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Executive Compensation and Environmental Harm

Author

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  • Dylan Minor

    (Harvard Business School, Strategy Unit)

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.

Suggested Citation

  • Dylan Minor, 2016. "Executive Compensation and Environmental Harm," Harvard Business School Working Papers 16-076, Harvard Business School, revised Apr 2016.
    • Handle: RePEc:hbs:wpaper:16-076
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    File URL: http://www.hbs.edu/faculty/pages/download.aspx?name=16-076.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    executive compensation; corporate governance; misconduct; environmental performance; accounting scandal; sustainable finance;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law

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