Linking Executive Compensation to Diversity and Inclusion
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Pat Miguel Tomaino, Director of Socially Responsible Investing, Zevin Asset Management
The structure of executive pay often causes companies to cut corners, take unwarranted risks, and ignore pressing environmental and social challenges. Exorbitant and unfocused pay packages created perverse incentives that reduced oversight at Wells Fargo, leading to the bank’s fake accounts controversy. After the Volkswagen diesel emissions scandal and BP’s Gulf of Mexico explosion, experts and advocates have pressed to “claw back” misbegotten CEO paychecks — without much success.
Responsible investors can help shape incentives toward positive outcomes even as we examine the deeper problem in executive compensation. To this end, Zevin Asset Management has urged dozens of companies to link senior executive payouts to social and environmental risk metrics and performance goals. Late last year, Citrix responded to our proposal, agreeing to spell out how diversity and inclusion factors influence annual CEO performance evaluations.