Climate change policies and carbon-related CEO compensation systems: an exploratory study of European companies
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In: Journal of Global Responsibility, Vol. 12, No. 2, 25.05.2021, p. 158-188.
Research output: Journal contributions › Journal articles › Research › peer-review
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TY - JOUR
T1 - Climate change policies and carbon-related CEO compensation systems
T2 - an exploratory study of European companies
AU - Winschel, Julija
N1 - Publisher Copyright: © 2020, Emerald Publishing Limited.
PY - 2021/5/25
Y1 - 2021/5/25
N2 - Purpose. In view of current climate change policies, this study aims to provide researchers, regulators, and business practice with the current picture of practices regarding carbon-related compensation granted to chief executive officers (CEO). To this end, it examines whether and to what extent European companies translate their carbon reduction strategies into carbon targets underlying their CEOs’ short-term and long-term compensation, what characteristics the carbon targets used commonly have in terms of their quality and time frame, and whether the carbon targets used differ among carbon-intensive, and less carbon-intensive companies.Design/methodology/approach.Drawing on the stakeholder-agency theoretical perspective, this study explores the patterns of use and characteristics of carbon-related targets in CEO compensation. In this vein, a content analysis of corporate disclosure for the business years 2018 and 2019 is conducted for a European sample of 65 large listed companies from 16 countries and 11 industries.Findings.The findings of this study show that albeit the trend toward new adoption, carbon-related CEO compensation systems are still uncommon. The results also reveal that carbon targets are mainly used to determine short-term compensation. Further, the findings highlight that carbon-related CEO compensation is almost equally widespread among carbon-intensive and less carbon-intensive companies. However, in terms of target quality, the study shows that carbon-intensive companies display greater heterogeneity and opacity.Originality/value.By analyzing the characteristics of carbon targets and the prevalence of carbon-related CEO compensation for the first time, this study contributes to the stakeholder-agency theoretical perspective on corporate governance. In view of the European Green Deal and climate-related stakeholder demands, regulators and business practice are encouraged to recognize that carbon-related CEO compensation should gain momentum and the disclosure on this matter should become more transparent and comparable among companies and across industries.
AB - Purpose. In view of current climate change policies, this study aims to provide researchers, regulators, and business practice with the current picture of practices regarding carbon-related compensation granted to chief executive officers (CEO). To this end, it examines whether and to what extent European companies translate their carbon reduction strategies into carbon targets underlying their CEOs’ short-term and long-term compensation, what characteristics the carbon targets used commonly have in terms of their quality and time frame, and whether the carbon targets used differ among carbon-intensive, and less carbon-intensive companies.Design/methodology/approach.Drawing on the stakeholder-agency theoretical perspective, this study explores the patterns of use and characteristics of carbon-related targets in CEO compensation. In this vein, a content analysis of corporate disclosure for the business years 2018 and 2019 is conducted for a European sample of 65 large listed companies from 16 countries and 11 industries.Findings.The findings of this study show that albeit the trend toward new adoption, carbon-related CEO compensation systems are still uncommon. The results also reveal that carbon targets are mainly used to determine short-term compensation. Further, the findings highlight that carbon-related CEO compensation is almost equally widespread among carbon-intensive and less carbon-intensive companies. However, in terms of target quality, the study shows that carbon-intensive companies display greater heterogeneity and opacity.Originality/value.By analyzing the characteristics of carbon targets and the prevalence of carbon-related CEO compensation for the first time, this study contributes to the stakeholder-agency theoretical perspective on corporate governance. In view of the European Green Deal and climate-related stakeholder demands, regulators and business practice are encouraged to recognize that carbon-related CEO compensation should gain momentum and the disclosure on this matter should become more transparent and comparable among companies and across industries.
KW - Environmental Governance
KW - CEO compensation
KW - carbon reduction targets
KW - stakeholder-agency theory
KW - Climate change
KW - corporate governance
UR - https://www.emerald.com/insight/content/doi/10.1108/JGR-06-2020-0065/full/html
UR - http://www.scopus.com/inward/record.url?scp=85113189602&partnerID=8YFLogxK
UR - https://www.mendeley.com/catalogue/0777e6e6-bc8f-38a2-8b8b-bd715a124fc0/
U2 - 10.1108/JGR-06-2020-0065
DO - 10.1108/JGR-06-2020-0065
M3 - Journal articles
VL - 12
SP - 158
EP - 188
JO - Journal of Global Responsibility
JF - Journal of Global Responsibility
SN - 2041-2568
IS - 2
ER -