Sustainable Bonuses: Sign of Corporate Responsibility or Window Dressing?
- 2.3k Downloads
Despite a strong plea for integrating sustainability goals into traditional corporate bonus schemes, a comprehensive implementation of these systems has been lacking until recently. This article explores four illustrative cases from the Netherlands, where several multinationals started to pioneer with sustainable bonuses in the past few years. The article examines the setups and the different elements of bonus programmes used, in terms of performance criteria (focusing in particular on external vs. internal benchmarking), their link to specific stakeholders, type and size of bonuses, target levels and transparency. While sustainable bonuses signal corporate awareness of responsibility vis-à-vis society and stakeholders, credibility varies considerably depending on these elements. Our case evidence sheds some light on the extent to which sustainable bonuses may be a credible sign of corporate responsibility or rather just another perverse mechanism meant to keep up bonus levels (window dressing). A definite assessment is hampered by the emergent state and lack of full transparency—while ‘justified’ by companies for competitive reasons, this raises questions. Insights are offered to appraise current and future systems and provide directions for further research.
KeywordsCorporate responsibility Stakeholders Sustainable bonuses Executive compensation Shareholders
- Aan de Brugh, M. (2010). In tijden van crisis biedt duurzaamheidsbonus uitkomst, NRC Handelsblad, 3 March.Google Scholar
- AkzoNobel. (2011). Notulen van de Algemene Vergadering van Aandeelhouders AkzoNobel N.V. Amsterdam, 27 April. retrieved from http://www.akzonobel.com/system/images/AkzoNobel_Notulen_AkzoNobel_AGM_April_2011_tcm9-61414.pdf.
- Burgess, K. & Steen, M. (2009). Investor rebellion over Shell pay report’, Financial Times, 20 May.Google Scholar
- Ceres. (2010). The 21st century corporation: The ceres roadmap for sustainability. San Francisco, CA.Google Scholar
- Ceres (2012). The road to 2020: Corporate progress on the ceres roadmap for sustainability. San Francisco, CA.Google Scholar
- Conference Board (2012). Linking Executive Compensation to Sustainability Performance, New York, The Conference Board.Google Scholar
- Daily, C. M., Dalton, D. R., & Cannella, A. A., Jr. (2003). Corporate governance: Decades of dialogue and data. Academy of Management Review, 28(3), 371–382.Google Scholar
- Freeman, R. E. (1984). Strategic management: A stakeholder approach. Boston: Pitman.Google Scholar
- Glass Lewis. (2011). Greening the green 2011, Linking executive compensation and sustainability. Retrieved from http://www.glasslewis.com/uncategorized/greening-the-green.
- Guerrera, F. (2009a). A need to reconnect. Financial Times, 13 March, p. 9.Google Scholar
- Guerrera, F. (2009b). Obsession with shareholder value was a ‘dumb idea’ says Welch’. Financial Times, 13 March, p. 1.Google Scholar
- Hol, H., Kurznack, L., Logger, E., & Van Tilburg, R. (2010). Sustainable renumeration. A guide for linking sustainable goals to executive incentives. VBDO, Hay Group and DHV. New York: The Conference Board, Inc.Google Scholar
- Jensen, M. C. & Murphy, K. J. (2004). Remuneration: Where we’ve been, how we got to here, what are the problems, and how to fix them. ECGS Finance Working Paper No. 44, Brussels.Google Scholar
- Kaplan, R. S. & Norton, D. P. (2005). The balanced scorecard: Measures that drive performance. Harvard Business Review, 83(7).Google Scholar
- Keuning, W. (2010). AkzoNobel en Philips toch niet zo duurzaam. Volkskrant, 5 November.Google Scholar
- Lacy, P., Cooper, T., Hayward, R., & Neuberger, L. (2010). A new era of sustainability. UN global compact-accenture CEO study 2010. Routledge, LondonGoogle Scholar
- Lansley, S. (2011). The cost of inequality: Three decades of the super-rich and the economy. Gibson Square Books.Google Scholar
- Lenssen, G., Bevan, D., & Fontrodona, J. (2010). Corporate responsibility and governance: The responsible corporation in a global economy. Corporate Governance, 10(4), 340–346.Google Scholar
- Lorsch, J. and R. Khurana: 2010, ‘The pay problem. Time for a new paradigm for executive compensation’, Harvard Magazine May/June, 30–35.Google Scholar
- Meyer, M. W. (2002). Rethinking performance measurement. Cambridge: Cambridge University Press.Google Scholar
- Mitchell, R. K., Agle, B. R., & Wood, D. J. (1997). Toward a theory of stakeholder identification and salience: Defining the principle of who and what really counts. Academy of Management Review, 22(4), 853–886.Google Scholar
- Perego, P., & Hartmann, F. (2009). Aligning performance measurement systems with strategy: The case of environmental strategy. Abacus-a Journal of Accounting Finance and Business Studies, 45(4), 397–428.Google Scholar
- Renwick, D. W. S., Redman, T., & Maguire, S. (2012). Green human resource management: A review and research agenda. International Journal of Management Reviews (in press).Google Scholar
- Sadowski, M., Whitaker, K., & Buckingham, F. (2010). Rate the raters phase two. Taking inventory of the ratings universe. London, Sustainability.Google Scholar
- Schiffers, M. (2010a). Shell moet van APG bonussen verlagen. Financieele Dagblad, 11 September.Google Scholar
- Schiffers, M. (2010b). Bonus Shell weer op de schop. Financieele Dagblad, 2 December.Google Scholar
- Siegel, R. P. (2010). When pigs fly: Haliburton makes the Dow Jones sustainability. Retrieved from http://www.triplepundit.com/2010/09/when-pigs-flyhalliburton-makes-the-dow-jones-sustainability-index/.
- Sprengers, P and M. Groen: 2010, ‘Wat zeggen duurzaamheidsindexen nou precies?. Retrieved from http://voordewereldvanmorgen.nl/blog/praat-mee-wat-zeggendeduurzaamheidsindexen-nou-precies#comment-3114.
- Stern, S. (2010). The outsider in a hurry to shake up his company. Financial Times, 5 April, p. 12.Google Scholar
- Tonello, M. (2010). Sustainability in the boardroom. New York: The Conference Board.Google Scholar
- Wang, H., & Choi, J. (2010). A new look at the corporate social-financial performance relationship: The moderating roles of temporal and interdomain consistency in corporate social performance. Journal of Management. doi: 10.1177/01492063103755850.
- WBCSD. (2010). People matter reward. Linking sustainability to pay. Geneva: World Business Council for Sustainable Development.Google Scholar
- Ziegler, A., & Schröder, M. (2010). What determine the inclusion in a sustainability stock index?: A panel data analysis for European firms. Ecological Economics, 69(4), 848–856.Google Scholar