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Taking the long view
How should remuneration committees incorporate environmental, social and governance issues into executive pay awards? Neil Hodge reports.
Investors are increasingly pressuring companies to pay greater heed to long-term environmental, social and governance (ESG) issues when they set executive pay, but as there is as yet no universally agreed guidance or standard on how to link ESG metrics to such awards, it can be difficult for some remuneration committees to live up to investor expectations.
Last year, Principles for Responsible Investment (PRI), a UN-supported initiative that promotes the implications of long-term sustainability for investors to incorporate into their investment decision-making and ownership practices, released a report called “Integrating ESG issues into executive pay: A review of global utility and extractive companies”. It found that 83% of the 84 organisations surveyed incorporated some type of ESG issue into compensation decisions.