The Advisors' Blog

– Lynn Jokela

Over the last year, we’ve blogged a few times about companies announcing inclusion of diversity metrics in executive compensation programs – here’s an entry about D&I metrics in the Fortune 200 and another entry about Starbucks’ plan to link executive pay to diversity targets. Glass Lewis recently issued a report with some high-level stats about diversity-related goals included in executive pay programs.  The report primarily focuses on proxy statement board diversity disclosures and discussion of diversity as a compensation metric begins on page 15.  Here are a few takeaways:

– In the 12-month period to September 30, 2020, 99 S&P 500 companies included a diversity metric in their compensation program, nearly doubling from 51 companies in the 12-month period to September 30, 2018

– When included, diversity metrics are usually not a fully-weighted metric, but rather a specific consideration under individual performance or strategic goals

– Achievement is generally assessed subjectively – usually no clear goals or achievements are described and instead a sentence or two describes what was considered.

– Often no real standard is established as what is considered ‘good’ performance because it’s highly dependent on the company, making comparison between companies’ performance difficult

The report lists a few 2020 proxy statements as examples of diversity metrics and goals – check these out if you want to see sample disclosure about certain approaches:

– Verizon Communications: an early adopter of diversity and sustainability metrics, weighted at 5%, under their STIP that discloses tangible goals

– Edison International: tangible goals disclosed for a weighted diversity metric under the STIP

– Prudential and Starbucks: inclusion of a diversity modifier to a certain LTIP performance cycles with a quantifiable goal to measure performance