Press "Enter" to skip to content

Big Oil CEOs have Reasons for Focusing on Energy

As Energy demand rises and commodities market pundits predict a return to $100 oil, new factors in the Energy sector are pressuring producers to extract less. It ranges from increased fiscal discipline in the United States after a decade-long bust to ESG pressure and how shareholders compensate Energy executives. Royal Dutch Shell was the first oil company to link ESG to executive compensation in 2018, allocating 10% of long-term incentive plans to carbon reduction.

BP followed suit, incorporating ESG factors into both its yearly bonus and long-term incentive plan. While the European majors were the first to integrate greenhouse gas emissions targets into executive compensation plans, Chevron and Marathon Oil are U.S.-based oil corporations. The oil and gas businesses are joining a long list of public companies tying ESG to executive pay, including Apple, Clorox, PepsiCo, and Starbucks. Last week, industrial Caterpillar announced the creation of a new role of chief sustainability and strategy officer and the announcement that a portion of the CEO salary will subsequently be tied to ESG.

According to research from Willis Towers Watson, 51 percent of S&P 500 corporations incorporated some ESG indicators in their executive compensation plans last year. However, only 4% of organizations employ ESG in long-term incentive plans, whereas half use it in annual bonus or incentive schemes (LTIP). According to a comparable survey by Pricewaterhouse Coopers (PwC), 45 percent of FTSE 100 companies have an ESG aim in their annual bonus, long-term incentive plan, or both. “We will continue to see the percentage of companies increase,” said Ken Kuk, senior director of talent and rewards at Willis Towers Watson.

Be First to Comment

Leave a Reply

Your email address will not be published. Required fields are marked *