While a number of companies pledged to fight racism and promote more Black employees last year when the murder of George Floyd put racial issues in the national spotlight, the Wall Street Journal reports that they now are "putting money behind those pledges by tying executive compensation to specific goals."
For example, "Starbucks Corp. said it would give top executives more shares if the coffee chain’s managerial ranks grow more diverse over three years. McDonald’s Corp. in February gave executives annual incentives to increase the share of women and racial minorities in leadership roles by 2025. In March, Nike Inc. said it would for the first time tie some executive pay to five-year goals for improving racial and gender diversity in its workforce and leadership positions."
“Historically, investors focused primarily on pay for performance, but performance was really measured as total shareholder return,“ says Melissa Sawyer, a partner at law firm Sullivan & Cromwell LLP whose work includes advising boards on corporate governance. ”This idea of performance also being measured relative to ESG - culture, diversity, social variables - that’s a newer concept that’s emerging and I think we’re going to start to see more of it over time.”
- KC's View:
This isn't just political correctness. In the end, investors and boards of directors are interested in return on investment, and as one expert tells the Journal, "there’s a growing body of evidence that shows that companies that have diverse teams outperform companies that are not diverse, whether they’re looking at operating performance or financial performance or innovation."
Which makes total sense.