Home Climate Change An Entirely Absurd Insistence About Oil Company Pay

An Entirely Absurd Insistence About Oil Company Pay

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The claim is that as oil company CEOs are paid with stock therefore they conspire to boil the planet. That is, no really, what is being said here.

Lucrative pay and share options have created an incentive for oil company executives to resist climate action, according to a study that casts doubt on recent net-zero commitments by BP and Shell.

Compensation packages for CEOs, often in excess of $10m (£7.2m), are linked to continued extraction of fossil fuels, exploration of new fields and the promotion of strong market demand through advertising, lobbying and government subsidies, the report says.

The setup with executives runs counter to efforts around the world to keep global heating to 1.5-2C (2.7-3.6F) above pre-industrial levels.

This is witless stupidity.

Stock awards – whether options or stock itself which then vests – align the interests of the managers with the shareholders. The shareholders would like to see rising profits, sure they would. OK, but what are profits? They’re the value added within an organisation.

Profits are the difference between the cost of doing something and what people are willing to pay to have that thing done. If consumers desired – this is the past we’re talking about so renewables were still more expensive than fossil, even if the claims that they’re not now are true – more expensive energy or transport then that is what would have provided the greater profits, providing them.

That is, it’s us out here who determine what profits are going to be by our consumer choices. Anyone who has ever seen their customer base high tailing it for the hills will understand this – a certain Mr. Green might be an example.

So, CEOs maximising profits by not investing in renewables? That’s us, we folks, doing that. Which is, of course what we all desire anyway. We want business to be responsive to our desires, just as the shareholders want managers to be aligned with their own. Stock awards do both – because maximising profit must, by definition, mean we consumers are getting what we want as so too are the shareholders. At least that part for consumers is true absent monopoly and that’s not something anyone’s claiming about the oil business except for Opec.

Another way t put this is that if we all wanted renewables then CEOs with stock would have maximised profits by providing them. We didn’t, they didn’t and that’s how it should be too.

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