With millions out of work or now reliant on the Government for their pay cheques, ESG investors are preparing to scrutinise executive pay like never before. While a number of companies had already begun to link the compensation of top managers to their performance on social and environmental issues before this year, the idea is set to gain much greater traction following the coronavirus outbreak, according to $1.1trn asset manager Nuveen LLC. “No compensation plan will be left unchanged by Covid-19,” said Peter Reali, Nuveen’s New York-based head of engagement. “Companies can’t afford to be tone deaf on compensation in terms of the societal context, and the virus will only further the conversation among investors on how ESG should impact wages, bonuses and incentives for executives.” The 2020 proxy season, which kicked off this month, could prove a good test of growing investor interest in the topic, said Reali.
The Covid-19 crisis has already had an immediate impact on executive pay at companies such as Barclays, L’Oréal and Renault, which have reduced the compensation of senior executives in recent weeks, due to loses from the global pandemic. In the UK, the Treasury and the Bank of England have announced that large firms borrowing more than £50m from the Government during the crisis will face restrictions on bonus payments and dividends until the loan is repaid. The increased focus on the societal context of executive pay holds potential to create a shift towards ESG-linked pay.