said bonuses for its C-suite leaders would be tied to specific diversity targets aimed at increasing the number of women and people of color in managerial roles. Incentive plans, or compensation plans that award executives based on their accomplishment of predetermined goals, are a key part of a company's compensation program.
The firm's 2019 short-term incentive plan was rewarded based on the achievement of four categories: adjusted earnings per share , free cash flow , total revenue , and diversity and sustainability . Verizon's long-term incentive plan was based on total shareholder return and cash flow. In order to receive the 5% of the short-term incentive award related to ESG metrics, the executives had to hit the following goals: have at least 60% of U.S.
Verizon's plan is in line with industry standards. Most companies with DEI metrics use them in their short-term incentive plans, and typically represent 5% to 10% of one's bonus. According to a spokesperson from Verizon, the firm plans to increase their ESG metric from 5% of the short-term incentive to 10% in 2020., a news outlet focused on DEI, Microsoft ties about 17% of annual bonuses to "culture and organization leadership goals," which include promoting diversity.
"Since bonus compensation is discretionary and tied to meeting business goals, I believe that diversity should be part of that equation as well to ensure accountability," she said.