Executive compensation has arguably been the most controversial issue facing companies over the last several years. Through say on pay votes, investors have gained tremendous influence over the pay packages awarded to senior executives. A major focus of investors has been ensuring that executives are paid for long-term performance and that compensation plans are designed accordingly. At the same time, there has also been a surge of awareness around the importance of sustainability issues. These two hot topics – executive compensation and sustainability – are converging into one conversation. Glass Lewis’ Greening the Green provides the data, analysis and context for investors to further examine this area.
Since 2010, Glass Lewis has reviewed this trend and has found a significant increase in the number of companies linking compensation to sustainability. For the 2012 edition of Greening the Green: Linking Executive Compensation to Sustainability, Glass Lewis reviewed the short- and long-term compensation plans disclosed by companies in their annual proxy filings. For this years’ report, we reviewed the constituents of indices in 11 global markets (S&P 100, S&P/STX 60, FTSE 50, S&P/ASX 50, IBrX 50, IBEX 35, CAC 40, AEX 25, OBX 25, SMI 20, DAX 30). We found that 42% of these companies provide a link between executive pay and sustainability, a considerable increase from two years ago, when only 29% of companies provided such a link.
Greening the Green discusses the strength and types of the reported links between compensation and sustainability as well as potential reasons for the increase in the prevalence of companies employing links. In addition to our global analysis, we also take an in-depth look at companies the United States, reviewing EPA fines as well as the level of board oversight afforded to sustainability issues at S&P 100 companies. We also provide specific examples of companies in various markets that link compensation to sustainability through several case studies.