Resource Library ESG

As companies finish the 2022 compensation season and prepare for 2023, we highlight top-of-mind topics for compensation committee members, questions to ask, and related resources.

Third article of a three-part series focused on how companies can implement the foundational steps of board-level ESG oversight.

The ground is shifting for executive compensation, from a focus on shareholder metrics to a more intentional longer-term approach that better supports key stakeholders: workers, suppliers, communities, and customers. To make the shift, companies need to prioritize their key stakeholder issues, then identify which ones actually belong in a compensation package.

What (if any) role should ESG play in their companies’ compensation plans, and if used, how should ESG-related incentives be structured?

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.

By investing in these areas even without an immediate commercial payoff, companies can bolster their long-term positions with both the stock market and society. 

Eager to give greater attention to stakeholders beyond investors, corporate boards have been adding environmental, social and governance (ESG) issues to their agenda.

There are five steps to designing sustainability incentives that effectively address myriad challenges.