In a nutshell: A majority of investors and non-investor personnel, including corporate board members and advisers, say at least some non-financial ESG factors should be incorporated into executive compensation, according to a comprehensive survey from Institutional Shareholder Services Inc.

The Numbers:

  • Of the 157 investors and 241 non-investors that responded to the question, 34 percent of investors and 46 percent of non-investors agreed with the following statement: “Yes, when chosen well, even ESG-related metrics that are not financially measurable can be an effective way to incentivize positive outcomes that may be important for a company.”
  • More investors (52 percent) agreed “such metrics should only be used in compensation programs if the metrics selected are specific and measurable, and their associated targets are communicated to the market transparently.” A smaller chunk of non-investors (27 percent) thought the same.
  • A small portion of investors (4 percent) and non-investors (16 percent) said they think non-financial ESG metrics are irrelevant as compensation program measures.

Tell me more: Of the 157 investors, a clear majority of 81% indicated that both long-term and short-term incentives (depending on circumstances) should be considered in executive compensation.

ISS, a proxy advisory firm, released the findings as part of its annual global policy development process to solicit broad feedback on areas of potential policy change for 2022 and beyond. The company also looked at racial equity audits and virtual-only shareholder meetings. It also published findings from a separate climate survey on issues including board oversight of climate risks and say-on-climate proposals.

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