESG) score and compensation for the board of directors at companies in Japan and five member countries of the Association for Southeast Asian Nations (ASEAN-5). Then, we examine each of the individual ESG pillar scores and their association with board compensation. Drawing on agency and stakeholder theories, and using a sample of sustainability-friendly companies for the period 2015 to 2019, we find, first, that in both Japan and the ASEAN-5, ESG scores are positively associated with board compensation, and, second, that in the ASEAN-5, the social pillar score is positively linked with board compensation. However, at Japanese companies, the governance pillar score is positively related to board compensation. Our study contributes to the academic literature on sustainability performance and board compensation by providing new empirical evidence on the relationship between overall and disaggregated ESG performance and board compensation.