New Global Research Shows Different Paths to Stakeholder Value
Dear Friend,
Investors around the globe are pressuring boards and management for greater accountability. Meanwhile, other stakeholders, including employees and the communities in which businesses operate, are demanding that corporations provide greater transparency and clearly defined commitments to ESG goals. Stakeholder stewardship is seen as vital to value and profitability.
The 2022 and Beyond: Global Trends in Stakeholder Incentives research is based on findings from publicly disclosed information representing more than 500 global companies to discern patterns in corporate governance across multiple industries and countries. This annual report, our fifth, is published by Farient Advisors in partnership with the Global Governance and Executive Compensation (GECN) Group, where Farient is a founding partner. This year’s research provides insights into “stakeholder incentives,” and identifies the measures that compensation committees are including in their executive pay programs to align pay and performance with pledges for carbon neutrality and greater diversity, equity, and inclusion (DE&I).
One of the report’s key findings is that companies are accelerating their ESG journeys as the value of corporations is redefined by governments, employees, investors, and society at large.
Findings from this year’s report suggest several major implications for boards and management, including:
Companies are still early in their long journey toward developing stakeholder strategies, measures, and incentives
Use of stakeholder incentives continues to increase
The most meaningful gain in the use of stakeholder-incentive measures is in the environmental realm
While many firms have started incorporating stakeholder interests into their pay plans in a qualitative way, the trend is toward greater quantification
The speed of change is faster than we think
In a year certain to be marked by increased investor and regulatory activism around environmental, social, and governance (ESG) issues, it’s paramount boards think about concrete ways to link incentives to stakeholder metrics that are clear, quantifiable, and attainable; “talking the talk” is no longer enough.
Throughout the year, Farient will publish more detailed analyses of the research findings, geared toward helping directors and executives understand where your industry and company are on the stakeholder journey; what you need to do now; and how to best communicate these processes and goals to often skeptical investor audiences.
Recent Stories Linking ESG and Executive Pay
2022 and Beyond: Global Trends in Stakeholder Incentives
In our annual research report with our partners at the Global Governance and Executive Compensation (GECN) Group, we highlight the five key trends in stakeholder incentives and what boards need to do to show they are taking ESG goals seriously, as investors ratchet up the pressure over the course of this year.
US Companies Add Environmental and Social Targets to Executive Bonuses
Starbucks’ CEO Kevin Johnson earned a slice of his 2021 bonus by slashing plastic straws and methane emissions—an example of a trend by US companies to add environmental and social targets to bonus pay. “Companies should move toward quantifiable ESG-pay metrics, such as the specifics Starbucks adopted,” said Farient founder and CEO Robin Ferracone in this Financial Times article. “Companies should be ‘afraid of the blowback’ if they pay bonuses derived from imprecise ESG metrics.”
Tech Giants Turn to a Classic Recruitment Tool: Cash
Tech companies have long lured top talent with large stock awards at a time when the sector seemed to only go up in the markets. But according to this Wall Street Journal article featuring Farient founder and CEO Robin Ferracone, inflation and market volatility are driving a return to using cash instead. Ferracone shares that companies increasing the size of their merit-raise pools is a sign of the times.
Investor Ire Lingers Over Covid-Related Exec Pay Bumps
Many companies saw shareholders revolt over executive pay increases in 2021 – and now investors are gauging whether those companies have adjusted their compensation policies accordingly. In an article for Agenda, Farient Advisors’ analysis highlights that 35 S&P 500 companies received less than 70% support for say on pay votes last year which reflects a growing trend of say on pay pushback boards should watch closely this proxy season.
This interactive forum featuring Farient partner Lori Miller will provide director participants with the opportunity to interact with a panel of esteemed compensation advisors. The forum, featuring some of America’s top board and governance experts, will include insights on trending issues that impact public company compensation committees. For more information and to register, please contact us at info@farient.com.
(In-Person) April 13, 2022 - National Association of Corporate Directors (NACD) Compensation Committee Chair Advisory Council: Washington, D.C.
Farient’s founder and CEO Robin Ferracone and COO RJ Bannister will partner with NACD and Weill Gotshall to lead the Spring Compensation Committee Chair Advisory Council. The event will feature discussions around current trends, disclosures, and the impact of macroeconomics and pending legislation on executive compensation and corporate governance.
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 in more than 35 countries. Farient is recognized by the Women’s Business Enterprise National Council as a certified diverse company.
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