Life in the Boardroom – have firms of differing types and sizes approached ESG?
June 29, 2022
In MM&K’s exclusive report Life in the Boardroom 2021/2022, we surveyed 885 boardroom positions on their demographics, fees, and much more. This article analyses these responses to see if firms of different market types (e.g., main-market, AIM, private, etc.) have had different responses and experiences with ESG (Environmental, Social, Governance). Here are some of the results we found for ESG questions:
We asked, “Does your company have an ESG policy?”, finding that the majority (62%) of respondents said “yes”. A break-down of these results suggests that listed firms are more likely to have an ESG policy, whereas private firms are less likely to do so. Still, an ESG policy has been adopted by the majority of firms in all groups (bar UK private firms). Perhaps this is to be expected because larger listed firms are subject to a greater investor scrutiny.
Even though most firms appear to have an ESG policy, we found only 25% said that they have come under increased pressure from investors in connection with ESG. A breakdown of these results suggests that listed firms are more likely to face such investor pressure. The result that only a minority of respondents reported investor pressure was held across every group. This may indicate that investors only form part of the pressure to adopt ESG policies: pressure may also come from factors such as news, employees, and customers. A report by PwC indicates that over ¾ of staff and consumers say they are more likely to buy/work for companies which stand up for ESG.
A minority of respondents (19%) across all company sizes, said that their companies have attached ESG metrics to their incentive plans, although the proportion is higher in main-board listed firms. We recently published a report, with our partner-firms in the GECN, examining how ESG has shaped executive pay in the FTSE100 and large listed companies across the globe (you can obtain a free copy here). Among many other findings, we found that executive pay has been increasingly attached to ESG performance over time. So, whilst ESG appears to take a backseat in incentives for many firms, this may be set to change in the future.
Finally, we found a majority (58%) of participants said that their focus on ESG has increased since the pandemic. Similar to the previous results, the majority of responses for listed firms said “yes”, whilst the opposite was true for private firms. Despite how one may have expected firms to reduce attention to ESG given harsh economic conditions, perhaps witnessing the vulnerability of the world’s status quo has highlighted to business leaders the role that enterprise has in effecting positive change.
Further information and data on the pay of NEDs and Chairs in firms of all industries and sizes, how they use their time, their opinions, their pandemic experiences, and more can be found in our 70+ page report on 885 boardroom positions, click here for a free preview.