As companies begin linking diversity, equity and inclusion metrics to certain elements of executive pay, in a recent NACD blog, Robin Melman and Christina Andersen of Baker Botts predict the next wave of executive pay metrics could include employee engagement goals. With investors increasingly taking interest in employee engagement, the authors say we should expect interest in linking employee engagement with executive performance goals. The blog offers these tips for how to do so:
– Assess the company’s employee engagement measurement practices – look for areas of improvement for accurately measuring various aspects of employee engagement
– Consider the company’s structure when establishing employee engagement goals, such as whether engagement goals should apply only to employees within the direct reporting line of the executive or whether it would be helpful to incentivize cross-departmental employee engagement measures
– Track and align progress – consider whether to tie payout to year-over-year improvement or to achievement of specific goals
– Start small – test the waters when adding a new employee engagement performance goal, consider adding an employee engagement goal as a metric with a relatively low weight associated with it
The blog also touches on governance-related reminders such as potential disclosure of the performance goals in next year’s proxy statement. With many companies starting to address whether, how and when employees might return to the office, employee engagement may be one element that factors into decisions and the authors say linking employee engagement with executive pay is one way to emphasize the importance of a company’s workforce to its overall strategy and performance.
-Lynn Jokela, CompensationStandards.com April 27, 2021
