Aligning Executive Compensation with Climate Targets
Updated: May 5, 2021
contributed by Salim Khubchandani and Purnima Joshi
The recently held Global Summit on Climate Governance 2021 we hosted in Malaysia, on the final day witnessed an engaging discussion, around incorporating ESG and Climate Change targets into Executive Compensation and Incentive Plans.
During this discussion, Shai Ganu from Willis Towers Wilson sponsor of the webinar session, shared research findings and resulting insights based on studies by Blackrock reflecting that investors and stakeholders have greater expectations from corporations and thus from senior management when it comes to addressing ESG and Climate Change.
Profits and purpose are inextricably linked as these studies also brought out, and without a sense of purpose companies would not be able to deliver returns to investors. Also, the fact that remuneration policies should promote long-term value creation and thus the need for executive compensation to align with stakeholder interests. The underlying finding has also been that climate change and ESG will reshape finance. Large corporations such as Unilever are even going to be seeking shareholder approval with regard to their climate change transition plans, clearly reflecting that investors are playing an increasingly stronger role.
Succinctly summarised by Page Motes, Global Head of Sustainability from Dell Technologies , the discussion closed with the following comments :
- One of the key challenge in a commodities-driven Asian region remain that the pool of directors equipped with appropriate skillsets in the area of sustainability is quite thin.
- Business is going to be the main driver of change in the battle to address climate change
- The cultural evolution with which most companies are approaching the issue is towards addressing the harm, whereas the technology sector companies are in fact addressing it as the problem on how to become carbon negative.
- The role of HR is key to embed the culture of sustainability in senior management thereby providing a strong lever for innovation.
It clearly emerged that corporations are at the early stages of this journey of transformation that requires significant shifts to help address the challenges that lie ahead.
The above session of the summit and some of the findings presented appeared in the current issue of the Edge Weekly. It offers renewed hope that Climate change is evidently rising rapidly on corporate agendas, giving hope that we could take timely action to avoid the worst effects of a warming world.
Here is a link to the Global Summit playlist for all sessions hosted by CGM: https://youtube.com/playlist?list=PLyRsJW2gvmdNUmqJDueFo5c-wohbwYzC-
and to all Global Summit sessions: