, published this week, there is a change that reflects a wider shift in how boards are approaching the ever contentious topic of executive pay.from former boss Alan Joyce’s pay packet, or the company flagging that it could “claw back” millions more. That looks like the board buying itself time, as it takes the temperature of grumpy investors in the coming weeks.
It would be easy to dismiss this as trivial. But it’s also something more of our biggest companies are doing, as part of the growing focus on environmental, social and governance issues. Executive bonuses are still mainly linked to shareholder returns, but “non-financial” metrics such as customer satisfaction, staff engagement, or cutting carbon emissions are playing a bigger role.
But it’s not just the banks and insurers. Woolworths links long-term bonuses to reputation, and its former pubs and liquor offshoot Endeavour Group has a bonus hurdle linked to responsible provision of alcohol and gaming. Mining giant South32 has a bonus linked to its goal of moving its portfolio towards commodities needed in a low-carbon world.
Despite this growth, however, some investors remain sceptical, and worry that it might be easier for executives to game metrics on reputation or diversity. Bachmann says this finding suggests companies are “moving the goal posts” in measuring CSR targets. It doesn’t mean companies shouldn’t have them, just that they should be carefully defined, transparent, and objectively measured.
The Australian Council of Superannuation Investors, which advises investment giants with $1 trillion in funds under management, says it supports “non-financial” measures, so long as they are “objective, transparent, measurable and truly at risk”. Really, the “non-financial” label is a bit dubious. As Qantas shareholders are feeling, issues such as how you treat customers can end up being deeply financial.
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