Queen Victoria commissioned a celebratory painting of Manchester, citadel of the Industrial Revolution, which featured factories billowing sunlit pillows of smoke. Today we might forgive this romantic view of pollution as rooted in the ignorance that the smoke was a regrettable toxic byproduct that poisoned countless people in England.
Yet today, such misplaced celebration of industrial ills persists in the promiscuously large paychecks awarded to energy company executives. That’s according to a report just released by the Institute for Policy Studies.
“Money to Burn,” authored by Sarah Anderson, a veteran CEO compensation observer, critic and reform activist, surveys and analyzes executive pay at the leading fossil fuel companies. She finds that executive pay at the 30 largest firms average $14.7 million, about 10 percent more than average pay for CEOs at the S&P 500. But Anderson exposes a dystopian dynamic. “Our contemporary executive pay incentives . . . directly encouraged the reckless behavior of Wall Street executives that led to the 2008 financial crisis,” she writes. “These same misplaced incentives are today encouraging the recklessness of fossil fuel executives — and deepening our global climate crisis.”
Here are the stakes. The largest oil companies already sit on top of enough fuel to emit approximately 2,795 gigatons of carbon dioxide — five times the amount of carbon needed to push the globe into catastrophic climate change, she reports. How are oil company executives responding? They spend more than $600 billion a year to locate additional carbon reserves.
And what they’re not doing responsibly, Anderson says, is investing in renewable energy. Instead, in 2014, the largest firms spent a collective $38.5 billion repurchasing their own shares. Share repurchasing boosts the stock price, and that means CEO pay tied to share prices increases. Exxon alone accounted for $13.2 billion in of the total buy backs. “This $38.5 billion amounts to nearly six times the $6.6 billion spent globally by the private sector on renewable energy research in 2014,” Anderson observes.
Exxon CEO Rex Tillerson personally shares an aversion to inappropriate fossil fuel extraction. Last year, he joined his neighbors to fight a fracking proposal in his Dallas suburb. But he accepted the $33 million in pay from Exxon, the world’s leading oil firm.
Lest one surrender to doom, Anderson concludes with reform initiatives, including those recently adopted, those in progress and those that deserve attention. For example, one reform calls for boards to allow shareholders to nominate directors. That can open the way for investors to focus CEO attention on sustainable sources for energy.
Bartlett Naylor is the financial policy advocate with Public Citizen’s Congress Watch division.