September 8, 2020

Agenda: Time to Update Plans?

by Lindsay Frost

The pandemic has left companies with an array of business challenges to contend with, and compensation committees continue to discuss how to keep executive pay practices competitive while addressing issues impacting the greater workforce.

With compensation committees working to adjust incentive plan time horizons, metrics and other elements, sources say this provides boards an opportunity to consider redesigning plans to include ESG elements — particularly those that have become increasingly material during the Covid-19 crisis, such as health and safety, and those that have grown more salient in light of the calls for racial equity that have exploded across the country this year, such as diversity.

R.J. Bannister, partner and chief operating officer (COO) at Farient Partners, says that although companies in some industries had to simplify plans and programs to be more conservative in terms of payouts due to the pandemic, “a lot of companies are at least going to review where the ESG — and broader stakeholder — issue fits within overall performance metrics systems.”

Bannister predicts the pandemic will drive compensation committees to consider whether to measure customer retention strategies as well as investments in suppliers and communities as performance goals in incentive plans.

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