Organization: AT&T, Inc.

Year: 2018

Description:

RESOLVED: Shareholders request the Board Compensation Committee prepare a report assessing the feasibility of integrating sustainability metrics into the performance measures of senior executives under the Company’s compensation incentive plans. Sustainability is defined as how environmental and social considerations, and related financial impacts, are integrated into corporate strategy over the long term.

SUPPORTING STATEMENT: Effectively managing for sustainability offers positive opportunities for companies and should be a key metric by which executives are judged.

Linking sustainability metrics to executive compensation could reduce risks related to sustainability underperformance, incent employees to meet sustainability goals and achieve resultant benefits, and increase accountability.Examples of metrics relevant to our Company could include: company-wide energy efficiency targets, diversity and inclusion goals, customer satisfaction scores, data security indicators, and greenhouse gas emissions.

WHEREAS: Numerous studies suggest companies that integrate environmental, social and governance (ESG) factors into their business strategy reduce reputational, legal and regulatory risks and improve long-term performance.

AT&T has taken certain steps regarding ESG issues; however, our Company has not explicitly tied those measures to senior executive incentives. Investors seek clarity regarding how AT&T is driving sustainability improvement and how that strategy is supported by C-Suite accountability. Integrating sustainability into executive compensation assessments would enhance AT&T’s approach.

A large and diverse group of companies has integrated sustainability metrics into executive pay incentive plans, among them National Grid, Nokia, and TELUS.

The 2016 Glass Lewis report In-Depth: Linking Compensation to Sustainability finds a “mountingbody of research showing that firms that operate in a more responsible manner mayperform better financially…. Moreover, these companies were also more likely to tie top executive incentives to sustainability metrics.” 

A 2015 Harvard Business School study of the top five highest paid executives in the S&P 500 found a positive relationship between the presence of explicit incentive compensation for corporate social responsibility (CSR) and firms’ social performance (Hong, et al, 2015).

A 2012 guidance issued by the United Nations Principles for Responsible Investment and the UN Global Compact found “the inclusion of appropriate Environmental, Social and Governance (ESG) issues within executive management goals and incentive schemes can be an important factor in the creation and protection of long-term shareholder value.”

A 2011 study of 490 global companies found that including sustainability targets in compensation packages was sufficient to encourage sustainable development.

The increasing incorporation of sustainability metrics into executive pay evaluative criteria stems from the growing recognition that sustainability strategies can drive growth, and enhance profitability and shareholder value.

• According to the largest study of CEOs on sustainability to date (CEO Study on Sustainability 2013, UN Global Compact and Accenture): 76 percent believe embedding sustainability into the core business will drive revenue growth and new opportunities.
• 93 percent regard sustainability as key to success.
• 86 percent believe sustainability should be integrated into compensation discussions, and 67 percent report they already do.