Board director Susann Chapman-Hughes is passionate about creating sustainable change and opportunities in organizations. The rapidly evolving ESG landscape, and the recent focus on the ‘S’ in ESG, is having great effects on board room compensation committees. Boards have been faced with how to offer compensation incentives to company executives to keep up with the growing landscape of the market.
As the former chair of the compensation committee at Potbelly Sandwich Works and current chair of compensation committee at J.M. Smuckers, Susan was featured on Diligent Insight’s ‘Inside America’s Boardrooms.’ Susan discussed evolving with ESG trends, measuring company changes, and the discretion that is involved.
“You focus on what you can measure. So if a leadership team, for example, is given the direction to have diversity on their team, you can measure that, you can absolutely measure it. There are companies out there that set goals, so just like you have goals for revenue growth, and just like you have goals for margin improvement, you have goals for diversity for your business.
“Coming out of last summer in particular, in the wake of the events around George Floyd’s murder, you saw many companies beginning to step out and be very vocal about the stake in the ground that they’re going to put around diversity and around these measures. The business roundtable was very vocal about encouraging their members and taking a stand there. I do think there is discretion yes, but there is also clear opportunities to measure and at the end of the day, the numbers don’t lie.
“The question is: how do companies get to a place where they can have a meaningful measure in place? Something that really moves the needle in the direction that they’d like it to go. To me that means that they have to be aware and that things are going to change. You know what you put in place today, just given the changing landscape of the environment, will likely change. So staying close to what’s happening in the marketplace understanding what your peers are doing, leaning on your compensation consultants to help you navigate to understand what’s happening in your sector all are all things I think compensation committees have to do to be prepared to navigate their way through this and again.”
How are Compensation Committees Adapting to an Evolving ESG Landscape?
Just a few years ago, investors and proxy advisors wanted to limit a compensation committee's use of discretion in…