There’s purpose in the air in fashion—but the industry’s newfound devotion to environmental, social, and governance reforms is just beginning to seep into CEOs’ wallets. Companies across industries strongly promote their efforts to look beyond shareholders as they take a broader view of their responsibilities as corporate citizens.
“We’re seeing quite a bit of movement in the inclusion of ESG metrics into incentive plans,” said Jan Koors, senior managing director and Western region president at executive compensation consultancy Pearl Meyer. “This is still not majority practice, but certainly a significant minority practice.”
Forty-one percent of companies in the S&P 500 included some kind of environmental, social, or governance target in their senior executive pay package last year, Koors said. That’s up from 35 percent the previous year. On a broader scale, there is more work to be done as she says only 22 percent of Russell 3000 companies include ESG targets in payments.
“I hope both numbers continue to creep up,” said Koors. “The fact that the company is talking about it and that conversation has been brought up to board level is a necessary first step.”
That puts executive salaries still at the mercy of shareholders, with the twist that investors care more about ESG issues than ever before, pumping trillions of dollars into investment vehicles devoted to the area.
“Let’s be completely honest—not all stakeholders are created equal and shareholders will still get the first benefit,” said Koors. “As a senior management team, you won’t get much sympathy or much leeway if you do all these good things as a corporate citizen, but you don’t give them anything in return.”