Companies Plan To Club Executive Pay to D&I, Climate & Social Initiatives: Survey

Companies Plan To Club Executive Pay to D&I, Climate & Social Initiatives: Survey

Propelled by the pandemic, social upheavals, and economic uncertainties, companies are working to accelerate their priorities of environmental, social, and governance (ESG), says the latest survey by Willis Towers Watson (WTT).


The research shows that organisations around the world are more focussed on a deeper alignment of executive pay and ESG priorities, especially within the purview of climate change and environmental measures, diversity and inclusion, and overall human capital governance.


Nearly four in five respondents (78 per cent) plan to change how they use ESG with their executive incentive plans over the next three years. More than four in 10 (41 per cent) aim to introduce ESG measures into their long-term incentive plans over the next three years, while 37 per cent are working to introduce ESG measures into their annual incentive plans. Additionally, about a third are planning to raise the prominence of environmental and social/employee measures in their incentive plans.


The survey identified challenges companies face with using ESG metrics in incentive plans. Among the greatest challenges cited by respondents are target setting (52 per cent), performance measure identification (48 per cent), and performance measure definition (47 per cent).


Employers are also taking various measures to review their workforces through an ESG lens. Nearly half (46 per cent) said they have deployed listening strategies to engage with their employees, while three in 10 have created a new executive role to drive ESG strategy and have identified new positions in their organizations to help achieve their ESG strategy. Nearly half of respondents are either planning to review their culture to ensure ESG is embedded throughout their organizations or are considering doing so in the future. In addition to culture, about one in five respondents are expected to add board and/or compensation committee oversight of wellbeing and fair pay within the next three years.


Ryan Resch, managing director, Executive Compensation, Willis Towers Watson said, “Although companies are revising their use of ESG measures to support their executive pay programs, it appears more work needs to be done. Boards have been asking for more information on ESG strategies and priorities, particularly in the areas of the environment and employee diversity, to understand their alignment to sustainable value creation and materiality. Their goal is to support the identification of the right measures for their incentive plans with appropriate performance targets.”


The 2020 ESG Survey of Board Members and Senior Executives was conducted during September and October 2020. The survey results are based on responses from non-executive and executive directors, and non-board member management executives at 168 organizations throughout North America, Europe, Asia, Africa, and the Middle East. Respondents employ 2.2 million workers.


Willis Towers Watson is a global advisory, broking, and solutions company that helps clients around the world turn risk into a path for growth.


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