The Advisors' Blog

As Meredith noted last fall, there’s been a general sense that some companies would revisit DEI metrics in the wake of the June 2023 SCOTUS decisions on the Students for Fair Admissions cases. This WSJ article says that 2023 was the first time since at least 2019 that the percentage of S&P 500 companies using DEI metrics dropped compared to the prior year. And now, in light of recent developments, many companies are taking yet another look at these programs.

Companies aren’t necessarily abandoning the overall concept of diversity, according to the article, but they may be shifting incentives to promote other types of metrics. In some cases, changes may be due to the fact that they have gained a better understanding of how to promote beneficial types of diversity that support business goals. The Journal shares a few examples of how companies are refining comp programs:

– A financial services company dropped financial incentives related to diversity and inclusion. The company started adding diversity goals to executive compensation plans in 2018 so that certain performance-based payouts increased or decreased by as much as 10% depending on the change in representation among senior management of people of color, women, veterans and LGBTQ and disabled people. It said last year in a regulatory filing that the compensation incentive was no longer necessary because the company had significantly increased diversity since introducing the tie to pay.

– An electric utility company reduced the impact of DEI metrics in executive bonuses, saying it needed to offset increased weighting for operational targets. A range of criteria that included hiring women, people with disabilities, veterans, LGBTQ workers and those from racial and ethnic minorities accounted for 10% of a business leader’s 2023 cash award, described in the company’s most recent proxy, down from 15% a year earlier. The company said [in its 2024 proxy statement] that it was continuing to focus on its DEI culture and priorities.

– A medical technology company changed the metrics for annual cash awards. Just over a year ago, the company said certain targets, including companywide inclusion and diversity goals, could boost executives’ annual awards by as much as 5%. Now, the targets are instead built into individual goals.

Other companies are framing the goals differently, to explain why retaining different perspectives is valuable to the business and incentivized – but not tying that concept to demographic characteristics. We’ll get more visibility in the next few months about other changes made during 2024, and perhaps some companies will also preview what they’re doing for 2025.

– Liz Dunshee