Executives' Pay Deters Big Oil From Acting On Climate Change

By Irina Slav - Apr 15, 2021

The way executives at large oil companies are paid encourages these companies to extract more fossil fuels, a study has suggested, as reported by The Guardian, who said it was given exclusive access to the findings.

The study came from the Climate Accountability Institute, an organization that says about itself that it "engages in research and education on anthropogenic climate change, dangerous interference with the climate system, and the contribution of fossil fuel producers' carbon production to atmospheric carbon dioxide content."

According to it, the remuneration packages for Big Oil CEOs are tied to metrics that are mutually exclusive with climate action, or, as one of the authors, Richard Heede, puts it:

"We show that executives have personal ownership of tens or hundreds of thousands of shares, which creates an unacknowledged personal desire to explore, extract and sell fossil fuels," Heede said. "That carbon mindset needs to be revised by realigning compensation towards success in lowering absolute emissions."

The study focused on the four biggest oil companies globally: BP, Shell, Exxon, and Chevron. According to the Guardian, it has been tracking these companies since 1990, and until 2019, the four had made combined profits of $2 trillion, only a tiny portion of which was invested in low-carbon energy.

In all fairness, however, at least one of the four has started untying its remuneration scheme from oil and gas production. Back in 2018, Shell said, under pressure from several institutional shareholders, that it would link executive pay to emission reduction targets with reports estimating that some 1,300 senior executives could be affected by the change.

Now, Shell has said it would tie the bonuses for its top executive directors more closely to the group's performance in reaching its net-zero goals, if shareholders approve the plan at the annual general meeting in May.

By Irina Slav for Oilprice.com