What should the Compensation Committee’s role be in creating a diverse and inclusive culture?

July 15, 2021

On Thursday 24th June, Paul Norris, CEO of MM&K, participated in a webinar – “An international perspective on D&I from the GECN Group”.  The webinar asked (and answered) the question, “what should the Compensation Committee’s role be in creating a diverse and inclusive culture?”

The GECN (Global Governance and Executive Compensation Group), of which MM&K is the UK member firm, was able to offer a fascinating insight from a global perspective – member firms from the US, Switzerland and South Africa (as well as the UK) all participated.  This global perspective was complemented by a NED view point (Marie-Pierre Rogers is a member of the Board of Directors of SoftwareONE and chairs the Nomination and Compensation Committee) and an academic view (Dr. Gudrun Sander is Adjunct Professor focusing on Diversity Management at the University of St. Gallen).

What did we learn?

It is always instructive to look at a subject though differing lenses.

There were three “Rules” I took away which are useful to frame an D&I action plan.

Rule One:  Work on mindset change and process adaptions.  Both will be required.  For example unconscious biases, stereotypes and mindsets can rarely be addressed via education or training. These require process interventions in hiring or compensation processes.  But simply adjusting processes only tells a part of the story.  Look at the two together.

Rule Two:  Make line managers accountable.  D&I is a core leadership task and it needs to be the case that decision makers are same people as those responsible for reaching D&I goals.  A clear link between D&I and corporate strategy is therefore key.  And there may be merit in linking D&I goals to the bonus system.  The key takeaway?  D&I is not a HR issue….

Rule Three:  D&I requires a long term perspective and resources.  This should push organisations away from single interventions and towards a holistic approach with prioritised projects and measures.  Measurement becomes key to assessing the progress of a long term change program.

Paul Norris covered the UK perspective.  We looked at the UK FTSE track record.  Some things look very positive.  For example, the number of all-male boards in the FTSE 350 currently sits at zero.  Conversely, only 8% of FTSE 100 CEOs are female.  The position on ethnicity shows that we still have a long distance to travel.

Paul noted the numerous interventions we have seen from a regulatory perspective seeking to move the dial on D&I outcomes – be it equal pay, gender pay and the latest iteration of the UK corporate governance code, for example.  The question is whether these policy shifts are making enough of a difference?

One aspect of interest covered in the session was the diversity of UK remuneration committees.  It is an interesting line of enquiry.  In essence, will greater diversity in the body responsible for senior management remuneration lead to better diversity outcomes more generally?  The logical answer must be “yes”.  Something for UK plc to keep an eye on when looking at Remco composition.

D&I is not solely a UK issue – the perspectives from the US, Switzerland and South Africa show us how different journeys are playing out over different time frames.  But the thinking across jurisdiction and many of the approaches taken are very similar.  Perhaps this is part of the problem – we have no real stand out role model country to adopt practices from which we can see work at scale.

For further information, please contact Paul Norris, or your usual MM&K contact.

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