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Abstract
There has been growing interest in green management practices among practitioners, researchers and regulators in recent years. However, there is limited research that examines the connection between natural environments and human resource management practices. The current study examined the relationship between Chief Executive Officer (CEO) compensation and green management practices within the agency theory and institutional theory frameworks. Results revealed a significant negative relationship between green management practices and CEO base pay, however, there was not a significant relationship between green management practices and CEO bonuses. In line with previous agency theory research, findings suggest a negative relationship between state regulation and CEO compensation in green states. An important implication for practice is that the negative relationship may strengthen negative perceptions about green management practices among CEOs and reduce willingness to implement green management practices.
Highlights
Today, “we live in an era of sustainability awareness” (Starik, Marcus 2000: 539) and there is growing pressure on organizations to adopt green practices
We live in an era of sustainability awareness as stated by Starik and Marcus (2000), we do not know much about how green management initiatives impact human resource management practices in general and Chief Executive Officer (CEO) compensation in particular (Jackson et al 2011)
While environmental studies have proliferated in recent years, studies examining the link between CEO pay and green management practices are limited (e.g. Berrone, Gomez-Mejia 2009)
Summary
“we live in an era of sustainability awareness” (Starik, Marcus 2000: 539) and there is growing pressure on organizations to adopt green practices. Environmental sustainability has become a strategic issue for organizations and the topic has generated concerns among business executives, governments, consumers, and management scholars (Delmas, Toffel 2008; Gallarotti 1995; Orsato 2006; Rehman, Shrivastava 2011; Zee et al 2011) This trend is due to the growing environmental and social movement and the perception that organizations have or could have significant impact on their respective ecosystems (Starik, Marcus 2000). Yen 2012), create isomorphic pressures on organizations at the state level and affect the agent-principal relationship It is proposed, based on agency theory that increased regulation will limit the discretion of the CEO and, have a negative effect on CEO compensation
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