Non-Financial Performance Measures in Executive Bonus Contracts and Firm Performance

Sammanfattning

This study investigates whether there is a relationship between the inclusion of non-financial performance measures (NFPM) in CEO bonus contracts and firm performance in the short- term perspective of one year. Data is hand collected from the preceding year's remuneration reports of 106 Nordic large cap firms listed on Nasdaq. From the cross-sectional data set, two multivariate linear regressions have been performed with two different proxies for firm performance. Although previous studies have found a positive relationship in the long run we did not find support for a positive relationship between the inclusion of NFPM in CEO bonus contracts and firm performance in the short-run. As a complementary qualitative analysis, we noted that ESG objectives are incorporated in only 35% of the executive bonus plans.