The Advisors' Blog

For the past few years, ESG metrics seemed to be gaining in prevalence in executive compensation plans – but, like “ESG” overall, their lack of specificity made them an easy target for criticism. A recent 32-page report from Farient Advisors reaches the conclusion that companies & advisors have taken the feedback to heart. But rather than backing away from ESG metrics, they’re refining them. Farient says:

Linking executive pay to stakeholder incentives is here to stay. For boards of companies, the research provides important insights into how corporate pay is being aligned with stakeholder metrics to better assess management performance and accountability.

Other key takeaways from this year’s research include:

– More than three-fourths of large companies now incorporate stakeholder measures into their incentive plans

– This prevalence is up by 5 percentage points compared to 2021 and 14 percentage points compared to 2020

– Differences between regions are reflective of each region’s industrial base, cultural norms, and local regulations. However, all regions but Canada are moving in the same direction—up

– Europe, the U.K., Australia, and South Africa lead the market with over 80% of large companies incorporating stakeholder measures into their incentive plans

– Liz Dunshee