Green or Greed? An Alternative Look at CEO Compensation and Corporate Environmental Commitment


This study relies on environmental stewardship, a stakeholder-enlarged view of stewardship theory, and institutional theory to analyze the relationship between CEO compensation and firms’ environmental commitment in a worldwide sample of 520 large listed firms. Our findings show that environment friendly firms pay their CEOs less total compensation and rely less on incentive-based compensation than environment careless firms. This negative relationship is stronger in institutional contexts where national environmental regulations are weaker. Our findings have important theoretical meaning and practical implications. Results show that CEOs do not necessarily act opportunistically; rather some of them may be willing to act as stewards of the natural environment and accept a lower, less incentive-based compensation from environment friendly firms. This study also provides evidence of the important influence of the institutional context in setting-up CEO compensation as the relationship is stronger when national environmental regulations are weaker. Our findings question the universal validity of agency theory in explaining CEO compensation. Compensation based on pecuniary incentives might be less indicated to motivate CEOs who feel rewarded by playing a stewardship role for environment friendly firms. When designing compensation for CEOs, compensation committees and external compensation advisors should consider psychological and institutional factors that might affect CEO motivation.

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  1. 1.

    As opposed to ‘triple bottom line.’

  2. 2.

    At worst, as pointed out by Bebchuk and Fried (2003), the compensation process is dominated by the CEO’s interests. Boards do not engage in arms’ length negotiations with the CEO over compensation, because they lack the independence, adequate time, and easy access to accurate and unbiased information. Moreover, also board members who sit in the compensation committee have economic and social incentives to favor CEOs (e.g., Murphy 1999).

  3. 3.

    We used the interquartile range rule to identify outliers.


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Correspondence to Claude Francoeur.

Appendix: SiriPro—Environmental Commitment/Performance Index

Appendix: SiriPro—Environmental Commitment/Performance Index

Public Reports and Communications

  1. (1)

    Public reporting on environmental issues

  2. (2)

    Public reporting externally verified

Principles and Policies

  1. (3)

    Environmental policy

  2. (4)

    Formal policy statement on green procurement

  3. (5)

    Formal policy statement on use of certified forestry product

  4. (6)

    Public position statement on transport and climate change

  5. (7)

    Public position statement on energy mix

Management Systems

  1. (8)

    Percentage of ISO 14,001 certified sites

  2. (9)

    Targets and programs for environmental improvement of suppliers

  3. (10)

    Targets and programs for CO2 eq emission reduction and/or energy consumption

  4. (11)

    Targets and programs to increase the use of renewable energy

  5. (12)

    Targets and programs to reduce air emissions

  6. (13)

    Targets and programs to reduce hazardous waste generation

  7. (14)

    Targets and programs to reduce non-hazardous waste generation

  8. (15)

    Targets and programs to reduce discharge to water

  9. (16)

    Targets and programs to reduce water consumption

  10. (17)

    Targets and programs to reduce material consumption

  11. (18)

    Targets and programs to phase out use of hazardous substances

  12. (19)

    Targets and programs to phase out CFC’s/HCFC’s in refrigeration equipment

  13. (20)

    Targets and programs to replace chlorine bleaching

  14. (21)

    Targets and programs to increase percentage of certified pulp/wood operations

  15. (22)

    Targets and programs to increase use of environmentally friendly paper

  16. (23)

    Targets and programs to improve the environmental performance of fleet and transport

  17. (24)

    Targets and programs to reduce emissions of transport means

  18. (25)

    Targets and programs to reduce the noise characteristics of transport

  19. (26)

    Targets and programs to phase out production of hazardous substances

  20. (27)

    Targets and programs to reduce the energy consumption of products

  21. (28)

    Targets and programs to reduce the impact of product at the end of the production cycle

  22. (29)

    Targets and programs to reduce the environmental toxicity of product

  23. (30)

    Targets and programs to reduce packaging materials

  24. (31)

    Targets and programs to increase the sale of eco-labeled/organic products

  25. (32)

    Targets and programs to reduce CO2 eq emissions of the fleet

  26. (33)

    Programs that offer favorable financial conditions for environmentally friendly projects

  27. (34)

    Programs to take into account environmental impact of products in investment decision


  1. (35)

    Percentage of ISO 14,001 certified suppliers

  2. (36)

    Data on CO2 eq emissions

  3. (37)

    Data on renewable energy consumption

  4. (38)

    Data on air emissions

  5. (39)

    Data on hazardous waste generation

  6. (40)

    Data on non-hazardous waste

  7. (41)

    Data on discharge to water

  8. (42)

    Data on oil spills

  9. (43)

    Data on water consumption

  10. (44)

    Data on material consumption

  11. (45)

    Data on percentage of certified pulp or wood of total consumption/production

  12. (46)

    Data on percentage of recycled fiber as raw material

  13. (47)

    Percentage of FSC paper

  14. (48)

    Percentage of recycled paper used

  15. (49)

    Percentage of renewable energy sold

  16. (50)

    Data on assets managed according to SRI criteria

  17. (51)

    Data on total amount of environmental fines and penalties

  18. (52)

    Total land disturbed and not yet rehabilitated

  19. (53)

    Percentage of sales from eco-labeled/organic products

  20. (54)

    Environmentally friendly construction materials

  21. (55)

    Environmentally friendly building products

  22. (56)

    Products beneficial to the environment

  23. (57)

    Percentage of loans with detailed environmental examination

  24. (58)

    Percentage of environmentally oriented loans

  25. (59)

    Percentage of transactions with detailed environmental examination

  26. (60)

    Percentage of transactions with high environmental benefits

  27. (61)

    Percentage of investments in non-listed pioneer companies with high environmental benefits

  28. (62)

    Percentage of premium volumes or number of policies with environmental incentives

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Francoeur, C., Melis, A., Gaia, S. et al. Green or Greed? An Alternative Look at CEO Compensation and Corporate Environmental Commitment. J Bus Ethics 140, 439–453 (2017).

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  • CEO compensation
  • Corporate social performance
  • Corporate social responsibility
  • Environmental commitment
  • Environmental regulations
  • Stewardship theory