Executive compensation plans are a vital part of strategic oversight and subject to critical shareholder votes – and the way these plans are built needs to meet the current moment: a more remote workforce, new models of digital transformation, resilience, and ever-increasing attention on ESG and diversity, equity and inclusion (DEI) initiatives. To get executive compensation right, organizations must incorporate new data sources and bring in more stakeholders internally – not only the compensation committee and Chief Human Resources Officer (CHRO), but also the general counsel and governance executives, such as Chief Sustainability Officers.
Last year's AGMs frequently struggled to grapple with the ramifications of COVID-19. This year, stakeholders and shareholders are eager to focus on recovery and how to move forward.
The New Reality Demands Stronger Executive Compensation Plans
It's clear that the new landscape demands executive compensation and incentives to align with modern governance practices. As ESG and DEI become more important to value-driven capitalism, leaders like Starbucks have announced they will tie executive compensation plans to diversity objectives. Companies like FirstEnergy have been tying executive bonuses to diversity goals since 2018. These are not outliers. In January 2021's Director Confidence Index, 40% of the directors surveyed said they intend to tie compensation to DEI initiatives – a number that is certain to grow.
With the right groups and data and analytics involved, organizations are poised to drive more informed, meaningful compensation plans that further organizational goals like ESG and DEI.
Aligning Executive Compensation to Modern Governance Practices
As boards and executives bring in new technologies to ensure financial integrity, investor confidence, stakeholder engagement, and sustainable performance, so must executive compensation too. Incorporating data and analytics ensures more comprehensive compensation decisions.
At a time when executive compensation has never been under greater scrutiny, Diligent is committed to empowering organizations to design more equitable, responsible executive compensation plans. Today, I'm excited to share information on our offering in this space.
Diligent's Executive Compensation Solutions allow organizations to design compensation plans that serve stakeholder interests, support critical ESG and DEI initiatives, attract and retain top talent, and align with modern governance practices.
Through Diligent's exclusive partnership with Glass Lewis, organizations have access to Glass Lewis' compensation models to understand how investors and shareholders will view their plans. With Disclosure Search, teams can quickly search millions of data points in public disclosures – a tactical way to tie compensation plans to ESG and DEI metrics. With more insight and the ability to proactively make changes, organizations propose more favorable compensation plans and achieve more progress towards their goals.
When organizations get executive compensation right, the positive effects flow throughout the entire organization. For those interested in additional information, learn more about our Executive Compensation Solutions. The time is now.
