Resource Library Insights

ESG metrics are increasingly prevalent in incentives, but disclosure has not kept pace. In recent years, the prevalence of ESG metrics in executive compensation design has expanded.

ESG metric prevalence in incentives continues to increase among S&P 500 companies but at a slower rate than prior years, as market focus shifts to refining existing ESG metric types and structures rather than increasing adoption.

Directors with human capital expertise can be invaluable at a time when the “war for talent” is raging.

As with other operational or strategic metrics, adding ESG metrics to incentive plans can be a signal of importance and a sign of commitment.

Moving forward, we anticipate that ESG metrics will continue to become more prevalent among S&P 500 companies before hitting an eventual plateau.

Spurred in part by the pandemic and the social protests of the past year, shareholders are calling for greater disclosure and commitment to ESG matters, and some are explicitly asking companies to include at least one material, measurable ESG metric in their executive pay plans.

2020 had a profound impact on corporate governance and responsibility, with the pandemic shining a spotlight on health and safety and the national focus on racial justice drawing sharp attention to diversity and inclusion in corporate America.

This final report for 2020 points towards design considerations for companies considering integrating more stakeholder metrics in the future.

Whatever boards decide, they will want to be clear and transparent on any substantial departures from usual practice.

Boards can still work to ensure they position their companies as well as possible to enter FY2021.

Environmental, social, and governance concerns continue amid heightened scrutiny of corporate behavior through the COVID-19 pandemic and protests over racism and police brutality. It's time to take the next step by incorporating ESG metrics into compensation plans.

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Three foundational principles for compensation committees