The Advisors' Blog

I’ve blogged that it’s somewhat rare right now for companies to link executive pay to environmental metrics (we also cover it in this checklist). Now, the non-profit shareholder advocacy organization As You Sow has taken a close look at the proxy statements of 48 companies that are “large carbon emitters.” They posted their initial findings yesterday.

Although few companies clearly described an express link between greenhouse gas reductions and executive pay for 2020, As You Sow found four companies that described specific goals and a specific impact on pay. Here’s an excerpt:

AES – links 5% of annual incentive pay for “decarbonization” consistent with GHG reduction goals and identifies target; 5% for “strategic capital initiatives” citing a target ”$1B through clean energy or 3rd party Fluence EV [an energy storage joint venture] of $750M. “

Ameren – awards 10% of Performance Share Units in LTIP based on “pre-established goals related to the total MW tied to renewable generation and energy storage additions. This measure includes MW associated with new wind, solar, biomass, landfill gas and energy storage added to Ameren’s generation portfolio over the three-year period.”

Marathon Petroleum – assigns “greenhouse gas intensity” as a factor for 5% of annual incentive compensation (which is 17% of target CEO pay) = 0.85% of total pay.

Southern Company – ties 10% of CEO LTIP pay to achieving specific megawatt reductions each year, either by adding zero-carbon megawatts and by eliminating coal or gas steam megawatts, with specific targets set for each year. The 100% payout target is set based on the trajectory needed to meet Southern’s 2020 goal of a 50% GHG reduction by 2040. There is a 150% payout stretch goal, which is set about 60% higher than the target three-year net MW change goal, meaning that there is more challenging to reach the maximum payout for the 2020-2022 performance period. The threshold for 2020-2022 is set to the garget for the 2019-2021 goal, so there is no payout if the target for the 2019-2021 performance period is not reached.

In addition, As You Sow also found that several companies said that they’ve adopted new policies for future years. I blogged a few months ago that environmental metrics could pick up in the US as European trends spread across the Pond.

As You Sow also says that companies are adding metrics in response to shareholder pressure, including proposals that it has submitted. According to its recent proxy season review, the proponent currently seems to be more focused on climate-related proposals right now than on proposals related specifically to CEO pay. It wouldn’t be too surprising if in the coming year, they pursue more proposals that urge adding climate metrics in pay programs.

– Liz Dunshee