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In 2020, amid the vast economic uncertainty from Covid-19, CEO total pay levels were mostly unchanged year-over-year, with lower cash compensation partially offset by equity grants. As we look ahead and consider how the pandemic will affect pay levels for 2021, we anticipate three trends.

There is general agreement that this means that the company should have the competencies and resources to make a material, positive impact on the ESG issue of concern.

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.

With long-term success increasingly depending on attracting, retaining and engaging talented people, HCM has become a concern not just for senior executives, but also for the board of directors.

Pressed for greater oversight of human capital management, boards are exploring ways to expand and sharpen their focus on talent.

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. 

When approached strategically, a focus on HCM can help companies develop the agile, innovative, and engaged workforce critical to differentiation and meeting strategic goals.  

The pandemic has made omnichannel and digital expansion an urgent priority for traditional retailers.

Investor demands, societal pressures and competition for employees are pushing boards to be intentional about where and how they focus on human capital management (HCM). Leading companies view HCM as a value driver and strategic differentiator.

Many have long maintained that in the long run, investing in stakeholders is good for shareholders— and that stakeholders and shareholders are not an either/or proposition, but rather a both/and proposition where addressing stakeholders leads to better long-term shareholder returns.

How does the board keep the magic alive as the company matures? How does the organization keep talent engaged when financial incentives become less effective? How do you keep competitors—whether established or upstarts—from coming for your now-proven talent?

The pandemic and other developments have changed the landscape for corporate behavior and strategy. Executive compensation must adapt accordingly for companies to capture fresh opportunities and overcome new challenges.

Stay competitive with your Director Pay decisions to attract the best talent and avoid criticism.