The Number Of European Companies Using ESG Criteria In Executive Compensation Has Increased Eightfold In The Last Decade

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Fernando Rodriguez | The percentage of European companies linking executive compensation plans to ESG targets has increased more than eightfold in the last decade, from 4% in 2008 to 34% in 2020. This is according to a survey conducted by the Diligent Institute of nearly 2,000 companies in 15 European countries, including Spain, which is in the high end of the range for most indicators.

According to the survey, the sectors in this sample with the greatest sensitivity to including ESG metrics in remuneration criteria are Energy and Utilities, with 59% and 65%, respectively, of the companies surveyed incorporating them into their plans. Meanwhile, the furthest behind is Health, limited to 22%.

Environmental (E) and social (S) criteria are incorporated much more than corporate governance (G) as indicators linked to executive remuneration. In the area of Environmental, the percentage of companies in the sample which use the criteria is 40%, compared to 30% using Social criteria and less than 10% which implement Governance indicators.

Short-term incentives included in annual bonuses prevail over long-term compensation variables: 50% of companies include them in bonuses – a percentage the Diligent Institute study expects to rise to 62% by 2021. On the other hand, only 26% do so in long-term remuneration plans – 36% expected by 2021.

About the Author

Fernando Rodríguez
Fernando Rodriguez is in charge of PR and Development at The Corner. He has worked for over 30 years for financial publications like Expansion, El Economista, Dossier Empresarial, Ciudadano and Afa Press-Worldfolio and has been a contributor to El Pais-Negocios, Emprendedores, Época, Sector Ejecutivo and Consejeros. Fernando holds a degree in Journalism from CEU-San Pablo (Complutense University) and a master’s degree in Strategic Communication from CESMA business school. As a communication consultant, he has developed PR projects for firms like Grupo Bancaja, JP Morgan, GBS, Corpfin, QBE, Howden, Asociación Española de Leasing y Renting (AELR) or Asociación Española de Accionistas Minoritarios de Empresas Cotizadas (AEMEC).