Non-financial performance measures and pay-performance sensitivity

Purpose This study aims to examine whether chief executive officer (CEO) pay-performance sensitivity shareholder wealth is related the use of non-financial performance measures in incentive contracts. Design/methodology/approach Using hand-collected measure data a sample S&P 500 firms across period 1994–2010, this investigates CEO bonus and cash pay that (NFPM) varying types contractual weights their contracts along with financial (NFPM firms) comparison using only (FPM firms). Findings finds evidence stronger NFPM than FPM firms. These results are driven by individual goals operational efficiency. Furthermore, when environmental, social governance factors, terms accounting only. also enhances more as increase risk increases. Practical implications findings important stakeholders, especially regulators understanding effects alternative measures. sheds light on what better helping align CEOs’ incentives shareholders’ interests. Originality/value contributes prior research benefits information within context compensation. presents original about sensitivity. new insights regarding how different affect