Executive Compensation and Environmental Harm

Minor, Dylan

doi:10.2139/ssrn.2714438

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Executive Compensation and Environmental Harm

Harvard Business School Strategy Unit Working Paper No. 16-076

49 Pages Posted: 14 Jan 2016 Last revised: 14 Apr 2016

See all articles by Dylan Minor

Dylan Minor

Anderson School of Management (UCLA); Columbia University - School of International & Public Affairs (SIPA)

Date Written: April 12, 2016

Abstract

We explore the relationship between managerial incentives and environmental harm. We find that high-powered executive compensation packages can increase the odds of environmental law-breaking by 40-60% and the magnitude of environmental harm by over 100%. We document similar results for the setting of executive compensation and financial accounting misconduct. Finally, we outline some managerial and policy implications to blunt these adverse incentive effects.

Keywords: executive compensation, corporate governance, misconduct, environmental performance, accounting scandal, sustainable finance

JEL Classification: G01, G31, J33, K32

Suggested Citation: Suggested Citation

Minor, Dylan, Executive Compensation and Environmental Harm (April 12, 2016). Harvard Business School Strategy Unit Working Paper No. 16-076, Available at SSRN: https://ssrn.com/abstract=2714438 or http://dx.doi.org/10.2139/ssrn.2714438