Improving executive compensation in the fossil fuel sector to influence green behaviors

Abstract

The effects of climate change are being felt around the world, and the calls to mitigate are growing louder. In hopes of responding to this call, we examine strategic compensation practices as innovative solutions for tackling climate change. We employ a fixed panel analysis and examine organizational data from an array of global fossil fuel organizations—arguably the principal climate change contributors. Our findings suggest that executive stock-option compensation oriented around a 3-year or more vesting period will enhance organizational green behaviors. The contributions of this study add to the green human resource management literature in offering new perspectives on how compensation practices can enhance green behaviors and clarify key misconceptions related to linking sustainability targets to firm-level compensation schemes.