Impact of COVID-19 on Boardroom Discussions on Compensation and the Emphasis on ESG Factors

Join BDO's Center for Corporate Governance Amy Rojik as she sits down with Melissa Means, Managing Director at Pearl Meyer, to talk about how today’s board directors are navigating critical compensation questions for leaders as companies emerge from COVID and face increasing attention and scrutiny related to both financial and nonfinancial strategic decision-making and performance impacts to their business.

Key Takeaways:

• Notable trends relative to ESG impacting the compensation committee include (1) expanding compensation charters to focus on HCM, DEI and other “S” issues and (2) considering whether and how to incorporate related metric(s) in either short or longer term incentive compensation plans
• Expansion of compensation committee charters are focused on tactical board HCM responsibilities - e.g., succession planning; “bench strength” talent development; review of DEI metrics within the organization; etc.
• Key incentive plan design questions relative to ESG boil down to strategic execution considerations:

- What are you trying to measure?

- Should it be over a long or short term? (i.e., how long will it take to show improvement for that area of focus)

- How much of an incentive should it be? (i.e., modifier vs. weighted component)

• Companies are in all different phases of this exercise and may have very limited comparative information from peer groups to rely on
• For companies just starting the conversation, begin with an agenda item that defines what HCM means for your organization and helps the board understand what management may already be doing (or not doing) in this regard