The Center’s
July 2020 survey on diversity and inclusion metrics found that 42% of Subscribers were considering adding D&I metrics to executive compensation plans for 2021. The Center has been monitoring disclosures closely as well as reviewing external analyses such as this
helpful research from Semler Brossy. The report provides in-depth examples of 20 Fortune 200 companies with D&I metrics incorporated into their plans for 2020. Of note is the fact that 19 of the 20 companies in the report incorporate D&I metrics into their annual incentive plans. This is certainly the current trend, but as the Center has previously advocated, tying D&I metrics to long-term incentive pay instead demonstrates alignment with a long-term goal and may be more motivational and sustainable in the long run.
Example disclosures from the Semler report include:
American Express. 15% of the annual incentive is tied to a “Colleague” metric, which considers “Talent Retention and Diversity Representation Goals to globally increase minority and women representation at management levels and retain our key talent (high potential or high performers).” Although the goals are not disclosed in the current proxy, it is clear that they exist internally.
Prudential. Performance shares for SVPs and above are subject to a diversity modifier with explicit three-year goals: “If we meet our goal of increased representation of diverse persons by five percentage points or more over this period, payouts will be increased by up to 10%. If there is no change in representation, payouts will be decreased by 5%. If such representation decreases over this period, payouts will be decreased by up to 10%.”
Starbucks. Starbucks announced several new D&I initiatives, including "[c]onnecting the building inclusive and diverse teams to our executive compensation program." Specific goals include "[s]etting tranking annual inclusion and diversity goals of achieving BIPOC (Black, Indigenous, and People of Color) representation of at least 30 percent at all corporate levels and at least 40 percent of all retail and manufacturing roles by 2025." Starbucks disclosed these plans in a press release. The 2021 proxy statement will likely be published in late January, so the specific methods used in the compensation should be fully disclosed at that point. The company was not on Semler Brossy's list due to the proxy publication date.
Verizon. 5% of the annual incentive is tied to “Diversity and Sustainability” with specific targets: “At least 60% of U.S.-based workforce comprised of minority and female employees; direct at least $5.2 billion of our overall supplier spending to minority- and female-owned firms; reduce our carbon intensity…by at least 10% compared to the prior year.” Critically, Verizon disclosed openly that 2019 representation results fell short of the goal (59.3%) while the diverse supplier metric was exceeded.
It is important to note that many companies outside the Fortune 200 also have D&I metrics tied to pay, and we will see the number grow this year. The Center will continue to track and report on best practices in this area.
