The paper addresses the crucial intersections between executive compensation, sustainability (represented by ESG factors), and financial performance. This area is gaining significant importance in corporate governance and strategic management. It also aims to fill identified research gaps, such as the need for literature testing these relationships in the banking sector and within the broader European context. This study is based on a systematic review of 149 articles published between 2000 and early 2022. From a theoretical perspective, agency and stakeholder theories are the most applicable theories for the relationship between compensation and sustainability and sustainability and performance. On the other hand, both agency and tournament theories are considered the most related to the relationship between compensation and performance. In addition, most of the literature shows a positive impact of compensation on both sustainability and performance. On the other hand, the literature revealed mixed results on the impact of sustainability on performance, depending on the factors and indicators used to represent the mentioned perspectives. Most of the literature used regression or correlation as the analysis tool. Furthermore, the literature revealed a gap in testing any of the relationships in the banking sector. Besides, more research is needed to study the relationships in the European context, as most of the studies are done in the USA, Asia, and individual European countries such as the UK. These findings may contribute to changing the compensation setup in the banking sector and have important implications for bank practitioners, decision-makers, regulators, auditors, professional firms, and policymakers.
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