Executive Compensation and Environmental Harm
49 Pages Posted: 14 Jan 2016 Last revised: 14 Apr 2016
Date Written: April 12, 2016
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