Are You Asking the Right Questions in the "Year of the Stakeholder?"
Dear Friend,
Last month, based on feedback from our 2021 and Beyond: Global Trends in Stakeholder Incentives research, our team at Farient coined 2021 “the Year of the Stakeholder.” This month, I want to keep the discussion on a forward trajectory and consider the continuum of change for which boards and management are now responsible.
As we verge on a full year of living with COVID, we have witnessed a growing focus on employees, customers and communities, requiring boards and management to better align the interests of corporations with those of stakeholders. To this end, we continue to see companies add stakeholder incentives to their executive pay programs. In fact, the Financial Times reported earlier this month that there are “New Criteria for Chiefs’ Bonuses: Diversity and Climate Change.” Additionally, our Farient Information Services (FIS) team found that companies like Textron, McDonalds, Verizon and Microsoft, among others, have announced their intention to use diversity, equity and inclusion metrics as part of their executive pay programs going forward.
In our latest Farient Brief, “In the Year of the Stakeholder: Getting Skin in the Game,” we pose key questions to help companies get started on the path toward incorporating stakeholder measures into incentives. These include:
Does your company have a sound ESG strategy with clear measures and goals? Does the board oversee this strategy? If so, through what mechanisms?
How does your company report on the strategy and progress against goals? Are these disclosures sufficient? How can they be improved?
Does your company use stakeholder measures in its incentive plans? Why or why not?
As the Year of the Stakeholder gains traction, now is the time to start thinking about how your company is showing up to the challenge.
Sincerely,
Robin Ferracone
Hot Off The Press From Farient
In the Year of the Stakeholder: Getting Skin in the Game
The COVID-19 pandemic has accelerated a trend that was already in progress: the push from stakeholders for better disclosure and action around the social and sustainability aspects of ESG. In this blog, I discuss how boards and executives can protect talent, customers and communities through serious inquiry around company strategy, culture, reporting and accountability.
Use of Diversity, Equity and Inclusion (DEI) Metrics in the S&P 500
Accelerated by the social unrest of last summer, diversity, equity and inclusion have become significant considerations for companies. In this Farient Brief, our Farient Information Services (FIS) team provides insight into how companies are using DEI metrics in their executive pay plans as part of a broader push toward building diverse, inclusive and equitable corporate cultures.
Eli Lilly Doesn’t Plan to Claw Back Past Pay From Former CFO
While pharmaceutical giant Eli Lilly opted not to claw back previous pay from former CFO John Smiley over his alleged inappropriate relationship with an employee, the company will be taking away his 2020 bonus and other incentive compensation. In this Wall Street Journal article, I discuss why this should be expected in cases involving CFO conduct, which directly connects to corporate culture: “The tone at the top is extremely important. Companies have to show that they are walking the talk.”
Rising CEO compensation is a controversial but often-misunderstood issue. In this article for BBC Worklife, I argue that much of the rise in CEO pay has been driven by the rise in company share performance. "If you have a good CEO, the multiplier effect can be huge. So, in principle, median pay for median performance and high pay for high performance makes sense."
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 governance changes in 2021. For additional information and to sign up for the session, please contact us at info@farient.com.
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.
About Farient
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, performance measurement and goal-setting, pay and performance alignment, board of directors’ compensation and shareholder communications, among others. Farient is located in Los Angeles, New York, Louisville and Dallas and is a founding partner of the Global Governance and Executive Compensation Group (GECN Group), serving clients throughout the world. Farient is recognized by the Women’s Business Enterprise National Council as a certified diverse company.
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