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Journal of Business Ethics

Erschienen in:

06.05.2015

Green or Greed? An Alternative Look at CEO Compensation and Corporate Environmental Commitment

verfasst von: Claude Francoeur, Andrea Melis, Silvia Gaia, Simone Aresu

Erschienen in: Journal of Business Ethics | Ausgabe 3/2017

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Abstract

This study relies on environmental stewardship, a stakeholder-enlarged view of stewardship theory, and institutional theory to analyze the relationship between CEO compensation and firms’ environmental commitment in a worldwide sample of 520 large listed firms. Our findings show that environment friendly firms pay their CEOs less total compensation and rely less on incentive-based compensation than environment careless firms. This negative relationship is stronger in institutional contexts where national environmental regulations are weaker. Our findings have important theoretical meaning and practical implications. Results show that CEOs do not necessarily act opportunistically; rather some of them may be willing to act as stewards of the natural environment and accept a lower, less incentive-based compensation from environment friendly firms. This study also provides evidence of the important influence of the institutional context in setting-up CEO compensation as the relationship is stronger when national environmental regulations are weaker. Our findings question the universal validity of agency theory in explaining CEO compensation. Compensation based on pecuniary incentives might be less indicated to motivate CEOs who feel rewarded by playing a stewardship role for environment friendly firms. When designing compensation for CEOs, compensation committees and external compensation advisors should consider psychological and institutional factors that might affect CEO motivation.

Vorheriger Artikel The Role of Board Environmental Committees in Corporate Environmental Performance

Nächster Artikel The Effect of Environmental Activism on the Long-run Market Value of a Company: A Case Study

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As opposed to ‘triple bottom line.’

At worst, as pointed out by Bebchuk and Fried (2003), the compensation process is dominated by the CEO’s interests. Boards do not engage in arms’ length negotiations with the CEO over compensation, because they lack the independence, adequate time, and easy access to accurate and unbiased information. Moreover, also board members who sit in the compensation committee have economic and social incentives to favor CEOs (e.g., Murphy 1999).

We used the interquartile range rule to identify outliers.

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Titel: Green or Greed? An Alternative Look at CEO Compensation and Corporate Environmental Commitment
verfasst von: Claude Francoeur
Andrea Melis
Silvia Gaia
Simone Aresu
Publikationsdatum: 06.05.2015
Verlag: Springer Netherlands
Erschienen in: Journal of Business Ethics / Ausgabe 3/2017
Print ISSN: 0167-4544
Elektronische ISSN: 1573-0697
DOI: https://doi.org/10.1007/s10551-015-2674-5

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