Did the crazy CEO compensation damage the environment?



  1. 0 Votes

    That’s difficult to know. One could make an argument that the money that’s going to pay high executive salaries could be put to much better use, among other things in R&D for environmental practices or programs to make companies more environmentally friendly. But that begs the question, how much responsibility do these companies feel to the environment in the first place? Much of the criticism of executive salary has focused on companies in the financial services sector, such as insurance giant AIG. Aside from the things all businesses can do to be greener (use less paper, make their buildings more efficient, etc.), can we really expect a lot of environmental leadership from an insurance company? It would be different if AIG was a power company or other business with a direct environmental stake. That being said, the issue of executive compensation may have a more indirect psychological effect that could affect environmental issues in a very roundabout way. If excessive pay for the executives of failing companies is generally accepted in the financial services or other sectors, what does it say about the willingness to devote significant resources to environmental betterment? This seems to be the main problem with executive compensation–allocation of resources. If some large company were to tie salaries of its executives to some measurable quantum of environmental responsibility–such as a percentage decrease in carbon emissions–in addition to purely bottom-line concerns, that might be an interesting and worthwhile way to demonstrate a company’s commitment to environmental issues. Outside of industries that are generally expected to be green in the first place, such as alternative energy companies or public utilities, I would not expect measures of that type to become widespread any time soon.

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