ESG Gains Prominence in Fortune 100 Executive Pay Programs

July 28, 2021

Nathan Grantz

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In March, Equilar published a study that explored the ways that  ESG is being integrated into the compensation plans of Fortune 100 companies. Since then, many companies have filed proxies that reflect the increased pressure on companies to address ESG concerns, and to drive executive accountability regarding those concerns, particularly after the social and environmental turmoil of 2020.

As featured in a recent Reuters story, seven additional Fortune 100 companies elected to incorporate ESG metrics in their most recent proxies, bringing the total number of companies holding their executives financially responsible for ESG goals to 44. In total, they disclosed 62 metrics, 61 of which were tied to annual incentive plans. Seven metrics are only applicable to plans going forward and did not affect 2020 compensation.

Diversity metrics, which were tied for the most common metric type when the initial study was conducted in March, have become by far the most prevalent metric after the influx of new data, now accounting for nearly a quarter of all ESG metrics. Most of the metrics that will be applied to forward looking 2021 awards are related to diversity. Allstate, for example, committed to including diversity as an aspect of its new “strategic initiatives” metric for 2021 and CVS will be including a 10% diversity modifier to its 2021 management incentive plan.

Allstate Corp. (ALL)

DEF14A filed 3/5/2021

CVS Health Corp. (CVS)

DEF14A filed 4/2/2021

Environmental metrics also became more prevalent. Historically, these metrics have been most prevalent in the energy sector, which has been under scrutiny on account of pollution for a long time and where environmental incidents can be spectacular and wide reaching in scale. In March, Verizon and Northrop Grumman were the only Fortune 100 companies outside that industry that included an environmental metric. They have now been joined by Dow Inc., who adopted a suite of ESG metrics in their most recent proxy.

Dow Inc. (DOW)

DEF14A filed 4/12/2021

ESG metrics as part of annual executive performance plans are becoming more common. In the few months between Equilar’s original study and this update, there was a five percentage point increase in the number of Fortune 100 companies that were using at least one type of ESG metric, pushing the total to over 40%. Pressure from shareholders and the public for more transparency and action make it likely that these trends will continue into the future.

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Nathan Grantz

Senior Research Analyst at Equilar

Nathan Grantz, Senior Research Analyst at Equilar, authored this post. Please contact Amit Batish, Director, Content & Communications, at abatish@equilar.com for more information on Equilar research and data analysis.


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