It is proposed that the Compensation Committee, through its annual reporting activities, submit a report on the importance it gives to environmental, social and governance criteria when assessing the performance of executives and setting their incentive compensation.
The 2012 guidance issued by the United Nations Principles for Responsible Investment (PRI) and the United Nations Global Compact state that applying ESG criteria can serve as a major factor in protecting and creating value for shareholders.
ESG targets could be expressed as follows: rate of feminization in decision-making groups; rate of inclusion of people from diverse sociocultural communities; initiatives that reduce the consumption of paper, energy and water; steps taken to ensure the sustainable employability of employees in preparation for task automation; the deployment of programs designed to favour employee health and well-being; etc.
Organizations that set specific ESG guidelines generally enjoy a better reputation among clients, adapt to change with greater agility, manage risk better, are more innovative, and are better positioned to develop long-term added value for shareholders and stakeholders.
There’s no doubt that using financial goals to assess performance and set executive compensation is critical to achieving those goals. The same approach should be used with ESG goals.”