With millions out of work or now reliant on the government for their pay checks,
While a number of companies had already begun to link the compensation of top managers with their performance on social and environmental issues before this year, the idea is set to gain much greater traction following the coronavirus outbreak, according to $1.1 trillion asset manager
“No compensation plan will be left unchanged by
Fallout from the deepest worldwide downturn since the Great Depression, which has seen businesses respond to lockdowns by laying off staff or putting them on furlough programs, is unevenly distributed and has magnified economic and social inequality from the U.S. to Italy. With this context, executive payouts will be followed more closely than ever, as will the metrics by which managers are graded: Are bosses encouraged to think only of the company’s share price, or are managers also looking at how they treat their employees and the environment?
Companies across the world, including
The International Corporate Governance Network, which is led by investors that oversee $54 trillion of assets, said last week that executive pay “should reflect the experience of the overall workforce, particularly in relation to staff redundancies, furlough programs, pay level reductions or bonus awards.” Remuneration policies should “seek an equitable treatment of ordinary staff with that of senior executive management and financial sacrifice appropriately shared.”
Tying executive pay to ESG targets is not a new idea — a Bloomberg analysis last year revealed
And even for those companies that have ESG-linked pay policies, it’s often not clear how those
The 2020 proxy season, which kicked off this month, could prove a good test of growing investor interest in the topic, said Reali. The response to shareholder proposals on pay filed late last year at companies such as
“Covid-19 only highlights the importance of ESG, which should have already been part of the conversation around issues related to supply-chain risk and health and safety of workers,” said Reali. “It also exposes companies that are unable to deal with future incidents of rapid and unexpected global turmoil where there’s some big shock to
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