February 12, 2020
Comp Committees and ESG To-Dos
– Lynn Jokela
Liz blogged last fall about how one company was planning to tie executive compensation to elements of strategic ESG goals. Shareholders continue to ask for standardized ESG disclosure and talk continues about finding ways to tie executive comp to ESG goals. Acknowledging that most agree with monitoring ESG goals and that it’s undecided whether ESG goals should be factored into incentive plans, this recent Directors & Boards blog highlights key areas of focus for compensation committees in 2020 and what they should do, one area being ESG:
– Identify the key ESG measures for your organization: based on the nature of your business, what are the most critical ESG metrics (e.g., environmental emissions, energy consumption, employee safety, pay equity, diversity)?
– Determine what the goals are for improving ESG performance: what level of progress is required to meet the objectives of the organization or be an industry leader?
– Assess whether there is a role for ESG in compensation decisions: should ESG measures be incorporated into the individual performance assessment for the CEO and other members of management? Are there any ESG measures (e.g., employee safety, diversity or environmental progress) that are critical enough to be included in the incentive plan for executives?
The blog also highlights other compensation committee to-dos for 2020 involving pay equity and diversity, ISS EVA metrics and pressure testing the company’s compensation structure.