Farient Advisors has just released our fourth annual Global Trends research, 2021 and Beyond: Global Trends in Stakeholder Incentives.
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2021: Welcome to the Year of the Stakeholder
Dear Friend,
Welcome to the New Year. I think everyone will agree that the events leading up to January 20, 2021 have been unparalleled in our history. Who would have thought that one year later we would still be addressing the fallout from COVID-19, unemployment would be at historically high levels and our political environment would reach its crescendo of discontent?
To this end, Farient Advisors and our partners in the Global Governance and Executive Compensation Group (GECN Group) have just released our fourth annual Global Trends research, 2021 and Beyond: Global Trends in Stakeholder Incentives. This study focuses on how public companies across six global regions are addressing stakeholder issues impacting the Environmental, Social and Governance (ESG) landscape and linking them back to executive incentives. It’s no secret that the Social aspect of ESG has received unprecedented attention. We have found boards of directors and CEOs around the world stepping up to “do what is right” for their stakeholders, including employees, customers, suppliers and communities, not to mention investors. Many of the directors we interviewed for the research said they didn’t need activist investors to tell them what should be done; instead, many were proactive and recognized the link of the stakeholder ecosystem to the long-term viability of the company.
As we enter a new year of possibilities, our analysis of 500+ global companies highlighted that the U.S. lags the rest of the world in the use of ESG and other stakeholder measures in executive pay programs. At 56% of companies using stakeholder measures in incentives, the U.S. is far behind Australia (81%) and the U.K. (72%).
Nevertheless, I am confident that we will see significant changes in these numbers over the next few years. From the Business Roundtables’ 2019 statement on the “Purpose of a Corporation,” signed by 181 CEOs, to the new administration’s focus on all aspects of saving the planet, diversity and inclusion, and governance, I see 2021 as the “Year of the Stakeholder.”
Sincerely,
Robin Ferracone
Hot Off the Press From Farient
Executive Compensation 2021: Back to the Future
As we leave one tumultuous year behind and enter another, it is a good time to look forward to the most powerful trends shaping compensation and governance in 2021. According to the Farient/GECN Group research, 2021 and Beyond: Global Trends in Stakeholder Incentives, rising concern over ESG and other stakeholder issues will, in 2021, shape everything from strategy and culture to executive incentives. In this blog, I discuss the findings and implications of the research and evolving trends.
KPMG Board Insights Podcast: Executive Compensation in 2020 and Beyond
2020 was a year that re-shaped corporate agendas and approaches to governance and compensation, as companies sought to address not just the COVID-19 pandemic but rising social activism and investor pressure over ESG. In this podcast from December 2020, Farient CEO Robin Ferracone talks with KPMG Board Leadership Center’s Senior Advisor, Stephen Brown, about how compensation committees were closing out the year, putting more flexibility into compensation plans, and navigating Diversity, Equity and Inclusion (DEI) as well as other human capital issues.
Related Stories About Stakeholder Issues in Executive Incentives
Conscious Capitalism: The New Norm
“Conscious Capitalism” is re-shaping the corporate world and the way boards think about compensation and governance. Stakeholder value – encompassing not just shareholders but employees, customers and communities, among others – is the guiding principle for today’s boards, as we found in our interviews with global directors for the 2021 Farient/GECN Group research. In this interview with FEI Daily, I discuss the trends highlighted in our recent research around stakeholder capitalism and what’s in store for 2021.
Companies Committing to Net-Zero Emissions and Diversity
As more companies adopt ambitious goals on issues like climate change and DEI, they are turning to incentive plans to back up their commitments with real action, according to this Pensions & Investments article that cites the Farient/GECN Group research. As this year goes on, we will observe how many companies adopt stakeholder measures, especially in the U.S., where such actions lag other regions.
One of NACD’s best programs for 2021 will bring together seasoned executive compensation advisors, and Compensation Committee members on one stage. Please join me for a panel on what to expect in corporate governance, executive compensation and regulatory changes in 2021. For additional information and to sign up for the session please contact us at info@farient.com.
The Expanding Landscape of Compensation Committees
In this “BDO in the Boardroom” podcast, I sat down with BDO’s Terry Adamson to discuss an important trend: the increase in responsibilities being taken on by compensation committees. These include oversight of human capital issues, incorporating stakeholder metrics into incentive plans, and addressing DEI.
Robin is our Founder and Chief Executive Officer. She is the author of the book “Fair Pay Fair Play: Aligning Executive Performance and Pay” and a frequent presenter for well-known organizations including the Council of Institutional Investors, Society for Corporate Governance Professionals, the National Association of Corporate Directors (NACD) and The Conference Board, among others. Robin has written extensively on the topics of performance management, incentive plan design, goal setting and corporate governance. She has been quoted by numerous business and industry publications, including The New York Times, The Wall Street Journal and The Washington Post. Learn more about Robin.
Farient Advisors LLC is an independent executive compensation, performance, and corporate governance consultancy. Farient provides a comprehensive array of services to boards of directors and management including: compensation program design, goal setting and performance measurement, pay and performance alignment, board of directors compensation, and shareholder communication among others. Farient has offices in Los Angeles and New York and covers clients in more than 30 countries through our partnership in the Global Governance Executive Compensation Group (GECN). Farient is a certified Women Owned Business.
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