More and more companies are integrating ESG goals into executive incentive plans. Phil Johnson and Tara Tays from Pay Governance, hkp// group strategic alliance partner for North America and Asia, report on how this is being done in a compact article.

Has there been a shift toward more quantitative ESG metrics?

According to a review of S&P 500 companies’ practice of incorporating ESG metrics into executive incentive plans, there was a seven percentage point increase in the prevalence of ESG metrics in incentive programs from 2021 to 2022. The incorporation of ESG in incentive plan designs continues to be a growing practice, with 72 percent of S&P 500 companies including some form of an ESG metric in their incentive plans. The most common ESG category found in incentive plans continues to be social-related metrics. However, we do note an eight percentage point increase in environmental metrics over the past couple of years, while the use of governance metrics has remained relatively flat.

What Design Approach is Used to Incorporate ESG Into Incentive Plans?

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Author Barry Kitz

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