Report: Extravagant CEO Pay Packages Are Fostering Planet's Destruction

Pay incentives for the chief executives of the biggest publicly-held fossil fuel companies in the U.S. are worsening climate change by encouraging recklessness from management teams and rewarding companies’ strongholds over oil, gas, and coal reserves, according to a new report published Wednesday by the Institute for Policy Studies.

Money to Burn: How CEO Pay is Accelerating Climate Change (pdf), an annual analysis of executive excess, outlines the complex cycle in which corporate bosses are given “enormous personal financial incentive” to promote the development of fossil fuels, which in turn allows them to donate ever-increasing funds to lobbyists and lawmakers who promote climate denial policies.

In addition, corporations “lower the performance bar by super sizing the number of equity-based rewards they grant executives during stock slumps,” the report states. That’s the same kind of high-stakes gambling that contributed to the 2008 economic crash and set up bankers for enormous windfalls if shares increased even slightly after the recovery began.

“Our perverse executive pay system encouraged the recklessness that led to the 2008 financial crisis,” co-author and IPS Global Economy Project director Sarah Anderson said on Wednesday. “These same misplaced incentives are encouraging the recklessness of fossil fuel executives that is putting the entire world at risk.”

CEOs of the 30 largest publicly-held fossil fuel companies averaged $14.7 million in total compensation in 2014, while their management teams took home roughly $6 billion over the past five years. That’s twice the size of the country’s recent $3 billion pledge to the Green Climate Fund, a United Nations body that redistributes wealth to developing countries in order to help them stave off the effects of global warming.

In another example, Exxon-Mobile spent $13.2 billion buying up its own stock in 2014, a tactic that inflates executive pay. That’s double what all global corporations spent on researching renewable energy, IPS found. Chevron spent $4.4 billion.

In addition to sky-high financial rewards, the incentives most often come in the form of stock options, which encourage executives to cash in their bonuses within three or four years—while climate change takes decades to play out.

“Short-termism,” as the report calls it, allows executives to “reap massive windfalls before the climate change their behaviors nurture starts hitting.”

As co-author and IPS senior scholar Chuck Collins explains, “The short-term incentive system is not only bad for the planet, it’s bad for investors as well. A rational system would encourage global energy leaders to shift investment away from drilling and mining untapped reserves towards renewable energy options.”