Investors have increasingly focused their attention on how environmental and social issues affect the long-term sustainability of a firm’s financial performance. Environmental, safety, product and labor concerns can and do pose significant potential costs. Some boards of directors have recognized these concerns as well, and have incorporated evaluations of sustainability performance into their executive pay decisions.
GMI Ratings analyzed the Compensation Discussion and Analysis sections of S&P 500 companies’ proxy filings for links between sustainability and executive pay. We then categorized how rigorously the overall incentive program, both long-term and short-term, was linked to sustainability. Additionally, we include summaries of practices across the sectors most commonly using these sustainability factors in their incentive programs.