Unparalleled wildfires are burning across the American west amid some of the worst droughts in centuries. The largest freak hailstorm on record swept Boston at the end of July, denting cars and smashing windshields. And Puerto Rico faces extreme water rationing.
But it’s getting harder to pay attention to these disasters. Especially in the summertime, we’re growing used to witnessing increasingly ominous signs of climate change — unprecedented drought, wildfires and weird weather.
Meanwhile, our CEO pay system is designed to keep us locked onto a destructive path. The people who run the 30 largest oil, gas and coal corporations are simply doing their (richly rewarded) jobs by pushing the volume of fossil fuel extraction higher.
The average CEO paycheck at the 30 biggest fossil fuel companies was $14.7 million, in 2014, 9 percent higher than average CEO pay among the S&P 500.
ExxonMobil CEO Rex Tillerson topped the list, pocketing $33 million in 2014, raising his total compensation over the last five years to $165 million.
ConocoPhillips CEO Ryan Lance hauled in $27 million in 2014, an 18 percent pay hike over 2013. Chevron CEO John Watson was close behind with a $26 million paycheck in 2014.
All told, the 30 largest U.S. publicly held coal, gas and oil companies have doled out compensation worth nearly $6 billion over the last five years to their top management teams. That payload rivals the $6.6 billion private corporations spent globally on R&D on renewable energy in 2014.
These are some of the biggest takeaways from Money to Burn: How Our CEO Pay System is Accelerating Climate Change, a new report that my Institute for Policy Studies colleagues and I have just released.
Half the compensation raked in by the executives who run the 30 largest U.S. publicly held energy companies comes in the form of options and stock grants. This practice encourages actions that boost quarterly share prices rather than long-term corporate health and global sustainability.
Most of the big fossil fuel companies tie compensation for executives to the company’s success in expanding fossil fuel reserves. Yet meeting the climate challenge requires that all of us, especially our political and business leaders, take action to reduce carbon pollution by getting ready to generate less of it.
Climate scientists have warned that we should cap carbon emissions to prevent the Earth’s temperature from rising more than 3.6 degrees Fahrenheit. Taking this step would limit emissions to roughly 565 gigatons of carbon. At our current levels of consumption, we’ll surpass this marker by 2040.
The 200 largest fossil fuel companies, however, already have an estimated 2,795 gigatons of oil, gas and coal reserves. That’s five times the amount of carbon than can be burned without triggering irreversible and catastrophic climate change.
Most of that dirty energy needs to stay in the ground. The global energy industry must shift its investment away from efforts to drill and mine its untapped reserves of oil, gas and coal, and move as swiftly as possible toward a new reliance on renewable energy options like wind and solar.
Yet the oil and gas industries, penned into their short-term mindset by perverse CEO pay incentives, spend $600 billion a year worldwide to locate additional carbon reserves. Fossil fuel CEOs have a clear motive to spend heavily to unearth and develop new carbon assets that cannot logically be used without destabilizing the planet’s climate system.
These companies also spend billions more on new infrastructure, such as pipelines, power plants and drilling platforms. These wasted dollars lock us into fossil fuel use and delay the inevitable transition to greener energy systems.
It’s time to change course. Today’s chronic short-termism isn’t only bad for their shareholders, it’s lethal for the planet and all of us. Remaining hooked on fossil fuels will only increase the severity and frequency of summertime hailstorms, devastating droughts, and wildfires of biblical proportions.
