Corporate executive bonuses are a hot button topic in the United States. When the nation’s megabanks need money to stay afloat yet turn around and give multibillion dollar bonuses to executives, Americans get upset. Perhaps American companies should embrace a new trend from the Netherlands — sustainability-based pay bonuses for corporate executives. That’s right, if you’re a corporate executive your bonus will be tied directly in to how well you’ve met sustainability goals. I like this idea!
AkzoNobel, a Netherlands-based paint and chemical company, has embraced this new trend. “The 600 top managers at the company now have to take into consideration whether they have done enough to reduce greenhouse gas emissions and whether they have developed more innovative, environmentally friendly products than the competition. If they fail to do so, their remuneration is reduced.” Source: nrc handelsblad
So these bonuses aren’t just tied to reductions in greenhouse gas emissions through energy efficiency upgrades, telecommuting, and other measures but they are also tied to eco-innovations. This allows the company to continue to spur creativity from their employees, which will, in turn, garner more attention from customers and even competitors. I like this idea even more.
However, this sustainability-based corporate compensation trend is not without its naysayers. As with everything else in the business world, for every person speaking out in support of an idea, you are sure to have someone speaking out against the idea.
Rob Bauer of Maastricht University actually called the system "perverted". His fear is that companies will begin to focus only on sustainability and that more traditional business goals will be ignored.
However, AkzoNobel’s plan accounts for this concern. Half of the executive’s bonus is based on the sustainability goals and the other half is based on traditional financial goals. This ensures that the company will be able to operate a successful business while keeping the environment in mind.
What is nice about this plan is that it draws attention to the importance of sustainability and executives that previously didn’t care about their company’s environmental impact now have the financial incentive to do so. For those who don’t favor altruistic pursuits, money is a great motivator.
While I’d like to see something like this implemented by major U.S. corporations, I'm not holding my breath.