The Wall Street Journal reports today that Chevron's Board of Directors has cut compensation for senior executives at the firm, despite stellar financial results. What's the reason? Apparently, Chevron has had a spotty safety record over the past year or so. Therefore, despite strong financial performance, the bonuses for top executives have been scaled back.
Now, the total compensation numbers are still very high. So, I don't think anyone is crying about the compensation changes. However, the move does send an important message. Unlike many other firms, Chevron's board is saying that financial performance at all costs will not be rewarded. A strong safety culture has many facets, so incentives alone will not improve safety. However, incentives are a key component. You have to reward the right kinds of behaviors if you want a strong safety culture. You also have to send the right symbolic messages. Chevron seems to have taken a step in the right direction.