In this special #WEF20 blog, an ESG report analyzing corporate governance data reveals there’s work to be done to improve boardroom gender balance and use of long-term incentives in executive pay. How quickly are corporate executives transforming their businesses to be successful in the sustainable future?
- Growing numbers of companies are becoming more transparent and improving their sustainability disclosure.
- Data shows the use of sustainable compensation incentives is increasing, but companies are putting less focus on rewards linked to long-term objectives.
- Female board membership has increased over the last three years, but the percentage still only accounts for 18.6 percent.
More corporate executives are starting to integrate sustainability inside, not just beside the business. In partnership with Professor Andreas Hoepner and Gabija Zdanceviciute, Refinitiv has produced a report taking a detailed look at the trends in corporate governance practices.
We analyze whether corporate boards and structures are changing and if such actions have an impact on the companies’ environmental and social performance.
Watch: Refinitiv Perspectives LIVE – ESG Investment, a cure all for Asset Management?
Deep dive into corporate governance data
Refinitiv’s ESG data covers more than 400 metrics for 70 percent of the global market capitalization, with 126 of these metrics relating to corporate governance.
The ESG report examines 5,584 of these companies with complete ESG coverage for a minimum of three fiscal years. The data shows a number of interesting trends:
- The percentage of companies with executive compensation linked to long-term objectives has decreased to 10 percent from 13 percent in three years.
This trend is concerning, especially at a time when industry bodies and regulators are discussing the critical need to shift capital markets towards long-termism.
- The percentage of companies with sustainability compensation incentives for executives has increased to 14 percent from six per cent in three years.
The number of companies that link executives’ compensation to sustainable targets has more than doubled in the last three years but still only accounts for less than one-seventh of companies. Stakeholder demand will result in improvements happening at a much quicker pace.
- Board gender diversity has increased to 18.6 percent from 15.5 percent.
More companies are reporting on gender and cultural board diversity, however, women account for only 18.6 percent of board membership. This represents a 21 percent increase in three years, but corporate boards remain far from being gender balanced.
ESG analysis through machine learning
In this report, we also looked at governance data with a machine learning approach to determine the relationship between two variables. The analysis found a number of strong explanatory power findings.
- The percentage of female managers in a company leads to a 62 percent increase in the percentage of female employees.
Women may be more confident of their career prospects in a company that has a good management level gender balance.
- Corporate Social Responsibility (CSR) reporting leads to increases in management commitment to environmental factors.
Companies reporting their CSR are likely to be more aware of their own ranking within the CSR standard and are more likely to set targets to improve their performance.
For further details, download the full report
Refinitiv ESG data
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