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Article
Publication date: 17 August 2021

Julija Winschel

In view of the current climate change emergency and the growing importance of the climate-related accountability of companies, this paper aims to advance a comprehensive…

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Abstract

Purpose

In view of the current climate change emergency and the growing importance of the climate-related accountability of companies, this paper aims to advance a comprehensive understanding of the determinants of carbon-related chief executive officer (CEO) compensation.

Design/methodology/approach

Building on the agency-theoretical perspective on executive compensation and existing work in the fields of management, corporate governance, cultural studies, and behavioral science, this paper derives a multilevel framework of the determinants of carbon-related CEO compensation.

Findings

This paper maps the determinants of carbon-related CEO compensation at the societal, organizational, group, and individual levels of analysis. It also provides research propositions on the determinants that can support and challenge the implementation of this instrument of environmental corporate governance.

Originality/value

In the past literature, the determinants of carbon-related CEO compensation have remained largely unexplored. This paper contributes to the academic discussion on environmental corporate governance by showcasing the role of interlinkages among the determinants of carbon-related CEO compensation and the possible countervailing impacts. In view of the complex interdisciplinary nature of climate change impact, this paper encourages businesses practitioners and regulators to intensify their climate change mitigation efforts and delineates the levers at their disposal.

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Article
Publication date: 22 January 2021

Julija Winschel

In view of current climate change policies, this study aims to provide researchers, regulators, and business practice with the current picture of practices regarding…

878

Abstract

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.

Details

Journal of Global Responsibility, vol. 12 no. 2
Type: Research Article
ISSN: 2041-2568

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