How Directors Can Link Stakeholder Incentives to Climate Goals in 2022
Dear Friend,
As the year gets off to a fast start, it’s becoming increasingly clear that we will see more stakeholder and regulatory demands around environmental, social and governance (ESG) issues, with a focus on climate in particular. With every new projection of the world’s anxiety-producing march toward a 1.5 degree Celsius increase in average temperatures, and extreme weather across every corner of the world, the call for action is becoming louder and more consistent.
The U.N. climate science panel has said man-made carbon dioxide emissions need to fall by about 45% from 2010 levels by 2030 to reach "net zero" by mid-century to give the world a good chance of limiting global warming. To this end, over the past couple years, we have seen boards demonstrate meaningful action with regard to all stakeholders – gaining a deeper understanding of the ESG landscape and linking executive incentives to various ESG initiatives from diversity, equity and inclusion (DEI) to climate programs as companies across multiple industries set deadlines to reach net zero carbon emissions.
In a recent brief for the National Association of Corporate Directors (NACD), I discussed how boards can start thinking about integrating climate goals into their compensation strategy. Our team at Farient will continue to explore these issues in our upcoming annual Global Trends in Corporate Governance research, which will focus on global trends in stakeholder incentives.
Additionally, as Farient continues to lead market discussions on executive compensation and ESG, you can find other Farient resources and commentary below to help you navigate some of the challenges boards are likely to face this year, including renewed SEC regulatory pushes around clawbacks and “spring-loaded” awards.
Best regards,
Robin Ferracone
On ESG and Executive Pay
Directors Are Grappling with Ways to Tie Pay Incentives to Climate Goals Under Mounting Investor Pressure
In this NACD brief, I discuss the rise in companies tying climate metrics to pay and what directors can and should do to ensure pay reflects performance around environmental goals as this issue takes center stage in 2022.
Top Governance Leaders Talk Diversity, Innovation, and ESG at NACD's Leading Minds of Governance
Farient Partner Dan Mayfield recaps NACD’s recent Leading Minds of Governance program on what boards are doing to fuel innovation and set meaningful strategies that include ESG topics.
SEC Guidance on Exec Comp Puts More Pressure on Boards
The SEC recently issued guidance advising companies to publish new disclosures when granting stock options ahead of big corporate announcements – so-called “spring-loaded” awards – to executives. Farient’s Marc Hodak comments in this article for Agenda about the implications for companies.
Like It or Not, Dodd-Frank Clawback Rule Coming
With the SEC set to finalize the Dodd-Frank rule on clawbacks, Farient’s RJ Bannister discusses what boards should be doing now to ensure compliance with impending regulatory changes in this interview with Reuters.
For this collaborative group of female chairs of boards and committees at public companies, Farient founder and CEO Robin Ferracone talks executive compensation, ESG and why stakeholder incentives matter to boards in general and compensation committees in particular.
Join Farient founder and CEO Robin Ferracone for this Agenda Education webcast from 12-1 pm EST on February 4, where she will be discussing how companies can effectively tie executive pay to concrete ESG metrics in an era of unprecedented investor pressure around social and environmental issues. Register for the event here.
Join Farient Partner Dan Mayfield for a lively panel on ESG within the context of corporate strategy, and how board members' roles, levels of accountability and oversight are expanding. Directors must guide management to be responsive to stakeholders, incorporating DEI while addressing climate related issues and the path to future net zero requirements. To join 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. Robin has written extensively on the topics of performance management, incentive plan design, goal-setting and corporate governance. For 11 years, Robin has been named to the NACD Directorship 100, a list of the most influential people in corporate governance and the boardroom. Her expertise has been cited by numerous business and industry publications, including The New York Times, The Wall Street Journal and The Washington Post, among others.
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 (GECN) Group, serving clients throughout the world. Farient is recognized by the Women’s Business Enterprise National Council as a certified diverse company.
Farient Advisors, 55 E. 59th Street, Suite 12B, New York, NY 10022
