The article in the url below reports on an innovative method the Dutch companies DSM (life sciences) and TNT (mail delivery) have introduced to address mounting societal concern about levels of executive compensation:
“DSM, the Dutch life sciences group, will today announce that half the bonuses for its management board will be tied to targets such as the reduction of greenhouse gas emissions and energy use, the introduction of new environmentally-friendly products, and improvements in workforce morale. Earlier this week, TNT, the Dutch mail operator, unveiled similar plans that also included customer satisfaction.”
The idea at DSM (which still leaves half of its executives’ bonuses tied to more traditional financial metrics) was developed in response to the rejection of the firm’s compensation plan by shareholders in 2009 and following extensive consultation:
“Half of DSM's short-term bonuses will be determined by the number of environmentally friendly products it introduces each year, whether it reduces energy consumption and how it performs in an employee satisfaction survey. The other half will be based on financial targets such as sales and cashflow. Long-term bonuses will be given in shares, with half based on performance - total shareholder return - and the other half on how much the company reduces greenhouse gas emissions per unit of production. Total bonuses cannot exceed fixed pay.”
In general, the article reports that similar executive compensation packages in other firms have been well-received by shareholders and converted initial skeptics:
“Akzo Nobel, the Dutch paint company that bought ICI of the UK three years ago, was among the pioneers. It based half of its long-term incentive scheme on its position in the Dow Jones sustainability index for chemicals companies. "There is a risk that if rewarding for performance is your value, you put all your eggs in one basket," said Hans Wijers, chief executive. … Mr Wijers says the idea has been positively received by shareholders - Akzo's proposal was passed by 97 per cent of investors - as well as by workers.”
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David
Bill Werther & David Chandler
Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)
© Sage Publications, 2011
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Executive bonuses tied to green targets
By Richard Milne and Michael Steen in Amsterdam
700 words
24 February 2010
Financial Times
Asia Ed1
14
http://www.ft.com/cms/s/0/28db1b9a-20e5-11df-b920-00144feab49a.html
