Based on its review of Russell 3000 compensation plans, Farient Advisors found that E&S compensation metrics are used almost exclusively in determining annual (STI) bonuses in lieu of LTI plans and that - when used - they are typically combined with other metrics in a category that is weighted at less than 10% of the overall annual award potential.
This graphic illustrates the Russell 3000 findings:
As shown, 57 Russell 3000 companies (concentrated in the energy, materials (mining) and utilities sectors) used environmental compensation metrics; 17 used diversity metrics; and five used sustainability metrics. Looking just at the S&P 500 using the interactive graphic online, 24 companies used environmental compensation metrics; 14 used diversity metrics; and two used sustainability metrics.
The firm also notes that E&S metric goals generally are not well-defined (if disclosed at all), and suggests that - among other things - companies be more specific in their E&S definitions and objectives, and consider linking them to longer-term strategic goals.
See these prior reports: Directors Weigh in on Pay-for-Performance," "ESG Meets Executive/Employee Compensation," "Compensation Committees & Non-Financial Metrics," and "Facebook Changes Bonus Structure to Include Social Issue Metrics," and additional resources here. This post first appeared in the weekly Society Alert!