also placed a strong focus on the integration of ESG metrics into executive compensation frameworks, demonstrating their increasing interest in long-term sustainability. In addition, decision-makers


highlighted the need to consider a broader range of stakeholders in executive compensation decisions and the importance of maintaining social legitimacy. However, balancing diverse stakeholder interests, they said, remained a challenge. The complex and unintended effects of increased transparency in executive compensation were also addressed in the sense that transparency was seen to have the potential to drive up compensation levels through competitive benchmarking. The importance of ethical leadership and corporate


culture


in shaping compensation practices emerged as a key theme, with the tone from the top being seen as crucial. Their emphasis on ethical leadership suggested recognition that effective governance of executive compensation goes beyond formal structures and policies to include the values and culture of the entire organisation. Finally,


the including


highlighted various contextual factors


interviews industry-


specific challenges, regulatory environments, and broader economic trends, all of which


influenced executive compensation decision-making. Overall, the interviews revealed


a complex executive compensation governance landscape characterised by competing pressures and evolving expectations with ongoing tension between market pressures and societal expectations, and unintended consequences from increased transparency. The translation of ethical and moral principles into practice remains challenging despite the acknowledgement of the critical role of ethical leadership in shaping compensation practices.


RECOMMENDATIONS FOR PRACTICE The analysis revealed rising concern about the perceived unfairness of the widening gap between executive rewards and other stakeholder outcomes. This suggests that ethical executive compensation governance requires a nuanced understanding of stakeholder interests, the commitment to long- term value creation, and courage to make principled decisions based on informed judgment. Gaining wider public trust will become ever more critical. Recommended actions could


include the development of more comprehensive stakeholder engagement potentially involving regular stakeholder consultations


and public perception surveys, and the creation of metrics that more accurately reflect impact on stakeholder groups. The development of more sophisticated pay ratio metrics could address vertical (executive to worker) and horizontal (across different business units/geographies) equity. With respect to utilitarianism


and virtue ethics, ethical leadership assessments could be incorporated into performance reviews and a portion of compensation could be linked to the development and maintenance of a strong ethical corporate culture.


CONCLUDING REMARKS Remco decision-makers face a number of challenges and tensions in determining and implementing executive compensation in the complex corporate governance landscape. While ethical considerations do shape practice decision-makers face persistent challenges in balancing pay determination with wider ethical considerations.


Notwithstanding this, by


integrating ethical and moral considerations into corporate governance practices, companies can enhance their legitimacy, stakeholder relationships, and public perceptions and contribute to a more equitable and sustainable business environment.


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GLOBAL LEADERSHIP MINI FACTSHEET: ESG


ESG: Environmental interventions & branding


Taking action to improve the environment, reduce carbon emissions and increase sustainability is an essential component of organisations’ ESG (environmental, social and governance) activities. Environmental interventions are important to organisations’ reputations and branding.


THE BUSINESS CASE FOR ENVIRONMENTAL ACTION There is a strong business case for environmental actions; adopting a proactive ESG approach can help organisations to achieve a range of advantageous business outcomes. There is also a moral, human-centric imperative to improve the environment and take action to reduce climate


change for


current and future generations. A strong focus on the environment as


part of an organisation’s ESG strategy can help to avoid business risks such as environmental accidents that not only cause harm to people and the wider environment but also result in negative publicity, falling share prices, customer dissatisfaction and talent exodus. A strong focus on environmental issues


can have a hugely positive impact on talent attraction, motivation, commitment and retention through the creation of an environmentally sensitive brand image. Demonstrating a positive approach


to the environment can help to attract and retain customers through enhanced brand image and corporate reputation. It can enable organisations to have greater


access to capital through distinctive


environmental values that appeal to particular types of investors.


ENVIRONMENTAL INTERVENTIONS Environmental concerns and action to mitigate environmental damage must be integrated within organisations’ business operations and HR strategies. Environmental interventions can be


very wide ranging. Action can be taken at the micro-level, for example by each individual employee acting responsibly in their use of resources, through to industry- wide macro-level action on safety issues. For example, employees can be


encouraged to turn off electrical equipment when not in use in the office or to cycle


can sponsor employees to engage


to work. Organisations in


community greening activities such as tree planting and beach clean-ups. Ensuring environmentally safe practices in the disposal of waste and in the running of industrial processes are examples of macro-level interventions. Safety


standards should be reviewed


regularly and applied consistently across organisational operations.


CULTURAL CONSIDERATIONS & LEADERSHIP BEHAVIOURS The


organisational culture improvements


sustainability, and


environmental objectives. The behaviours of leaders are


important. Senior


leadership should be seen to adopt positive environmental practices. For


example,


their travel arrangements should not indicate a lack of environmental concern; sustainable options can show that leaders’ values align with organisational policy.


GLOBAL MOBILITY The transfer of employees and their families abroad has implications for environmental action. Travel arrangements, local transport, housing and temporary accommodation options, as well as other aspects of the assignment package should be reviewed to determine where


more environmentally-friendly


and sustainable approaches can be taken. The types of assignments used and the environmental commitments of third party suppliers should also be reviewed.


must


embrace a positive approach to carbon reduction,


environmental safety. Culture


change may be required to achieve this. Employees will be used to behaving in certain ways, potentially being less careful with their use of energy at work than at home where they are responsible for the electricity bills. Organisations need to encourage mind-set


a sustainable aligned with


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* Perkins, S.J. and Shortland, S. (2025) ‘Bridging theory and practice: Ethical governance of executive compensation in the Financial Times Stock Exchange 100’ Compensation and Benefits Review. Available here.


Dr Sue Shortland wishes to acknowledge the contribution of Prof. Stephen J. Perkins to the content of this article.


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GLOBAL LEADERSHIP MINI FACTSHEET: ESG


ESG: Leadership


Excellent leadership is essential for good governance. It is important to use the best leadership approach to achieve organisational success and thereby improve ESG (environmental, social and governance) credentials.


THE IMPORTANCE OF LEADERSHIP IN CONTEXT Leadership approaches depend on the people being led, the nature of the work they are doing, and the wider organisational setting. Styles of leader decision-making can


range from autocratic to democratic with a variety of approaches in-between. Factors to consider include the leaders themselves, the nature of the followers and the organisational situation. So, for example, the approach used can depend on the


leader’s


personality, values, preferences, beliefs about employee participation, and confidence in subordinates. With respect to followers, factors include their need


for independence, tolerance of


ambiguity, knowledge of the problem, and expectations of involvement. As for the organisation, the size and location of work groups, effectiveness of team working, and the nature of any problems or changes required will affect the leadership approach. Where subordinates’ commitment


is important, a more participative style of leadership can work well. Where subordinates do not share organisational goals, group-decision making should be


avoided. But such generalities are over-ridden by time constraints,


organisational policies and preferences of leaders and subordinates.


TRANSACTIONAL VERSUS TRANSFORMATIONAL LEADERSHIP Transactional leadership is used when an organisation operates under stable conditions. This approach focuses on task completion, and optimising the performance of the organisation through incremental changes within the confines of existing policy, structures and practices. In contrast, transformational leaders


are charismatic or visionary individuals who seek to bring about radical change. They use the force of their personality to motivate followers to identify with their vision and to sacrifice their own self-interest in favour of the group or organisation. They seek to gain the trust and emotional commitment of their followers by appealing to higher moral and ethical values.


OTHER LEADERSHIP APPROACHES Servant leadership is concerned with the needs of others. It is characterised by the desire to serve (as opposed to lead) and to build the leadership capacity of others. This approach helps to increase empowerment and more flexible communication at all levels. Spiritual


leadership uses principles


of humanity and care as a basis for achieving optimal performance. Ethical


leadership is directed ethical by beliefs and values. It focuses


on respect for the dignity and rights of others and draws upon trust, honesty, and fairness. Authentic


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leadership involves an


ongoing process whereby leaders and followers gain self-awareness and establish open, transparent, trusting and genuine


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relationships. Authentic leadership can incorporate transformational, servant, spiritual or other forms of positive leadership. Authentic leaders lead by example.


LEADERS & EMPLOYEE RELATIONSHIPS The quality of the exchange relationship developed between leaders and their followers is a key determinant of exceptional


leadership. High quality


exchanges are characterised by trust, liking, and mutual professional respect. Excellent leaders are emotionally intelligent. They are emotionally self- aware and can manage their emotions appropriately and use them to reach a goal. They also recognise and manage others’ emotions and show empathy.


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