Shareholder pressure builds momentum for CEO pay to be linked to performance, sustainability measures

NI Managing Partner Michael Kramer is writing a regular column for GreenBiz.com; this month’s piece looks at the growing trend of companies linking executive compensation to a broad range of performance measures.  The piece, entitled “Momentum builds to link CEO salaries to sustainability measures,” can be read in full here on the GreenBiz site.  Here’s a teaser:

The most publicized 2012 say on pay vote occurred in April at Citigroup’s annual meeting, where 55 percent of shareholders rejected management’s proposed executive compensation package. Citi’s compensation committee now will assess the CEO not on profitability, but on measures such as talent management, organizational culture and risk management. It’s a marked departure from the longstanding tradition of evaluating management on financial performance alone.

Many sustainable investors believe that linking executive compensation to Environmental, Social and Corporate Governance (ESG) performance is an appropriate incentive model that supports long-term shareholder value while benefiting society and the environment. And sustainable and responsible investors acknowledge that executive accountability has a direct correlation to long-term share price. Dozens of companies are beginning to agree, and while a handful are using a broad array of sustainability performance criteria in their executive compensation evaluation, most are focused primarily on workplace diversity in areas of hiring, promotion, and management. Others assess performance by using health and safety issues as measures.

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Michael Kramer

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