The Global Governance and Executive Compensation Group (GECN Group) is a global consortium of independent remuneration consultants of which Guerdon Associates is a founding member.

Each year, Guerdon Associates and the GECN Group publishes its research report on global trends in corporate governance. The 2019 report (see HERE) identified one major theme of concern for investors – linking the management of environment, social and governance (ESG) risks to executive remuneration.

The 2020 report includes a comprehensive review of ESG metrics used in incentive plans across the leading companies in global markets:

• Australia – ASX 100
• North America – S&P 100 and TSX 60
• Europe – CAC 40, DAX 30 and SMI 20
• United Kingdom – FTSE 100
• Singapore – STI 30

The research was surprising. As the graphs below indicate, it shows Australian companies incorporate ESG metrics in their executive remuneration more so than other advanced markets.

Another interesting observation is that despite the longer term material risks associated with ESG factors, most companies have a greater focus on short-term incentive measures in both Australia and across the globe.

Figure 1: Proportion of companies with ESG measures (by region)

Figure 2: Proportion of companies with ESG measures (by GICS sector)

Figure 3: Performance period of ESG measures in incentive plans (by region)

Figure 4: Performance period of ESG measures in incentive plans (by GICS sector)

These results will be explored in more detail with interviews of leading company directors from around the globe.

Our full report will also dive deeper into the details of the ESG metrics, breaking it down further and examining:

• Which stakeholders are companies focusing on? Employees, customers, community or regulators?
• How are ESG metrics incorporated in incentive plan designs?
• How much weight is given to ESG metrics in an executive’s total remuneration package? Does it actually have a significant impact on their remuneration outcomes?

The full report will be published later this year.

To receive the report, please contact us at info@www.guerdonassociates.com.

 

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