Agenda – ESG Metrics ‘Biggest Change to Comp Plans in Decades’
April 12, 2021
Chipotle Mexican Grill is one of several companies to introduce new environmental, social and governance (ESG) goals tied to top officers’ annual incentive compensation in the lead-up to this proxy season. At Chipotle, ESG goals relate to food and animals, people and the environment and will account for 10% of executive bonuses starting this year.
Companies that have decided to include ESG metrics in incentive plans seem to be taking a cautious approach by not including too many details in disclosures on the goals themselves and how the compensation committee assesses performance, sources say.
“Companies might be vague because they aren’t confident in their baselines and measurement system yet, and they might be paying people with a system they aren’t confident in,” says Robin Ferracone, CEO of Farient Advisors and a director on the board of Trupanion. “If they are not confident in the measurement itself, they need to be looser in how they define the measure. There’s a lot of subjectivity in these measurements, because if you put [ESG] goals in black and white, you might leave yourself open to lawsuits and criticism.”
About Robin Ferracone
Founder and CEO, Farient Advisors/GECN Group
As the founder and CEO of Farient Advisors LLC, Robin has led the strategic development and expansion of the executive compensation, performance, and corporate governance advisory firm. Her client work focuses on providing high-impact decision-making support and organizational solutions based on insightful market insights.
With over 30 years of consulting experience, Robin advises clients in business and talent strategies, executive compensation, organization, value management, and performance measurement. She is the author of Fair Pay Fair Play: Aligning Executive Performance and Pay (John Wiley & Sons, 2010). In addition, Robin has authored numerous articles, is a regular contributor to Forbes.com and Directorship magazine, and is often quoted in national publications. She is a frequent presenter for prominent organizations such as the Council of Institutional Investors, Society for Corporate Secretaries and Governance Professionals, the National Association of Corporate Directors (NACD), and The Conference Board.
Robin formerly served on the board of directors of Trupanion, Inc., where she chaired the compensation committee. In addition, Robin is a trustee emeritus of Duke University. She currently chairs the board of WildAid and is a member of 5050 Women on Boards, NACD, Women Corporate Directors, YPO Gold, and the Trusteeship. For 12 years, Robin has been named to the NACD Directorship 100, a list of the most influential people in corporate governance and the boardroom. In 2014, she was selected as one of EY’s Entrepreneurial Winning Women, an annual competition recognizing female entrepreneurs. Robin is also a founding partner of the Global Governance and Executive Compensation (GECN) Group collectively serving clients in more than 35 countries across five continents.
Robin received an MBA from Harvard Business School and a BA in management science and economics from Duke University.