WHY HAVE THE world’s corporations done little to tackle the climate
crisis? Perhaps because they have no monetary incentive to do so.
According to new research from the Vlerick Business School in Belgium,
only 6 percent of CEOs in the U.K. have bonuses tied to key
performance indicators (KPIs) that focus on the environment, and
fewer than 1 percent are offered long-term incentives in this area.
This was one finding of a recent study that examined the pay
levels, habits, and incentives of CEOs and CFOs at 899 major European
companies. The main focus was on the STOXX 600—a stock
index of the 600 largest firms across European countries, including
159 U.K. firms. The research was produced by Xavier Baeten, a professor
in reward and sustainability at Vlerick Business School and
director of the school’s Executive Remuneration Research Centre;
and researcher Bettina De Ruyck.
Baeten and De Ruyck found that for U.K. CEOs, both short-term
and long-term incentives focus less on environmental issues and
more on income, revenue and profit, employees, customers, safety,
innovation, and shareholder return. And this distribution of incentives
holds true even though,
as Baeten notes, most
CEOs “now understand
how their practices are
impacting the environment
and are actively looking to
implement initiatives that
focus on being more environmentally
Baeten suggests that
firms should consider exactly
how climate change will affect them
and develop sustainability strategies
that align with their business goals. “Then these firms can select
the relevant KPIs to include in CEOs’ remuneration.