Incenting Managers Towards the Triple Bottom Line: An Agency and Social Norm Perspective

Abstract:     
Research to date has identified CEO pay structure as an important factor in the environmental and social performance of the organization, but has not considered how pay may influence these sustainability efforts at the middle-management level. We address this void with an experimental manipulation of direct and indirect pay incentives for an environmental sustainability project and production cost savings project. Counter to our predictions, investment in sustainability versus cost savings is significantly lower when incentives for both projects are equivalent, and investment is only comparable when incentives for the sustainability project are superior. Further investigation using qualitative data attributes this to differences in the salient social norms that individuals hold and an apparent undervaluing of the indirect incentive derived through sustainability’s contribution to cost savings. The results shed light on primary ways in which human resource management practices may be used to embed support for sustainability initiatives throughout the organization.

Number of Pages in PDF File: 41

Keywords: sustainability, triple bottom line, incentives, multitask agency theory, rational choice theory

working papers series