According to Willis Towers Watson's "The growing importance of ESG measures in incentives" based on its review of 2020 proxy statements, 45% of the S&P 500 include a human capital measure in their executive incentive plans, most commonly: succession planning and talent development (23% of companies); employee health and safety (17%); inclusion and diversity (17%); employee engagement (11%); and culture (9%).
More broadly, 49% of the S&P 500 incorporated a Social measure (which includes customer service in addition to the afore-referenced human capital); 18% included a Governance measure; and 12% included an Environmental measure in their incentive plans. Nearly all companies that include at least one ESG metric in their executive incentive plans incorporate the measures in their annual (as opposed to long-term) incentive plans. Measures are incorporated in different ways - in the individual portion of the executives’ incentive award (23%), as a weighted component of the total incentive (20%), and as a qualitative component of the incentive award (17%).
See also FW Cook's analysis of ESG measures in incentive plans based on its review of proxy statements filed as of July 31, 2020 by companies with >$25 billion market cap (237 companies) and our recent reports: "Incorporating ESG Metrics into Incentive Pay Plans" and "ESG Incentive Metrics by Industry" (including the additional related write-ups and associated resources noted in that latter report).
This post first appeared in the weekly Society Alert!