A small, but growing number of companies have started linking a portion of executive pay to corporate environmental, social and governance (ESG) goals. In doing so, they are deploying a tactic they say aligns management's mindset with the company's ESG strategy. Proponents say the general idea is to give managers a personal incentive to incorporate such considerations into business decisions on a daily basis. If everyone from the CEO to the plant manager factors such things as carbon emissions into capital-expenditure decisions, it stands to reason that rank-and-file workers will also make choices that help the company reach its goals more quickly, reports the Wall Street Journal
(24 June, Shumsky). Jenny Davis-Peccoud, global leader of Bain & Co.'s sustainability and corporate-responsibility practice, calls on CFOs to support ESG-linked compensation plans by creating processes that enable managers to incorporate sustainability into what they do every day. Overall, however, success has been elusive for most corporate ESG programs. In a 2018 survey of 297 global companies by Bain, 47 percent said they had failed to meet even half of their sustainability targets, while only 4 percent reported achieving or exceeding their goals. Some investors worry that ESG-linked compensation programs, unless structured correctly, might not lead to thoughtful action on sustainability.
From "More Companies Link Executive Pay to Sustainability Targets"
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