Executive compensation at 73% of S&P 500 companies is now tied to ESG performance, survey finds

October 31, 2022, 10:49 AM UTC
Updated October 31, 2022, 10:51 AM UTC
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Good morning.

The vast majority of S&P 500 companies are now tying executive compensation to some form of ESG performance, according to an analysis out this morning from The Conference Board, Semler Brossy and ESGAUGE. Seventy-three percent of companies made the link last year, compared to 66% the year before.

The most significant increase came from companies using diversity, equity and inclusion goals in their executive compensation plans. Those included 51% of companies in 2021, up from 35% the previous year. Carbon and other emissions goals tied to compensation increased sharply as well, but still only exist at 19% of S&P 500 companies—up from 10% in 2020.

The report makes clear that, despite widespread adoption, methodologies for linking pay to ESG performance remain disparate and vague, and the metrics far from precise. Moreover, the links between ESG and company performance are, in most cases, yet to be proven. The main reason boards adopt such goals, according to the study’s survey, is to “signal that ESG is a priority.” You can read the full report here.

We’ll be exploring rising ESG commitments at this week’s annual meeting of the Fortune CEO Initiative, a community of purpose-driven corporate leaders. I’ll be talking with Bank of America CEO Brian Moynihan about how he’s dealing with the political pushback against ESG, asking former Treasury Secretary Larry Summers about how much pain the economy has to endure to defeat inflation, and speaking with Sen. Joe Manchin (D–W.Va.) about what to expect from a post-election Congress. You can follow the full proceedings on fortune.com, and I’ll be reporting back here.

More news below.

Alan Murray



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This edition of CEO Daily was edited by David Meyer. 

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