Want More Diversity? Some Experts Say Reward CEOs for It

When Charles E. Jones, the chief executive of a large Ohio-based utility, realized that his senior executives weren’t fully behind his push to hire and promote people of color and women, he decided to do something to get their attention. In 2018, Mr. Jones linked 10 percent of annual bonuses for himself and other top executives at his company, FirstEnergy, to diversity goals, and increased the number to 15 percent the next year.

This approach is striking because it is extremely rare in corporate America. But Mr. Jones and other management experts say it shouldn’t be. For decades, companies and top business schools have preached the gospel of tying pay to all manner of business goals, like stock price performance and profits.

Yet just 78 of roughly 3,000 companies said fulfilling diversity goals determined some portion of chief executives’ pay, according to an analysis of public pay disclosures by Pearl Meyer, a compensation consulting firm, and Main Data Group. Of those, only 11 revealed the share of pay affected by fulfilling diversity goals, and 21 gave some details of their diversity goals.

The issue has gained new salience in recent weeks as businesses across the United States have declared support for Black Lives Matter, pledged to hire more people of color, and ditched decades-old brands that were built on racist imagery.

Deb Lifshey, a managing director at Pearl Meyer, said that there was a growing interest in linking pay to diversity goals, though she said it was too early to say whether it would be sustained. “Whether or not this will have a material impact on how much compensation they’re making is hard to tell,” she said.