The Advisors' Blog

In July, the HLS blog ran a post from Meridian Compensation Partners discussing ESG metrics in compensation plans among the S&P 500. The blog described how ESG metrics are used — including DEI metrics, which were the most prevalent:

Unlike traditional financial and operational metrics, most ESG metrics are not individually measured and weighted. Instead, most companies use either scorecards and/or individual performance assessments.

Both approaches generally incorporate a list of undifferentiated performance measures that include an ESG metric with a variety of other operational or strategic criteria. This approach tends to reflect that many companies are either unable, or find it undesirable, to set more precise goals for these metrics and prefer instead to use judgment and discretion to assess results. 

I was reminded of the guest post from Orrick that Liz recently shared on considerations when incorporating DEI goals in light of June’s SCOTUS affirmative action decision. They noted that “rewarding executives for their overall efforts on DEI rather than for achieving targeted metrics will mitigate some of the legal risk” to avoid managers perceiving “achievement of the metrics as a de facto quota.” So we may see DEI metrics trending even further from precise goals. The guest post also noted that “the devil is in the details” and recommended that companies that incorporate DEI metrics into compensation programs do a privileged evaluation of their programs.

– Meredith Ervine