2020 MM&K / GECN Group research highlights the role of ESG factors in global executive remuneration

September 28, 2020

Every year the GECN Group conducts research into global trends in Corporate Governance. The GECN Group comprises five independent advisory firms specialising in executive remuneration and corporate governance www.gecn.com. GECN Group companies have offices in Los Angeles, New York, London, Kyiv, Geneva, Zurich, Singapore, Melbourne and Sydney. MM&K is the GECN Group company in the UK.

Our 2019 research highlighted investor attitudes and expectations generally, the increasing influence of ESG on executive remuneration and the increasing pressure from investors for the companies to embrace ESG metrics. The 2020 research focuses on the ESG metrics adopted by companies comprising the leading global indices in connection with their executive remuneration policies:

  • UK – FTSE 100
  • EU – CAC 40, DAX 30 and SMI 20
  • USA – S&P 100 and TSX 60
  • Australia – ASX 100
  • Singapore – STI 30.

Chart 1, below, shows the breakdown of the companies in the sample by sector.

Chart 1:

The preliminary findings were surprising – indicating that only 63% of companies have incorporated ESG metrics into remuneration plans, with as many as 78% of companies in Australia and as little as 54% of companies in the USA; in the UK the proportion is 66% (see Chart 2, below, for more details).

Chart 2:

The next graph (Chart 3) shows findings for the global sample by sector, with the Utility and Energy companies being in the lead in terms of implemented ESG metrics:

Chart 3:

Another aspect of the research was to examine into which incentive plans companies have incorporated ESG metrics. Instinct might suggest that ESG measures would be more prevalent in long-term plans; however, the research suggests that ESG is linked predominantly to short-term incentive plans (see Chart 4, below, for more details).

Chart 4:

The next graph (Chart 5) shows a breakdown of the global sample by sector.

Chart 5:

Our full report, to be published later this year, will present a detailed analysis of the data and dive into more details of the linkages between ESG performance measures and executive remuneration. The report will be supplemented with the findings from a series of interviews with directors from leading companies around the world.

For more information please contact Margarita Skripina.

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