ESG: Building Shareholder-Focused Incentive Plans for a New Generation of Investors

Financial metrics have been the bread and butter of our pay-for-performance culture for more than 20 years. However, a new era is dawning and performance is no longer defined solely by the company’s bottom line. Investors and the public at large are increasingly pressuring organizations to expand performance criteria beyond traditional financial yardsticks and increase the focus on environmental, social, and governance issues.

Coincidently, the gutting of 162(m) in recent tax law changes has given companies new freedom to structure compensation programs with an eye on non-financial metrics. The question for each individual entity is what type of non-financial metrics best align with their long-term shareholder—and by extension stakeholders—interests. The answer is likely to be some combination of strategic, operational, human capital, and sustainability-based goals.

This webcast with Pearl Meyer, BlackRock, and the NACD explores the growing question about incorporating ESG-like metrics into short-and long-term incentive programs from both a company and shareholder perspective. The panel discusses why, regardless of your industry, monitoring and evaluating sustainability is now critical to long-term corporate viability and should not be viewed as just “good PR.” They also explore the challenges associated selecting the appropriate metrics, determining objective evaluation protocols, and communicating this new approach.