Semler Brossy’s “Three Questions Compensation Committees Should Ask About ESG” provides sound advice for compensation committees that are contemplating integration of ESG metrics into the company’s executive incentive plans. The piece also cites these examples of companies that have taken the plunge, organized from least to most prominent:
- T. Rowe Price Group (page 42) – D&I metric is a factor considered in the assessment of the CEO’s individual achievements for the purposes of determining the annual incentive plan.
- Chipotle Mexican Grill )page 49) - Annual incentive plan payout for company financial and individual performance can be reduced by up to 20% based on a food safety metric that is used as a negative modifier to overall corporate results.
- Chevron Corp. (page 49) - An ESG metric, formally included as part of a scorecard, represents 15% of the total payout with unweighted but objective scoring tied to personal safety, process safety, and environmental and GHG management.
- Humana (page 58) – The annual incentive plan includes a Net Promoter Score with a 20% weighting.
See also the firm’s “Diversity, Equity and Inclusion in Executive Pay” and additional resources on our Executive Pay page »Non-Financial Metrics (Sustainability, DE&I, etc.).
This post first appeared in the weekly Society Alert!