CEO Non-financial KPIs hit 10-year high while ESG scores decline since 2021 

New research from Vlerick Business School reveals a significant shift in CEO remuneration structures over the past decade, with an increased emphasis on non-financial key performance indicators (KPIs) in both long-term incentives (LTIs) and short-term incentives (STIs). 

The study, conducted by Professor Xavier Baeten and senior researcher Marthe Van Hove, analyses trends in executive remuneration and composition across the STOXX Europe 600, a stock index comprising the 600 largest listed companies across 17 European countries. 

Since 2014, the proportion of companies incorporating non-financial KPIs—such as emissions, employee engagement, customer satisfaction, diversity metrics, etc.—into their LTIs has soared. In 2014, only 16% of companies linked LTIs to these broader performance measures, while in 2023, this figure has surged to 64%. Similarly, the percentage of companies embedding non-financial KPIs into STIs has grown from 71% to 90% over the same period. 

And yet, since 2021, ESG scores have declined.  

Between 2014 and 2021, Refinitiv data shows ESG scores (across 630+ measures) rose significantly, with the median ESG score increasing from 55 to 68, reflecting broader adoption of strong ESG practices and a stronger sustainability performance. But since 2021, scores have been decreasing (to a median score of 63 in 2023), suggesting challenges in sustaining the strong momentum found in the data between 2014 and 2020.  
“There has been notable progress in integrating ESG and other non-financial factors into executive compensation schemes, but CEO pay has not seen a significant increase,” says Professor Baeten. “Despite these advancements, the data suggests that the metrics companies are using may not always drive true improvements in business performance. It’s essential to continue evaluating whether these changes are truly enhancing leadership effectiveness or merely serving as quick wins.” 

Additionally, the overall structure of CEO pay has remained relatively stable. Base pay continues to account for approximately 28-34% of total remuneration, while STI and LTI components remain in the range of 22-29% and 44-50%, respectively.  

This annual study, produced by Vlerick Business School's Executive Remuneration Centre, partnered with Deloitte, tracks the evolving landscape of executive pay across Europe. 

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To speak with Professor Xavier Baeten or for more information on this research, please contact Stephanie Mullins-Wiles at BlueSky Education at smullins@bluesky-pr.com or call +44 (0)1582 790 703