Executive Compensation Linked to Diversity, Equity, and Inclusion (DE&I) Goals
Readers expressed unusually high interest in one of last week’s blogs, McDonald’s Puts Its Executives’ Money Where Its Mouth Is on HCM and D&I, so I thought I would add another post on the topic. Starbucks has always been a leader in sustainability and other ESG areas, but in the proxy statement for its December 27, 2020 fiscal year end (Starbucks is on a 52-53 week fiscal year), Starbucks takes its game up a notch. In its proxy statement filed January 22, 2021, under the heading “2021 Executive Compensation” Starbucks reports as follows:
We hold ourselves accountable for measurable results at the highest levels of the organization, connecting the building of inclusive and diverse teams and our sustainability objectives to our executive compensation program through clearly set goals and metrics. Based on shareholder feedback, our long-standing culture of inclusion and our commitment to our planet, we have modified our executive compensation programs beginning in fiscal 2021.
In September 2020, the Compensation Committee approved the incorporation of additional targets into both our short-term and long-term fiscal 2021 incentive plans (Annual Incentive Bonus Plan and LSP) for our U.S.-based senior leadership team members at the senior vice president level and above with respect to the Annual Incentive Bonus Plan design, the weighting of the [Individual Performance Factor] was increased from 30% to 50% of the overall payout calculation, with the goal of holding senior leaders individually accountable to drive inclusion and sustainability at Starbucks, among meeting other goals. With respect to the fiscal 2021 LSP [Leadership Stock Plan] design, we will hold our senior leaders collectively accountable for meeting a 3-year representation target. This representation target focuses on improvement in Black, Indigenous and LatinX representation at the manager level and above, with a 3-year target of improving Black, Indigenous and LatinX representation by more than 5% by 2023. The representation metric will operate as a modifier to the payout of the fiscal 2021 LSP PRSU award, with the following levels of modification based on representation growth: (1) an upward modifier of 110% if the representation target equals or exceeds 5%; (ii) reducing the awards payout by 5% if the representation goal is not achieved but growth is positive and below 5%; and (iii) reducing the award payout by 10% if representation falls over the three-year performance period.
I tend to focus on companies’ disclosures about DE&I and compensation in their SEC filings. I pay less attention to press releases and other public announcements, which although helpful, generally are not legally binding. Sometimes these announcements are aspirational (or happy talk) and often they are not specific.
-Mike Melbinger, CompensationStandards.com February 25, 2021
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