Illustration: Shoshana Gordon/Axios
A rush of companies say they are putting their money where their mouth is. From McDonald's to Wells Fargo, a record number of big businesses say how they fare on a slew of goals — like diversity — will impact part of CEO pay.
Why it matters: It's kicked into high gear in the past year, as companies try to signal they are serious about their role in improving society.
The backdrop: Corporations are set to face pressure to disclose more about their workforce — as a tweet from SEC chair Gary Gensler reminds us.
Where it stands: About 100 S&P 500 companies link a portion of short-term incentives for CEOs (think annual cash bonuses) to environmental, social and governance metrics, according to ISS Corporate Solutions. That's up from roughly 68 in 2020.
- Nearly three-fourths of those metrics are around the workforce, including diversity and inclusion.
What to watch: Some payouts are pegged to goals with long time horizons — like putting more women on boards by 2030 or cutting carbon emissions by 2050.
- But it can be unclear to the public what near-term progress is necessary to trigger annual payouts, says Jun Frank of ISS.
What they're saying: "Too often when companies do this, it's a very small percentage of CEO annual pay. And it can become a reward for something they would do anyway," says Rosanna Landis Weaver, who tracks governance and compensation at investor advocacy group As You Sow.
- And details around how these goals are set — and whether they go far enough to fix the issue — are often unclear.
The intrigue: It's not just top executives. Banker bonuses in Europe are increasingly being pegged to how firms are "contributing to a ... better society," Bloomberg reported today.
- But bonuses will "partly rely on a variable that’s harder to quantify than profit, which might make it easier to game."