Guest essay by Eric Worrall
The Institute for Policy Studies, a prominent Washington based think tank, has released a report which claims corporate pay structures which incentivise Chief Executive Officers to maximise shareholder value are accelerating climate change.
According to the report;
MONEY BURN HOW CEO PAY IS ACCELERATING CLIMATE CHANGE
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Our contemporary executive pay incentives, analysts believe, directly encouraged the reckless behavior of Wall Street executives that led to the 2008 financial crisis. These same misplaced incentives are today encouraging the recklessness of fossil fuel executives — and deepening our global climate crisis.
The world’s largest fossil fuel companies are currently holding vast stocks of carbon reserves. These reserves, if all burned, would emit approximately 2,795 gigatons of carbon dioxide, five times the amount of carbon that researchers tell us would push the globe into catastrophic climate change, everything from extreme flooding and drought to a significant rise in sea level. Yet the fossil fuel industry, fixated on the extreme short term by perverse CEO pay incentives, is now spending over $600 billion a year to locate additional carbon reserves.
Today’s executive pay packages, these pages will show, give the leaders of America’s oil, gas, and coal giants an enormous personal financial incentive to spend billions per year developing new fossil fuel reserves that cannot be exploited without destabilizing the climate. These fossil fuel executives spend billions more on new infrastructure — pipelines, power plants, drilling platforms, and more — that lock us into fossil fuels at a time when our nation should be investing in conservation and renewable energy options.
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Read more: http://www.ips-dc.org/wp-content/uploads/2015/09/EE2015-Money-To-Burn-Upd.pdf
The report quickly moves on to discussing what should be done with all that executive pay. Their top suggestion is to give the money to green groups.
What else could $6 billion pay for?
To put these fossil fuel executive compensation figures in perspective, we can compare them to several urgent climate-related challenges and opportunities at the U.S. and global levels.
Green Climate Fund
At the global level, $6 billion could double the U.S. governments’ $3 billion pledge to the Green Climate Fund, the new institution tasked with helping the world’s most vulnerable countries mitigate and adapt to climate change. …
Of course, it wouldn’t be possible to redistribute the money to green groups, if the money was still being paid to the executives.
Abolish executive performance pay
Michael Dorff of the Southwestern Law School, author of the 2014 book Indispensable and Other Myths: The True Story of CEO Pay, is proposing the abolition of “performance pay.” Others have suggested executives should have to wait to cash in such forms of compensation for at least 10 years, even if they are fired or retire. At best, stock options and other performance-pay incentives have CEOs thinking more about their own personal rewards than long-term enterprise sustainability. At their worst, “pay for performance” deals encourage criminal behavior.

If underpaid executives don’t have any financial incentive to do a good job, there might not be that much excess money to redistribute. But maybe I’m just being pessimistic. Perhaps all those formerly well paid company executives would discover a new source of motivation, while viewing pictures of happy green activists enjoying their new financial windfall.
It’s true there is a problem with the capitalist model right now, but it needs to be fixed, not thrown away.
Businesses are supposed to maximise their profits and maximise their longevity. Some CEO’s are maximising their personal wealth instead, whilst risking the other aims.
It’s easily fixable, and it has b*gger all to do with climate change
“We may get to the point where the only way of saving the world will be for industrialized civilization to collapse.”
Maurice Strong, U.N. Earth Climate Summit 1992.
It has been a recurring theme, propounded by many, in various forms. Truly, to them, “the science” is merely a means to an end. And the ends, to them, justify the means.
Don’t forget leftys mantra. Achievement must be punished.
I always thought the lefties’s mantra was: “Let no good deed go unpunished.”
Good deeds being: paying taxes, not being a burden on society, creating prosperity, saving for your old age, believing in science versus alarmist BS, supporting traditional family values, etc., etc.
Reminds me of the solutions being proposed to help save Social Security.
Those who have sacrificed to put money away to pay for their retirement, will have their SS payments cut, sometimes even eliminated, so that those who haven’t planned ahead can keep their SS payments in full.
As soon as the coin in the coffer rings, the soul from AGW springs.
So ….. Big Green is hindering Big Green?
“At the global level, $6 billion could double the U.S. governments’ $3 billion pledge to the Green Climate Fund, the new institution tasked with helping the world’s most vulnerable countries mitigate and adapt to climate change. ”
Or as the man from Potsdam put it…
“But one must say clearly that we redistribute de facto the world’s wealth by climate policy…One has to free oneself from the illusion that international climate policy is environmental policy any more.” – Ottmar Edenhofer, Co-chair of IPCC WG III, New American, Nov. 19, 2010
How many times do they need to discredit themselves before the lie completely collapses? Yes climate changes naturally, I don’t buy man made climate change.
“LIBERALS” just hate capitalism and fat cats, they are so jealous, they want to reform the system and force socialism. Environmentalist and Marxists are perfect bedfellows.
Left wing professors in colleges throughout the country, have convinced themselves that they are the smartest and most capable people on the planet.
They look around and see legions of “lesser” people making way more than the professor does.
This inequity drives them to dream of ways to perfect the economic system so that they will be finally be paid what they believe themselves to be worth.
Just when you think that you have seen the most insane suggestion ever possible from the Warmist/Greenists, they manage to top it all and come up with something even more insane and ridiculous…..always however to their benefit.
Now, on blame for CO2.
Take the North American continent before the three ships of Columbus.
How many deer, antelope , moose, bison, etal , were out and about, how many wild fires on the plains, how many millions and millions of acres of forest burned in one summer at the time.
So much flatulence, so few facts.
No forests burned. – Native Americans were super-firefighters.
/sarc?
Native Americans actually set wild fires in order to burn off the under growth in order to make hunting easier. They also used fire to clear fields to make planting easier.
And fair enough.
Some of these blokes are earning nearly as much as Elon Musk (is that really and truly his name? Or is it a stage name?)
[Please, no ‘chemtrails’ on this site. ~mod.]
Just further evidence (like we needed more) that the CAGW Hoax is ultimately about destroying capitalism; not “saving the planet”….
The 2008 Sub-Prime Loan Collapse, was about.. well… sub-prime loans. Leftists thought it would be a brilliant idea to force banks to give poor people with awful credit ratings ARM mortgages with zero down… Leftists also thought it made sense to set interest rates at zero to allow governments to finance the $trillions of national debt they already have, and run up $trillions more.
The Leftists’ zero-interest policies also drive good money out of low-risk investments (savings accounts/CDs) and into high-risk real estate and stock market bubbles…
Leftists learned NOTHING from the 2008 sub-prime loan collapse. Leftists still have zero-interest policies, which is why we have even worse real estate, government bonds and stock market bubbles that have already started to implode in China and will soon collapse around the world.
CAGW, Keynesianism and centrally controlled economies are all hypothese that have failed miserably. Until free-market capitalism, limited governments and free-floating interest rates are adopted, the world will simply move from one financial crisis to another ad infinitum.
You are absolutely correct. Sadly, once free-market capitalism, limited governments and free-floating interest rates are adopted, the world will continue to move from one financial crisis to another ad infinitum.
CommieBob– Free-market capitalism is the only moral and ethical system capable of the equitable and efficient allocation of land/labor/capital as it is based on the principle of the non-initiation of force.
Free competition allows only the best companies with the best products and services to survive.
Statism in its various forms (Communism, Socialism, Facism, mixed economies) is entirely dependent on the initiation of force to implement their command and control objectives, which de facto makes them immoral and inefficient.
Governments are at best “necessary evils” and must be kept as small as possible to prevent tyranny. Public spending should never exceed 10% of a country’s GDP.
Free-floating interest rates are essential to prevent boom/bust economies as interest rates rise when demand for funds increase, and fall when demand for lendable funds is low. They act as a natural control mechanism.
“Free competition allows only the best companies with the best products and services to survive.”
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What if the product maims or kills the customers?
Why did Merck survive and prosper after putting deadly Vioxx on the market?
Why, on the other hand, was Harold Shipman was sentenced to prison?
The economy can be viewed as a feedback control system. In your model, floating interest rates act as negative feedback that will smooth out boom-bust cycles.
The climate can also be viewed as a feedback control system. The inputs to the climate (TOA radiation, Milankovitch cycles, etc.) change slowly and yet we slam back and forth between glacials and interglacials. The fact that a system has feedback doesn’t necessarily make it stable. In fact, many systems can be made more stable by removing the feedback.
If a system responds in a linear fashion to inputs and feedbacks, we call it a proportional system. If there are leads and lags, the system is described by the order of the differential equation that describes it. (first order, second order, third order, etc.) Second order and higher systems can become unstable and oscillate.
In response to changing conditions, the economy will have boom-bust cycles no matter how we try to prevent them. The economy is not a first order control system and no amount of wishful thinking will make it so.
Khwarizmi – you’re close : “Free competition allows only the best companies with the best products and services to survive“. — What if the product maims or kills the competitors?
I am fiercely in favour of capitalism and free enterprise, but we do need government too to set and enforce the rules. And that’s why we need democracy …
That there will be the occassional recession under free-market capitalism is inevitable. Nobody has perfect information.
However it should be obvious to even a communist that govt serves only to make such crisis worse and more frequent.
Would you continue to shop at a company who’s products maimed and killed?
Between the lawsuits and loss of market share, any company that did what you intimate would quickly go out of business.
commieBob, what is your evidence that solar output changes slowly?
There is plenty of evidence that it can have significant changes on time frames of well under a century.
BTW, putting a feedback mechanism with a response time that is longer than the signal you are trying to correct for is a recipe for disaster.
“save the planet” How did we get to this point? The planet hasn’t missed a beat. If I thought environmentalists actually cared about the environment or people I would still be one.
CommieBob– Regarding interest rates and the economy in general, it’s far too complex for government hacks and “experts” to try and inflict their will upon it to accomplish some contrived agenda..
There are natural market costs for all things at any given time based on the collective force of 7 billion people making 100’s of decisions everyday and countless other variable impossible to predict nor determine what their net effect may or may not be.
Invariably, any economic control or coercion political hacks inflict on the market will have the complete opposite effect of their intensions, which then requires addition coercive measures to “fix” the problems previously created; the immutable law of Leftist Irony….
The same hubris that makes politicians think their policies can save the planet, also deludes them to think they can effectively control economies.
Governments just need to leave the economy alone and let it work its magic, i.e. Laissez- faire economics..
We’ve had a couple of hundred years experience with various experiments in laissez-faire economics. It has never been the panacea that you seem to think it is. wiki You previously stated that floating interest rates are a cure for boom-bust cycles. There is no evidence for that at all.
If there is one field as seriously polluted with religious fervor as climate science, it is economics. All your observations are, to a greater or lesser extent, accurate. I have no argument with them. What I do object to is your faith that some particular approach will solve all our problems. That’s not going to happen; it never has done so in the whole recorded history of the human race.
SAMURAI,
I agree with you that 7 billion individuals, each making hundreds of thousands (not just hundreds) of discrete decisions every day are much greater processing power than any group of government bureaucrats, no matter how many there are.
Large groups of people making lots of rational decisions in their own self-interest are on the order of a quantum computer. That level of efficiency leaves a relatively limited group of bureaucrats in the dust; no group in government can possibly arrive at the best solution to a problem by comparison.
The proof is everywhere we look: the growth of government control is inversely proportional to its efficiency and the well-being of its populace. Look at North Korea vs South Korea, for just one of many examples.
So now we have a small group of self-selected of young’uns with a ‘progressive’ agenda:
http://www.ips-dc.org/wp-content/uploads/2013/08/retreat_2014-815×480.jpg
Obviously, they don’t live in the real world.
This so-called ‘policy’ group is about as radical and far Left as anyone in Washington, DC. And that’s saying a lot. They are such economic illiterates, and so ignorant of basic human nature, that if they ever read Bastiat with an open mind their heads would collectively explode.
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Here’s a fun story I’d like to share: Sundays are our day to go to our local Farmer’s Market. Lately there have been lots of Greenpeace volunteers there — young women handing out literature and requesting cash donations.
I usually ignore them, but today when one pretty young thing tried to engage me in a discussion of “global warming”, I resisted my usual response: asking if she knew how much CO2 is in the air? Instead, I interrupted her and asked if she could make a “donation”. She asked, “A donation?” I didn’t say for what, I just said “Yes,” and repeated that I would like a donation. She asked me, “How much do you need?” I said, “Five bucks.”
To my astonishment, she pulled out a wad of one-dollar bills, counted out 5 of them, and handed them to me. She started to ask about the “donation” again, but I just said, “Thank you!” and walked away.
My wife and I have been laughing about it all day. It’s probably the first and last time that Greenpeace has ever donated to me!
I sort of feel sorry for those kids. They get no pay, they just stand in the sun all day collecting cash — money which they then pass on to Greenpeace. It’s the same tactic Ralph Nader used to funnel more than a hundred million to his (unaudited) organization in the 1980’s and ’90’s. (I can’t feel angry at Ralph, though. His 100,000+ votes in Florida were a big reason that Algore lost by only about 500 votes there ☺).
Today, Greenpeace donated to me! My life is full. I’m a happy camper.
We have never had even close to Laissez-faire economics in this country or any other.
The fact that you believe that to be the case just demonstrates how little you know regarding economics.
dbStealy: Pat Buchanon got almost as many votes as did Nader in FL 2000, I doubt many of his voters had Gore as their second choice.
Regardless, decisions are usually best made by those who are closest to where the information is being gathered.
The problems with bureaucracy are two fold. First off the gathered information has to be passed through numerous layers before it can finally make it to a decision maker. This delay means that the situation on the ground has changed by the time any decision can be made. As a result, the decision that is finally made is at best, less optimal and at worst, completely wrong. (There’s an old joke from back in the ’80s was that the best lagging indicator of an economic recovery was the fact that congress was debating a jobs bill.)
The other problem with bureaucracy is that since high level decision makers can’t deal with information regarding millions of individual markets, that information has to be homogenized into larger units. This means that the decision makers are making one size fits all decisions. A decision that is good for one area might end up being disasterous for another. Putting the decisions closer to the source allows decisions to be tailored to be best for smaller groups.
Typical watermelon clap-trap.
Do they explain what “accelerating climate change” means? Are major US landfalling hurricane numbers dropping more rapidly? Presumably any change is bad and caused by humans?
“Those who can make you believe absurdities, can make you commit atrocities.” Voltaire
http://rhymeafterrhyme.net/2015/08/08/the-pseudo-morals-of-a-pseudo-science/
Well, they’re consistent. If they think it’s bad, it’s from global warming—sorry, ‘climate change’.
It’s time for all those who believe in catastrophic climate change that can be stopped by a change in behaviors to lead by example. How about they stop driving, stop flying, stop using any products that require to be mined and transported, and disconnect from the grid? Wouldn’t the world be a better and quieter place?
The economic cycles of boom and bust predate the history of performance pay by centuries and can be tracked back to before the “Tulip Mania.” All the so-called “performance pay” has done is give CEO’s and other executives greater opportunity to pillage and plunder their paymasters, which, of course, because they are such ethical and conscientious individuals they could not possibly do.
(/sarc)
This silly claim about executive compensation is a derivative of the CAGW initiative to force companies to account to their shareholders about their adherence to a “carbon budget”. I truly loved the response that Exxon-Mobil made to demands that it revise its investment planning. You can read it here:http://cdn.exxonmobil.com/~/media/global/files/other/2014/report—energy-and-carbon—managing-the-risks.pdf
“If underpaid executives don’t have any financial incentive to do a good job, there might not be that much excess money to redistribute.”
1. Ban / confiscate all performance-related pay.
2. Watch CEOs et al get massive salary increases unrelated to performance.
3. ???
4. Profi- no wait, never mind.
Do the members of this “think tank” realize that without customers ready to buy the product the
wouldn’t mean anything?
It is not like the evil fossil fuel companies are recovering the fossil fuels and just burning them in open pits. People are buying the fossil fuels to provide them the power they need/want to live their lives. And in general those people will chose the cheapest means to provide that power.
Confiscate pay of capitalists to give to elite insiders? Yes, I think that’s been tried.
Remember “management by objectives” (MBO)? Great idea, but…everyone quickly relearned the old caution to “be careful what you wish for”. If you don’t think out, set and state your objectives very carefully you won’t get what you had in mind, or expected, which also hammered home the “law of unintended consequences”.
People will respond to their incentive sets, but of course we never know, cannot know their entire incentive arrays — their individual, personal, private knowledge, ignorances, things each “knows” which are not so, etc. This is exactly why open, honest markets with discouragement against initiation of force and fraud are so very important.
The watermelons are showing their true nature. There are only two types of greens: 1) those who use climate change as cover to implement their true agenda, and 2) useful idiots