CEO Pay Increasingly Tied to Diversity Goals

McDonald’s and AmEx are among the companies tying executive compensation to adding women and people of color to leadership ranks

The Wall Street Journal | June 2, 2021

The Wall Street Journal article, "CEO Pay Increasingly Tied to Diversity Goals​," quoted Russell Reynolds Associates Consultant Tina Shah Paikeday on how companies often go about beginning to measure diversity within their organization. The article is excerpted below.

The killing of George Floyd in police custody a year ago and the subsequent protests prompted pledges from U.S. business leaders: They would fight racism and work to recruit and promote Black and other minority employees.

Now, more companies are putting money behind those pledges by tying executive compensation to specific goals.

In January, Starbucks Corp. said it would give top executives more shares if the coffee chain’s managerial ranks grow more diverse over three years. McDonald’s Corp. in February gave executives annual incentives to increase the share of women and racial minorities in leadership roles by 2025. In March, Nike Inc. said it would for the first time tie some executive pay to five-year goals for improving racial and gender diversity in its workforce and leadership positions.

Several companies including Microsoft Corp., Intel Corp. and Verizon have been tying diversity goals to compensation for years. Some have expanded their diversity goals recently. Intel said in its 2020 proxy that investor feedback led it to more fully describe how ESG goals factor into compensation decisions and which goals it uses. Investors voted about 62% of Intel’s shares against the company’s executive-pay practices at its annual meeting on May 13, citing one-time equity awards for the CEO.

Companies often begin by measuring simple representation—how many managers are women, Black or Latino, for example—but that can be difficult to change over short periods, said Tina Shah Paikeday, who leads the diversity, equity and inclusion practice at leadership advisory and search firm Russell Reynolds Associates.

Companies that are further along on these efforts tend to also measure inclusion in some way, such as changes in employee survey results or closing the gap between benchmarks among business units, she said.

Access the full article here.

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CEO Pay Increasingly Tied to Diversity Goals