Abstract:
Economic, social and governance (ESG) have become topical subjects amidst the deleterious
effects of climate change, inequality and similar pressing challenges facing the people and the planet.
The main objective of this study was to rank the importance of both the pillars within the ESG model
and the five indicators beneath each pillar for the purposes of executive compensation plans through
the Analytical hierarchical process (AHP). It is not known which pillar within the ESG model should
be prioritised by companies operating in a developing economy context such as South Africa, and
neither is it known which of the available indicators should be prioritised when designing executive
compensation plans. AHP and pairwise comparison is employed in prioritising important pillars
and indicators. The environmental pillar is identified to be the most important among the three
pillars. Indicators that are prioritised mirror both the environmental and socio-economic challenges
prevalent in South Africa as an emerging economy. Companies’ boards, remuneration committees,
investors and policymakers can use the ESG-based indicators that have been prioritised in this study
in designing the executive compensation plans. AHP and pairwise comparison are novel approaches
used to prioritise the important pillars within the ESG model and the underlying indicators.
