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Executive Compensation and Environmental Harm

By: Dylan Minor
  • Format:Print
  • | Language:English
  • | Pages:49
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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.

Keywords

Misconduct; Environmental Performance; Accounting Scandal; Sustainable Finance; Crime and Corruption; Corporate Social Responsibility and Impact; Executive Compensation; Environmental Sustainability; Corporate Governance

Citation

Minor, Dylan. "Executive Compensation and Environmental Harm." Harvard Business School Working Paper, No. 16-076, January 2016. (Revised April 2016.)

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