A New View of Stakeholder Incentives

A worldwide trend by companies to incorporate stakeholder metrics into executive compensation continues even in the United States where an anti-woke political movement has taken root, according to Farient Advisors’ newly released 2024 Global Trends in Stakeholder Incentives: What’s Next? report.

Farient—in conjunction with the Global Governance and Executive Compensation (GECN) Group of which it is a founding partner—analyzed for a fourth consecutive year the executive compensation practices and environmental, social, and governance (ESG) incentives of the S&P 1500 and some 500-plus global companies.

“ESG has established itself as a strategic value driver for companies in all industries, of all sizes, and around the globe. Companies are stepping up to navigate these crosscurrents and amplify performance and the value of their sustainability efforts,” writes Farient founder and CEO Robin A. Ferracone in the report’s introduction.

Among the key takeaways from the 2024 report:

• Companies globally continue to tie incentives to their ESG strategies and goals—a trend evident across large-, mid-, and small-cap companies
• The climate crisis has led to an urgent need to reduce greenhouse gas (GHG) emissions, as evidenced by a steep increase in incentives tied to emissions reductions
• While most ESG goals are currently benchmarked against internal objectives by companies, relative goals could be on the horizon amidst better comparability and transparency of ESG data

The report features innovative approaches to incentive design in case studies on companies including Allstate, Dow, and Mastercard. Plus, Farient’s proprietary “ESG Maturity Curve” plots the maturation of companies as they finetune the alignment of executive compensation with ESG performance measures.

“Companies must first develop an ESG strategy before they can adopt ESG incentives; that is, they must know what they are working toward and how their ESG objectives support their overall business strategy,” says Brian Bueno, Farient ESG Leader, and one of the report’s authors. “ESG incentives also mature over time, with companies often starting with process goals, followed by content goals, and finally ESG incentives with published measurable goals and outcomes.”

Download the full report here:

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About Farient Advisors 

Farient Advisors LLC is an independent premier executive compensation, performance, and corporate governance consultancy. Farient provides a full array of services, linking business strategy to compensation through a tailored, analytically rigorous, and collaborative approach. Farient has locations in Los Angeles, New York, Louisville, and London and works with clients globally through its partnership in the Global Governance and Executive Compensation (GECN) Group. Farient is a certified diverse company and is recognized by the Women’s Business Enterprise National Council.