The Advisors' Blog

We’ve heard in a previous webcast that compensation committees are feeling the pressure to incorporate ESG-related metrics into incentive plans, due in part to increasing investor expectations. Since ESG is a broad category, compensation committees do have some breathing room to find ESG-related metrics that drive the business forward. This Pearl Meyer memo points out that climate-related metrics can be thornier to implement (vs. DEI metrics, for example), since climate-related issues may be intrinsically tied to how the company conducts its business. As a first step, the memo lays out several key questions compensation committees should be asking when considering climate-based incentive metrics, with a few excerpted below:

– What is the company’s culture and its strategic priorities?

– Are these goals critical to business success and value creation?

– Is it possible to set specific goals and make progress on the proposed metrics?

– What are the assurance processes? Can results be audited?

You should also check out the pay-related communication topics heat map on pg. 6 – it highlights which compensation topics are higher priorities for various stakeholders, so your company can prepare specific messaging to address concerns across different stakeholder groups. As you sort through which metrics would work best for your company, keep also in mind that the larger institutional investors and proxy advisors generally have a perspective on what they want to see with respect to ESG-related metrics (for example, see our previous blogs about BlackRock and Glass Lewis).

You can also join us at our “1st Annual Practical ESG Conference” – virtually on October 11th – where we’ll have a session on “ESG Hot Topics: Forewarned is Forearmed” – with Sourcemap’s Leo Bonanni, BlackRock’s Michelle Edkins, Latham’s Sarah Fortt and S-Factor’s Bonnie Lyn de Bartok. And at our “Proxy Disclosure Conference,” our agenda includes a session on “The Evolving Compensation Committee” – with Semler Brossy’s Blair Jones, Davis Polk’s Kyoko Takahashi Lin, American Water’s Jeffrey Taylor and Pay Governance’s Tara Tays. These Conferences can be bundled together for a discounted rate – and will help get your compensation committee situated on how to best handle pressing ESG-related executive compensation matters. We’ve also extended the “Early Bird” rate! Register before this Friday, June 17th, to get the best rate. You can sign up online, email sales@ccrcorp.com, or call 1-800-737-1271.

– Emily Sacks-Wilner