Expert in ESG incentives and supply chain management joins ASB faculty

The Alberta School of Business welcomes Minjia (Minka) Li as an assistant professor in the Department of Accounting and Business Analytics. With a distinguished academic journey spanning Wuhan University, MIT Sloan, and UBC Sauder, Li brings a global perspective to ASB. Her research focuses on critical business challenges, including supply chain management and climate change, with a particular emphasis on ESG-related metrics and climate-linked executive pay. We sat down with Li to dive into her research, find out how she teaches accounting as “the language of business” to new students, and discover her secret to unwinding after a long day.

How did your academic journey, from Wuhan University to MIT Sloan and UBC Sauder, shape your research interests in archival-based studies within financial and managerial accounting?

My research interests have always evolved dynamically over time. During my undergrad, I was generally interested in how information is managed and priced. At MIT Sloan, I had numerous opportunities to connect with practitioners and MBA students. Every day, we had lunch information events where industry professionals were invited to introduce cutting-edge technologies and discuss current challenges. These interactions profoundly shaped my research philosophy, emphasizing the importance of addressing real-world problems. I am inspired to focus on research with practical implications, and I aim to provide academic solutions to real-life challenges.

Finally, my time at UBC Sauder gave me comprehensive training to be a serious researcher. The curriculum offered a blend of theoretical knowledge, empirical techniques and practical application, which together have equipped me with the skills to conduct research I am genuinely passionate about. For example, the onset of Covid 19 during my first year of Ph.D. studies brought unprecedented shocks to the global supply chain, and I personally experienced the impact when I was informed that I would have to wait two years for a new car. These real-life challenges directed my research focus to studying how information helps various stakeholders along the supply chain make informed decisions.

I appreciate the opportunity to experience different cultures and education systems across three countries. This exposure potentially has broadened my research and fostered an openness to exploring a wide range of research questions.

Can you provide more details on your research involving climate change and supply chain management in the context of financial and managerial accounting? What are some key findings or insights you've discovered so far?

One of my current research projects examines how climate-linked pay affects firms’ supply chain management. Climate-linked pay is a firm practice to include “E” (i.e., environment) or climate-related targets in executive compensation. A rising number of companies have linked executive pay to ESG-related metrics to demonstrate their commitment to sustainability. For example, the largest five oil and gas companies, BP, Shell, Total, Chevron, and Exxon Mobil tied an average of 8% of CEO bonus pay to “E” (i.e., environment) or climate-related metrics. Usually, such contract design allows firms to credibly convey the idea that managers are financially incentivized to improve ESG performance. However, the current climate-linked pay is often criticized for being too vague about its metrics without specific or assessable objectives. For example, executives may set up easily achievable targets for “green” bonuses. The inclusion of climate targets in executive pay raises issues for executive line-of-sight, particularly regarding the emissions from different sources. Though large-sample evidence remains limited, it is possible that firms with ESG-linked pay could benefit from being perceived as ESG-conscious while avoiding costly ESG efforts.

My research provides evidence of potential “greenwashing” involved in climate-linked pay. I find that climate-linked pay does not exert any real effects on the production of total greenhouse gas emissions. It only affects the reallocation of emissions by outsourcing firms’ direct emissions to their upstream suppliers. One specific channel through which firms facilitate emissions outsourcing is strategic supplier selection. Firms with climate-linked pay initiate fewer and terminate more contracts with suppliers who ace in the enforcement, transparency, and awareness of ESG-related activities. In other words, climate-linked compensation contracts lead firms to restructure their supply chain to reduce the net exposure to those “hard-to-shift-emission” suppliers. However, such decisions still seem to be rational and cost-relevant. First, firms will only do so when they face lower supplier switching costs. Second, firms’ financial performance is sacrificed when managers are compensated on some non-financial targets. Overall, I highlight potential spillovers to the supply chain induced by a certain compensation contract design.

What motivated you to join the Alberta School of Business, and what are you most looking forward to in your new role as an assistant professor?

I am excited to join the Department of Accounting and Business Analytics at the Alberta School of Business. I appreciate the opportunity to be in an environment that is resourceful and supportive of junior faculties. My colleagues have been so warm and welcoming, and I feel a great synergy between our research interests. I am looking forward to collaborating with talented minds and contributing to the dynamic academic community at the Alberta School of Business!

How do you approach teaching complex accounting concepts to students who may not initially find the subject engaging? Do you have any specific techniques or strategies that have proven successful?

Accounting is the language of business, and it is completely normal to feel challenged when learning a whole new vocabulary.

My primary goal as an educator, consistent with my research philosophy, is to provide students with a big picture of how the knowledge we are acquiring at the moment can help us solve real-life problems in future.

To achieve this goal, I find it invaluable to incorporate real-life applications and practical examples into the classroom. These elements help bridge the gap between theoretical concepts and their practical uses, such as through case studies and relevant current news. I am also a big fan of inviting industry professionals as guest speakers to enhance the learning experience. Their insights and experiences give students a realistic view of what to expect in the business world and prepare them for future challenges. Additionally, I am passionate about adopting new techniques in classrooms, such as game-based learning platforms. I hope to create an environment where students feel valued and can freely express themselves while respecting others, making the educational experience both effective and enjoyable.

My long-term goal is to achieve a well-balanced synergy between research and teaching. While I aim to bring academic solutions to some practical problems, I also seek inspiration from my students’ input.

What’s one thing people would be surprised to learn about you?

If you asked me 20 years ago what I wanted to be when I grew up, I would have said a professional musician. I started playing the Erhu, a traditional Chinese instrument, when I was just four years old. Now, it’s a wonderful way for me to relax and have fun!