Exploring ESG Performance and Executive Pay Structures in Malaysia: Evidence from Listed Companies

Abstract

Research Question: This study examines the relationship between Environmental, Social and Governance (ESG) performance and executive pay structures in Main Market among Malaysian listed companies span from 2023 to 2025. Motivation: As global corporate governance trends increasingly emphasize sustainability, integrating ESG criteria into executive pay structures has gained substantial attention. This aligned with the Bursa Malaysia Board Remuneration Policy introduced in April 2025 recently. However, the extent to which Malaysian listed companies align executive remuneration with ESG performance remains unclear. Idea: The research aims to assess the prevalence, determinants and impact of ESG-linked compensation, offering empirical insights into corporate governance practices among Malaysian listed companies. Data: A quantitative approach was employed, utilizing secondary data from publicly available financial reports and ESG disclosures of Bursa Malaysia Main Market firms for the year 2023 to 2025. Using LSEG Workspace data, a sample of 296 Main Market was analyzed. Panel data regression analysis has also been conducted to estimate the relationship between ESG performance and executive pay structures. Method/Tools: The study applied regression models to examine the correlation between compensation policy, ESG scores, financial performance indicators and executive pay structures span from 2023 to 2025. The research framework is grounded in agency theory and stakeholder theory, providing insights into how firms balance managerial incentives with both shareholder and stakeholder interests. Findings: The results indicate that ESG performance partially contribute to the executive pay structures, suggesting that ESG-linked pay structures are not yet widely adopted in Malaysia. However, firms with structured executive compensation tend to offer significantly higher executive pay, underscoring the role of corporate governance frameworks in shaping remuneration practices. Contributions: The study provides partial support for the hypothesis that ESG performance affects executive compensation and encourages further exploration in this area. A key limitation is the absence of qualitative insights into leadership commitment toward ESG adoption. Future research should examine industry-specific variations and incorporate qualitative assessments to develop a more comprehensive understanding of ESG-linked executive compensation. Overall, this study contributes to the corporate governance discourse by emphasizing the need for stronger regulatory frameworks to enhance ESG integration into executive remuneration score.