Abstract
Executive pay is often linked to sustainability goals to instigate responsible leadership. Since the senior executives are responsible for adopting sustainable practices in their goal-setting objective, sustainability reports are being used as an instrument to convey the sustainability initiatives of the management to its stakeholder. This paper aims to evaluate the relationship between executive pay and sustainability reporting quality. We investigate whether executive compensation plans tied to sustainable goals will have a favourable impact on sustainability reporting quality, using a sample of FTSE350 firms. Using agency theory, we propose that compensation plans serve as a motivating factor for managers to align sustainability goals with individual goals, ultimately improving sustainability reporting quality. Our results authenticate this theory by suggesting a positive influence of sustainability-linked compensation scheme on sustainability reporting quality, using correlational regression analysis. Quite interestingly, this paper shows a negative link between executive payoff and sustainability reporting quality. Our paper mainly contributes to the critique literature of sustainability reporting by providing evidence for the influence of executives’ pay on the reporting quality