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Majority of S&P 100 Now Tie ESG Metrics to Pay

60% of the 100 largest U.S. companies incorporated ESG metrics into their executive compensation programs, up from 41% in the previous year, according to Shearman & Sterling’s 2022 Corporate Governance and Executive Compensation Survey. The study, which has reviewed the practices of the 100 largest US public companies annually since 2003, also discusses evidence that investors are dissatisfied with the quality of the ESG-linked metrics disclosed and are seeking more robust disclosures with increased clarity in how these metrics align to shareholder value and executive pay.

 Other key findings include:

  • ESG Governance. The majority of companies disperse ESG oversight across the board and multiple committees. The breadth and intersection of topics makes it difficult for a single role to oversee the full function from a management perspective as well – as indicated with only one organization reporting a Chief ESG Officer. It is unclear if companies will continue to utilize multiple-disciplinary teams to oversee ESG initiatives or if responsibilities will need to be streamlined to support changes in how ESG is governed from a board perspective.

  • Human Capital Disclosures. While 71% of companies disclose information on their recruitment and hiring practices, only 7 of these companies provided data to support their narrative. For retention and turnover, 60 of the top 100 disclose information with 22% of these furnishing statistics. Both workforce demographics and turnover are expected to be addressed in the SEC’s proposal of prescribed human capital management rules.

  • Shareholder Proposals. Social issues made up 41% of all shareholder submissions this year with proposals related to political spending, racial equity and civil rights audits gaining momentum.

 The report also provides a breakdown of the SEC’s proposed climate rule and offers guidance for boards and management in anticipation of the regulations. Insights and recommendations for compliance with 10b5-1 plans and share repurchase rules are also included.

Published on: December 9, 2022

Authors: Megan Wolf

Topics: ESG and Diversity & Inclusion, Executive Pay Plan Design

Megan Wolf

Director, Practice, HR Policy Association and Center On Executive Compensation

Detailed Bio

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