Resource Library Insights

Nearly 30 percent of companies in the S&P 500 used a diversity, equity, and inclusion (DE&I) metric in executive incentive design last year, and a quarter of these businesses did so for the first time, although metrics focus on representation only, easily achieved goals disconnect from long-term aspirations, and metric definitions are not stress tested.

Our research in 2021 indicates that 28% of companies included DE&I as a metric in executive incentive design. This report evaluates the level of specificity disclosed around DE&I metrics for a representative sample of those companies.

One visible way some companies are showing their commitment to diversity, equity, and inclusion is by linking DEI progress to executive pay. 

How can a board member evaluate if DEI incentive metrics would be meaningful? As with any key initiative, the dialogue surrounding performance management can give clues as to what does or doesn’t make

Compensation committees should consider near-term and long-term implications for pay program design as part of this discussion.

A mid-sized consumer products company introduced a relative total shareholder return (TSR) measure to its long-term incentive program.

Today, compensation committees seem to have fewer tools in their arsenal to directly incentivize a company's stock price growth. Increasingly since 2007, stock options have been replaced by various performance-based vehicles. As a result, long-term incentive plans (LTIPs) may be paying for achievement of operational or financial performance goals while shareholders fail to benefit from a similar growth in share value.