Agenda: Climate-Linked Incentive Metrics Expected to Heat Up
March 8, 2021
In January, Apple disclosed in its proxy that it would begin tying bonus pay to environmental, social and governance targets starting in 2021. The compensation committee will apply a modifier related to the company’s performance on ESG goals to adjust annual incentive pay, up or down, by up to 10%, the proxy states.
Companies and boards are increasingly interested in sustainability issues, since they are closely linked to their future financial success, says Eric Hoffmann, Farient Advisors’ vice president of information services and technology solutions. Moreover, states are beginning to pass laws restricting greenhouse gas emissions that will take hold in the not-too-distant future. “Companies are having to react to that,” he says.
However, the use of sustainability-related incentive metrics is still relatively rare. Just nine companies in the S&P 100 disclosed that they used these types of targets in 2019 executive pay plans, according to data from Farient, and use is most prevalent among utilities and energy companies. Indeed, three of four utilities companies in the S&P 100, Duke Energy, NextEra Energy and Southern Company, tied executive pay to the environment, according to 2020 proxy statements.
By Alana Pipe
About Eric Hoffmann
Leader, Information Services
Eric leads Farient’s data strategy, operational capabilities, partnerships, research, and client insights. With more than 20 years of human resource technology and data analytics experience, Eric’s work at Farient focuses on creating and delivering information and decision support to boards of directors, human resource professionals, and investors. Combining data analytics and visualization, Eric and his team create compelling narratives that lead to business insight and defensible decisions for his clients.
Eric has extensive experience in executive compensation and performance. From March 2005 to January 2011, he was the Technology Solutions Delivery Leader and a partner at Mercer. In support of Mercer’s compensation and benefits data and analytics business, Eric and his global, cross-disciplinary team delivered leading-edge SaaS-based client-facing and operationally driven data analytics solutions. Before that, Eric was a principal at Mercer, where he led a software development team. Eric holds a BS in computer science and mathematics from Purdue University and an MS in computer science from the University of Illinois at Urbana-Champaign.
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