CFODive reported on a new WTW study about the use of ESG metrics in CEO compensation. The article stated:
“Seventy-six percent of Standard & Poor’s 500 companies used at least one metric for environmental, social and governance performance when creating executive incentive plans last year, a jump of 14 percentage points since 2020, Willis Towers Watson said.”
The increase may be surprising given the political pushback on ESG prevalent in 2023 (WTW’s report was based on data on U.S. companies from proxies filed from October 2022 through September 2023.) But Ken Kuk, WTW’s work and rewards senior director, responded to questions from CFODive about the report – adding that the practice has probably reached:
“‘a point where we will see some plateauing going forward … it’s hard to make sweeping comments about this, as every organization is likely making their own calculation as to how they would react to these market sentiments… [but] for companies that already have ESG metrics in place — and some have put them in not too long ago — removing them presents bad optics.'”
Companies now face conflicting dynamics of ESG-based CEO metrics versus political pressures against publicizing their ESG achievements (see here and here). Add one more interesting aspect of ESG to watch in 2024.
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