FACULTY AND RESEARCH

The Stern-Stiglitz Report on carbon pricing emphasizes that environmental policy must not only cope with market failures, but also with government and organizational failures. Focusing on the latter, this paper investigates how some practices central to human resource management – employee selection and training, performance appraisal and rewards, employee discretion and empowerment – can be jointly deployed to direct managerial attention adequately. Using a static multi-task principal-agent model and standard monotone comparative statics tools, I derive predictions/prescriptions on how these practices should adjust as the firm's stakes in sustainability increase. These prescriptions notably include some qualifications concerning the outsourcing of environmental services and employee training, and some implications for public policy.