ARTICLE
10 October 2020

ESG Slowly Finding Its Way Into Incentive Compensation Plans

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A&O Shearman

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A&O Shearman was formed in 2024 via the merger of two historic firms, Allen & Overy and Shearman & Sterling. With nearly 4,000 lawyers globally, we are equally fluent in English law, U.S. law and the laws of the world’s most dynamic markets. This combination creates a new kind of law firm, one built to achieve unparalleled outcomes for our clients on their most complex, multijurisdictional matters – everywhere in the world. A firm that advises at the forefront of the forces changing the current of global business and that is unrivalled in its global strength. Our clients benefit from the collective experience of teams who work with many of the world’s most influential companies and institutions, and have a history of precedent-setting innovations. Together our lawyers advise more than a third of NYSE-listed businesses, a fifth of the NASDAQ and a notable proportion of the London Stock Exchange, the Euronext, Euronext Paris and the Tokyo and Hong Kong Stock Exchanges.
Incentive compensation has long been a board's primary tool to ensure the interests of management are aligned with the interests of its shareholders.
United States Corporate/Commercial Law
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Incentive compensation has long been a board's primary tool to ensure the interests of management are aligned with the interests of its shareholders. To that end, the ongoing challenge facing compensation committees is choosing metrics that motivate management to optimize shareholder value without incentivizing behaviors that focus on short-term stock price appreciation that can threaten the company's long-term interests.

In this chapter of our 18th Annual Corporate Governance & Executive Compensation Survey, we examine the forces have led to the increased use of ESG metrics in incentive compensation plans and action items for companies looking to consider incorporating ESG metrics into their incentive compensation programs.

Read "ESG Slowly Finding its Way into Incentive Compensation Plans."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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