Annual Corporate Governance & Executive Compensation Survey

2019 Corporate Governance & Executive Compensation Survey

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YES 15 NO 85 75 Shearman & Sterling LLP The Climate Changes for ESG | 19 YES 15 NO 85 ARE ESG FACTORS CONSIDERED IN LONG- OR SHORT-TERM COMPENSATION METRICS?*** 7 85 10 9 Corporate Responsibility Environment/Sustainability Diversity/Inclusion/ Talent Management BOARD OVERSIGHT OF ESG Board-Level Discussions To what extent does the full board discuss ESG matters? Is ESG a separate topic on the board's agenda or does it form a real part of the board's discussion regarding financial outlook, strategy, risk, culture and executive compensation? Some companies schedule time on the board agenda to discuss ESG issues and may even devote a full board meeting to ESG topics. The perspective of those who advocate for integrated reporting of financial and operational information with ESG is that integrated reporting starts with integrated thinking. This means that management and the board do not allocate specific time for "an ESG discussion," but have ESG form part of the dialogue that management has on a day-to-day basis about the financial, operational and risk issues that arise, and the board does the same when it meets to discuss higher-level matters. The right spot on this continuum for most companies is likely somewhere in between, which means thoughtfully integrating ESG considerations as part of a company's ongoing risk management and strategy discussions, but also allocating time for the company to consider developing issues on a regular basis. HOW DOES THE BOARD ALLOCATE RESPONSIBILITY FOR ESG OVERSIGHT? Board and Committee Not Disclosed Full Board Committee Only 2 7 75 16 Committee Responsibilities Which board committees have responsibility for ESG? Given the significant responsibilities of the audit and compensation committees of most boards, responsibility for ESG oversight is more frequently the responsibility of the nominating and governance committee or another committee, such as a public affairs or corporate social responsibility committee. A common approach is for the nominating and governance committee to oversee ESG matters given the overlap between ESG and traditional governance matters and engagement. As ESG engagement increases, there is likely to be an increased expectation on boards to have one or more directors directly participate in such engagement with shareholders and other interested constituencies. *** Some companies considered more than one ESG factor in their short- or long-term compensation metrics.

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