Governments and employers throughout the world are paying more attention to environmental, social and corporate governance (ESG) issues. That’s according to the International Bar Association Global Employment Institute’s (IBA GEI) Eleventh Annual Global Report.
The report is based on data from lawyers in 55 countries and covers a range of topics, including artificial intelligence, mental health, cybersecurity, immigration and compensation. McDermott Partner and IBA GEI co-chair Todd A. Solomon served as an editor, and McDermott Partner Abigail M. Kagan contributed to the report.
An important new governance survey suggests an increasing willingness to consider linking a company’s ESG performance measures to executive incentive compensation. Such a practice would demonstrate a significant corporate embrace of social responsibility principles. But implementing such measures may present boards and their compensation committees with practical implementation challenges.
The new survey from The Conference Board, “Linking Executive Compensation to ESG Performance” (the “Survey”), essentially concludes that tying some portion of executive compensation to ESG principles is becoming a mainstream governance practice. Indeed, Survey data suggests that the percentage of S&P 500 companies that have adopted ESG performance measures is increasing at a steady pace—from 66 percent in 2020 to 73 percent in 2021.
In this three-part podcast series focusing on healthcare governance, McDermott Partner Michael Peregrine joins the American Health Law Association to discuss a range of governance issues, including the following:
The nature and scope of the fiduciary responsibilities facing board members within nonprofit health systems;
Standards of conduct, expectations and the line between governance and management;
The board’s role in tackling the pressing challenges facing nonprofit health systems, including environment, social and governance issues;
How to handle issues related to charitable status, cybersecurity and the US Department of Justice’s recent pronouncements on corporate compliance;
How legal counsel can advise their clients who are board members of nonprofit health systems; and
How chief legal officers can effectively share information with the board, approaches to board education and training, and the role of board assessments.
Over the past year, the regulatory backdrop around environmental, social and governance (ESG) investing has shifted. As McDermott Partner Brian J. Tiemann explains in these slides, the US Department of Labor (DOL) under the Trump administration dropped ESG terminology and set a high standard for considering factors other than purely financial projections for investment alternatives. However, the Biden administration’s DOL has said that it will not enforce Trump-era regulations or pursue enforcement actions against plan fiduciaries for failure to comply with those regulations.
Environmental, social and corporate governance (ESG) efforts can create hazards for multinationals with US operations due to the risk of reverse discrimination litigation under US law. According to McDermott’s Ludia Kwon, a recently filed lawsuit (Kafiti v. AB Electrolux, Case No. 3:21-CV-00029 (W.D. NC. 2021)) highlights the risk in implementing ESG efforts in the United States. US employment discrimination laws swing both ways, as the prohibition against sex discrimination protects men as well as women.
With a new election and administration, there also are projected impacts on proxy preparation for 2021 and beyond. McDermott partner Andrew Liazos, member and immediate past chair of the ABA’s National Institute of Executive Compensation, led a discussion together with Sharon S. Briansky, associate general counsel and secretary at Thermo Fisher Scientific along with Bindu Culas, managing director at F.W. Cook. Topics addressed include: adjustments to existing short- and long-term incentive awards, the use of new performance metrics for social justice and environmental, social and corporate governance (ESG), new human capital disclosures for 2021, the impact of Institutional Shareholder Services (ISS) policy changes on compensation and disclosure practices and what to consider when requesting shares for equity plans in the current environment.
In recent guidance, the Department of Labor clarified the retirement plan standards for environmental, social and corporate governance (ESG) investing without mentioning the term ESG. The new guidance provides that, when selecting and monitoring plan investments, an Employee Retirement Income Security Act (ERISA) fiduciary must never sacrifice investment returns, take on additional investment risk or pay higher fees to promote non-pecuniary benefits or goals.
Teal Trujillo, an incoming associate in our Chicago office, also contributed to this On the Subject.
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