Can businesses foster social, environmental, AND shareholder goals?

The answer to the question might be positive, thanks to contingent monitoring and clawbacks. Take two business stakeholders, say an investor and the environmental regulator. The former monitors financial results and compensates the business accordingly. When these results exceed a certain level, the regulator comes in (this is contingent monitoring) to check on the environmental dimension; she then rewards or fines the business (this is the clawback) when the outcome is respectively good or bad. With this scheme, the investor’s and the regulator’s incentives may not conflict but would rather reinforce each other.

Bernard Sinclair-Desgagné is Professor of Economics and Corporate Social Responsibility at Skema Business School. He holds a PhD in Management science/Operations research from Yale University. His recent work focuses on incentive compensation and responsible business, CSR and artificial intelligence, and the measurement of innovation. He has published extensively on these matters in leading scientific journals, delivered numerous conferences across the world, and done consulting work with several international business and non-business organizations.