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Incentive Contracts and Environmental Performance Indicators

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  • Peter Goldsmith
  • Rishi Basak

Abstract

A principal-agent (P-A) model is used to analyse the effect of environmentaldiligence, the principal (top management), having to use imperfectperformance indicators and fearing penalties for environmental damages,wants to avoid environmental harm and induce the agent (employeemanipulating hazardous materials) to take appropriate action. To motivatethe agent, the principal offers an incentive contract based onenvironmental stewardship performance (as measured by EPI).Environmental stewardship being difficult to measure, due to high levelsof uncertainty surrounding, EPI, creates impediments to the establishmentof an efficient P-A contract. Copyright Kluwer Academic Publishers 2001

Suggested Citation

  • Peter Goldsmith & Rishi Basak, 2001. "Incentive Contracts and Environmental Performance Indicators," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 20(4), pages 259-279, December.
    • Handle: RePEc:kap:enreec:v:20:y:2001:i:4:p:259-279
    DOI: 10.1023/A:1013065801547
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    References listed on IDEAS

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    Cited by:

    1. Goldsmith, Peter D. & Turan, Nesve A. & Gow, Hamish R., 2004. "Firms, Incentives, And The Supply Of Food Safety: A Formal Model Of Government Enforcement," 2004 Annual meeting, August 1-4, Denver, CO 20343, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Paolo Perego & Frank Hartmann, 2009. "Aligning Performance Measurement Systems With Strategy: The Case of Environmental Strategy," Abacus, Accounting Foundation, University of Sydney, vol. 45(4), pages 397-428, December.
    3. Aline Grahn, 2020. "Precision and Manipulation of Non‐financial Information: The Curious Case of Environmental Liability," Abacus, Accounting Foundation, University of Sydney, vol. 56(4), pages 495-534, December.
    4. Goldsmith, Peter D. & Turan, Nesve A. & Gow, Hamish R., 2003. "Food Safety In The Meat Industry: A Regulatory Quagmire," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 6(1), pages 1-13.
    5. Philippe Bontems & Gilles Rotillon & Nadine Turpin, 2004. "Improvement of water quality as a joint production of milk when dairy farms are heterogeneous [Incitation à la production jointe d'eau de qualité et de lait lorsque les exploitations laitières sont," Post-Print hal-01606126, HAL.
    6. Poyago-Theotoky Joanna & Yong Soo Keong, 2019. "Managerial Delegation Contracts, “Green” R&D and Emissions Taxation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 19(2), pages 1-10, June.
    7. Rishi Basak & Sylvia Karlsson‐Vinkhuyzen & Katrien J. A. M. Termeer, 2022. "Information for climate finance accountability regimes: Proposed framework and case study of the Green Climate Fund," Public Administration & Development, Blackwell Publishing, vol. 42(5), pages 261-280, December.
    8. Eduardo Ortas & Isabel Gallego‐Alvarez & Igor Álvarez Etxeberria, 2015. "Financial Factors Influencing the Quality of Corporate Social Responsibility and Environmental Management Disclosure: A Quantile Regression Approach," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 22(6), pages 362-380, November.
    9. Patrice Loisel & Bernard Elyakime, 2006. "Incentive Contract and Weather Risk," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 35(2), pages 99-108, October.
    10. Patrice Loisel & Bernard Elyakime, 2018. "Incentives under Upstream-Downstream Moral Hazard Contract," Post-Print halshs-01649804, HAL.
    11. Frank Hartmann & Paolo Perego & Anna Young, 2013. "Carbon Accounting: Challenges for Research in Management Control and Performance Measurement," Abacus, Accounting Foundation, University of Sydney, vol. 49(4), pages 539-563, December.
    12. Zabel, Astrid & Roe, Brian, 2009. "Optimal design of pro-conservation incentives," Ecological Economics, Elsevier, vol. 69(1), pages 126-134, November.
    13. Alonso-Paulí, Eduard & André, Francisco J., 2015. "Standardized environmental management systems as an internal management tool," Resource and Energy Economics, Elsevier, vol. 40(C), pages 85-106.

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