The L-Blast | April 2022
ESG & Executive Compensation
Linking environmental, social, and governance metrics to executive compensation is becoming increasingly prevalent. Pressures from investors, shareholders, environmental and rights advocates, and the government are pushing companies to adopt ESG metrics.
In this month’s L-Blast, we take a deeper look at this issue and analyze whether this trend is beneficial to the overall effective design of executive compensation programs. We explore key considerations to help determine if incorporating these metrics is suitable for your company and if so, how to do it right.
We hope you find this information helpful and aids in your executive compensation decisions. As always, let us know if you have any questions regarding the topics shared in this L-Blast, or if you need help developing an executive compensation plan that is right for your company.
Effective compensation programs have a strong circular relationship between measurable goals, tangible performance, and actual payouts. This is true whether the goal or goals are short-term or long-term in nature. But what happens when the lines between goals and performance become blurred? Do the compensation programs themselves cease to carry the same power to influence actions? Or even more concerning, are the actions being influenced in the best interest of stakeholders?
The Evolving Role of ESG Metrics in Executive Compensation Plans
The broad area of environmental, social, and governance (ESG) issues is undeniably making its way onto corporate boardroom agendas today. Many large institutional shareholders are asking companies to focus more, do more, and disclose more about ESG efforts. In fact, ESG is now the topic most often covered during shareholder engagements that include company directors.
Executive Pay Tied to ESG Goals Grows as Investors Demand Action
Chipotle, McDonalds, Caterpillar, and other companies are increasingly tying executive pay to environmental, social, and governance goals as more investors, regulators, and activists scrutinize corporate behavior. Executive pay is usually tied to meeting key financial metrics, such as profit margins or return on equity for shareholders.
2022 Midstream and Upstream Industry Compensation Surveys
OPEN JUNE 1st!
We appreciate your patience as we work through changes to our surveys platform. The revised open date is June 1st. Keep your programs competitive in the oil and gas industry by participating in the survey(s). Click below to learn more or contact us to participate.
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We are Rebranding as NFP Compensation Consulting
A new website is underway as we continue our transition to NFP Compensation Consulting. Our web address will remain the same but our site will have a whole new look. We will communicate further details as they become available. Thank you for your patience and support during this time.