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Farient Alert

2021 and Beyond: Global Trends in Stakeholder Incentives

Dear Friend,

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I am sure we can all agree 2020 has been an unusual year. From a pandemic impacting the four corners of the Earth, to social justice imperatives, to one of the most remarkable election cycles in U.S. history.

One bright spot has been the extraordinary focus of companies around the world on the “Social” aspect of Environment, Social and Governance (ESG) issues. Stakeholder prominence and the use of stakeholder incentives in executive pay are becoming priorities for investors, boards of directors and management to better align the goals of the corporation with the needs of the various constituencies it touches.

To that end, on behalf of Farient Advisors and the Global Governance and Executive Compensation Group (GECN Group), of which Farient is a founding partner, I am pleased to share the GECN Group’s new report, “2021 and Beyond: Global Trends in Stakeholder Incentives”, the most recent publication in our yearly Global Trends in Corporate Governance research series.

This GECN Group study is the first of its kind to provide relevant data, interviews and insights on how corporations are addressing stakeholder issues across five continents and multiple industries. Key findings include:

  • 67 percent of companies now apply ESG in their incentive plans. While most of these measures populate short-term incentive plans, ESG measures are now starting to appear in long-term incentives as well
  • Australia leads the way in the use of ESG and other stakeholder measures in incentives with an 81 percent prevalence, whereas the U.S. lags all other regions studied at 56 percent
  • Of all measures, “social” measures, including diversity, employee engagement and health and safety, are used most frequently, with a 61 percent prevalence

As investors focus their capital on companies that emphasize stakeholder incentives, Farient and the GECN Group are confident this study will assist companies and other organizations to understand what is at stake, benchmark themselves to global standards and identify what’s next for companies, their management and boards.

I hope you enjoy the research and would welcome an opportunity to discuss with you in more detail.

Wishing you a happy holiday season and a great New Year.

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Sincerely,

Robin Ferracone

Farient Advisors LLC

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).

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