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24 April | Online As we approach the 10-year anniversary of the Paris Agreement, Carbon Tracker...
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Saidrasul Ashrafkhanov, the report's author, said “It’s telling that, despite the global energy crisis and elevated commodity prices, oil and gas companies generally chose to scale back incentives to grow production. That said, volume growth metrics are still the mainstay of a standard chief executive’s compensation plan. Investors should engage with companies on their remuneration policies and have their say on pay during the voting season to ensure that their best interests remain front and centre of executive decision-making”
With demand for hydrocarbons expected to peak this decade, oil and gas companies seeking to manage energy transition risks should adopt strategies focussed on maximising shareholder value rather than growing output. For such strategies to succeed, this key principle – value over volume growth – must be linked to incentives contained within executive remuneration plans.
This is the sixth instalment in Carbon Tracker’s series of reports on executive remuneration in oil and gas, in which we continue to analyse the influence of volume-growth and value-growth incentives on executive decision-making.
Our analysis explores executive remuneration at 30 of the world’s largest oil and gas companies and is focussed on compensation plans from 2023, the latest year for which a comprehensive dataset could be built at the time of writing. We also provide a comparative analysis against compensation plans from 2022 and, where disclosed, 2024.
Key questions addressed:
- Metrics Utilised: Which categories of metrics drive executive decision-making?
- Production Growth Incentives: Which companies were most reliant on volume-growth metrics?
- Transparency and Disclosure: How adequate is the disclosure of remuneration policies on both a retrospective basis and a prospective basis?
- Timeline Mismatch: How do the vesting and/or holding periods of incentive plans compare with corporate strategic timelines?
- Recent changes: How did remuneration policies change between 2022 and 2023?
- Engagement questions: What questions can investors and stakeholders ask corporates as part of engagement efforts?
In addition to the cross-sectional analysis of compensation plans from 2023, we have also included a time-series analysis of executive remuneration plans at each of the 30 companies in our universe over 2021-2023.
For previous reports in the series, see Paying with Fire (2019), Fanning the Flames (2020), Groundhog Pay (2020), Crude Intentions (2022), and Crude Intentions II (2024).
