Executive compensation, sustainable business practices and firm performance: a systematic literature review and future research agenda

Abstract

Purpose

This paper provides the latest systematic literature review (SLR) of prevailing studies on the interrelationship among executive compensation, financial performance and sustainable business practices. This SLR is done in three parts: (1) examine the theories employed by previous studies; (2) identify the unique variables employed by researchers in analysing this interrelationship and (3) explore potential opportunities for further study in the field.

Design/methodology/approach

This study conducted an SLR analysing studies from the Web of science, Scopus and EBSCO in over 20 countries from 2009 to 2022 published in several top-ranked journals. We utilised various search strings using the key phrases “executive compensation”, “CEO Pay”, “financial performance” and “sustainable business practices”. The initial sample of 27,210 was filtered with our meticulous inclusion and exclusion criteria to produce a list of 161 studies.

Findings

Our findings are as follows: first, most studies encompassing this subject area lack multi-theoretical perspectives with agency theory being the most dominant theoretical viewpoint; second, we observed the use of monotonous quantitative research methods, with studies heavily lacking qualitative and mixed-method research approaches; finally, there is a palpable gap in cross-country studies.

Research limitations/implications

There are a few limitations that must be acknowledged. First, the inclusion criteria ensured that only articles published in the CABS journal ranking of three star and above. Thus, this review may not be a precise reflection of the EC, FP and SBPs literature scope. The inclusion criteria also limit our review to only accounting, finance, management and business-related studies about the topic. Therefore, future studies could explore studies ranked three star and below and from other subject areas.

Originality/value

This study contributes to the existing literature by conducting a comprehensive SLR that examines both the theoretical underpinnings and empirical evidence on this topic. It builds upon previous research and extends our understanding of the interrelationship among executive compensation, financial performance and sustainable business practices.

Citation

Morrison, E.A., Adu, D.A. and Guo, Y. (2024), "Executive compensation, sustainable business practices and firm performance: a systematic literature review and future research agenda", Journal of Accounting Literature, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JAL-03-2023-0040