The incentive gap
Globally, firms are beginning to embed ESG performance metrics in executive contracts. Yet in Vietnam, this practice is rare. The study’s findings highlight how ESG-linked compensation can counteract short-termism, turning environmental stewardship into a measurable, career-linked priority.
“In emerging markets like Vietnam, where environmental regulations are evolving and enforcement remains patchy, ESG-based pay can fill the gap,” says co-author Dr Aitzaz Ahsan Alias Sarang from the Institute of Business Administration, Karachi. “It internalises sustainability within the firm, making it part of how success is defined.”
The study also finds that this link is most effective in firms operating in environmentally sensitive industries, such as manufacturing, energy, and materials – sectors central to Vietnam’s export economy. Moreover, firms in countries with weaker governance or less stringent environmental policies see the strongest benefits from tying executive rewards to ESG outcomes. This pattern mirrors Vietnam’s own regulatory context, where corporate governance reforms are still maturing and ESG disclosure standards are in their infancy.
Implications for Vietnam’s ESG transition
As Vietnam strives to attract ESG-focused investors and comply with global supply chain standards, the researchers argue that aligning executive pay with sustainability outcomes could become a strategic advantage.
“This is not just about paying CEOs more,” Dr Shakri notes. “It’s about paying them differently, linking their bonuses to measurable improvements in waste reduction, recycling, and environmental impact.”
For policymakers, the findings point to three actionable steps:
Encourage voluntary disclosure of ESG-linked compensation structures to enhance transparency and investor confidence.
Develop sector-specific incentive guidelines that reward verifiable sustainability achievements.
Integrate waste reduction targets into the upcoming circular economy roadmap, tying executive performance to tangible national goals.
A turning point for corporate Vietnam
Vietnam’s manufacturing success has come at an environmental cost. But as the country deepens its net-zero commitment, firms must rethink what drives executive behaviour.
“Boardrooms in Vietnam need to see ESG not as a reporting checkbox, but as a reward-worthy achievement,” Dr Shakri concludes. “When sustainability becomes part of the paycheck, it becomes part of the business culture, and that’s how Vietnam can turn its waste challenge into an innovation opportunity.”
