You are here: Home » News-IANS » Business-Economy
Business Standard

Oil, gas companies incentivise executives to chase growth: Carbon Tracker

IANS  |  New Delhi 

and gas are jeopardizing shareholder returns by rewarding bosses for endlessly chasing growth in a world where investor pressure to conform to climate targets and sharp falls in renewables costs are set to eat into future demand, financial think tank Carbon said on Thursday.

Previous research by it has found that rapid growth of coupled with tightening climate policies would see global demand growth for weaken through the 2020's before eventually declining, with growth in demand for gas curtailed.

The new report warns that that try to maximise production risk overinvesting and wasting money on projects that deliver poor returns and destroy value.

The report titled "Paying with fire: How and gas executives are rewarded for chasing growth and why shareholders could get burned" analyses remuneration schemes at 40 of the largest listed in North America, and Australia, and will fuel investor campaigns for policies that deliver better value.

Released ahead of these companies' annual general meetings, it demonstrates that policies which incentivise production growth and reserves can deliver less value to investors than schemes which reward top executives for delivering financial returns.

Andrew Grant, Senior at Carbon and of the report, said: "The vast majority of oil and gas companies incentivise their executives to chase growth -- behaviour that risks destroying value given uncertainty over future demand."

This report provides shareholders with the ammunition they need to challenge this approach and press for remuneration policies which reward executives for delivering solid financial returns, Grant added.

The report found that 92 per cent of 2017 incentive schemes rewarded executives for either increasing production, growing reserves or resources volumes, or both, although companies are increasingly moving away from this model.

Only one company, US-based Diamondback Energy, does not reward growth, incentivising executives purely on controlling costs and improving financial returns.

Four companies have no direct incentives for growth, but include other measures which indirectly reward growth: (although only in a minor element), BP, and

It says the companies that disclose the greatest focus on rewarding volume growth are Anadarko, Cabot Oil & Gas, and Oil Search; at the other end of the scale production and/or reserves metrics determine just eight per cent of annual bonuses at Total and 10 per cent at

Nine companies include metrics related to mitigating climate change -- Shell, Equinor, Repsol, Eni, CNRL, ExxonMobil, Suncor, Total and -- but this affects only a small proportion of remuneration, and most still simultaneously reward fossil fuel growth.

Carbon warns that demand for oil and gas is likely to slow and then decline as a result of action to meet the climate targets and the rapid growth of renewables and electric vehicles.

--IANS

vg/mag/

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, February 14 2019. 10:40 IST
RECOMMENDED FOR YOU
RECOMMENDED FOR YOU