There's a new push for executive pay to be linked to ESG. Should this be done, and if so how?
Cevian Capital has recently called for all European public companies to include ESG metrics in management compensation plans by 2022.
London Business School’s Centre for Corporate Governance (CCG) hosted a virtual event exploring how and why companies are beginning to integrate ESG into executive pay, the pitfalls in doing so and recommendations for best practice.
The event included a presentation of CCG’s recent report “Paying well by paying for good” produced in collaboration with PwC.
This virtual event was held in partnership with London Business School’s Centre for Corporate Governance and the AQR Asset Management Institute.
The event was divided into three sessions as follows:
This virtual event was held in partnership with the European Corporate Governance Institute and the Harvard Law School Program on Corporate Governance.
Alex and Lucian hold contrasting opinions on stakeholder capitalism, which they have developed in their academic work, and this discussion allowed for their views to be explored in depth. Alex presented the case for corporate leaders serving goals other than shareholder value, and Lucian questioned this approach. Lucian and Alex challenged each other on their positions. Gillian led Q&A with questions of her own as well as fielding some from the audience.
Purpose is one of the corporate buzzwords of 2020, with the politicians, the public, and even investors themselves calling on businesses to address the world’s social problems. But it may seem unrealistic to think about purpose in a pandemic when companies are strapped for cash - companies also have a responsibility to their shareholders, and some of the world’s most serious challenges are in developing countries where solutions are unlikely to be immediately profitable. Is there a trade-off between purpose and profit, or is it possible for companies to achieve both?
Alex Edmans, Professor of Finance and Academic Director, Centre for Corporate Governance, London Business School, explored these questions in a conversation with Andrew Hill, Associate Editor and Management Editor of the Financial Times, in a virtual event hosted by Olenka Kacperczyk, Associate Professor of Strategy and Entrepreneurship, London Business School.
Edmans and Hill critically examined the case for purposeful business, using rigorous evidence and real-life examples to show what works – and, importantly, what doesn’t. The audience heard about practical ways for businesses of all sizes to put purpose into practice, address problems being faced across the globe, and how investors and citizens can play their part.
Professor Alex Edmans drew on his book, “Grow the Pie: How Great Companies Deliver Both Purpose and Profit”, which headed the list of the Financial Times Business Books of the Month for March 2020 and was included in the FT's list of best business books of 2020.
The event was co-hosted by London Business School's Wheeler Institute for Business and Development and the Centre for Corporate Governance.
What does it mean to be a responsible business in the time of crisis? This might seem clear for industries most directly affected, such as supermarkets and healthcare companies, but how can every company show leadership and play its part? How can investors and ordinary citizens support and reinforce the actions that businesses are taking?
Alex Edmans and Tom Gosling hosted a webinar, as part of London Business School's 'Beyond the Crisis' series, collectively drawing on decades of academic research and practical experience to show how responsibility can be translated from idealism to realism
We brought academics and practitioners together for a one-day conference focused on executive pay.
Businesses are facing criticism that compensation for executives is too high, particularly compared to workers, and contributing to societal problems. However, many companies claim that pay levels are not only justified but key in retaining top talent and ultimately growing their business.
We set out to present the evidence, promote diverse viewpoints from all sides, and engage in informed debate.
Participants included a member of parliament, academics, investors, reward directors, consultants, journalists and representatives of public and private companies.
1. Event summary
Overview and key highlights
Event introduction by Alex Edmans, Academic Director of the CCG and Professor of Finance, London Business School
3. Market or racket? Academic introduction
Are levels of executive pay justified by competitive market forces or the result of a corporate governance failure? Presentation by Dirk Jenter, Associate Professor of Finance, London School of Economics
4. Market or racket? Practitioner discussion
Panel bringing together economic and societal arguments on executive pay
5. The commercial realities of pay
Practical factors that boards and investors need to consider in designing CEO pay packages
6. The politics of pay
A view from Rachel Reeves MP on how politicians and the wider public view executive pay, its impact on society and the reputation of business
7. How should we think about motivation beyond pay?
Examines the impact of intrinsic motivation on performance. Lunchtime presentation by Dan Cable, Professor of Organisational Behaviour, London Business School
8. Paying for performance
Does the current executive pay model work or do we need a completely new way of linking pay to performance? Presentation by Alex Edmans, Academic Director of the CCG and Professor of Finance, London Business School
9. Processes and implementation
Practitioner discussion examining executive pay models from a commercial perspective
10. Reflections on pay and performance
Challenges common perceptions of CEO pay and corporate governance in the US. Presentation by Professor Steve Kaplan, Neubauer Family Distinguished Service Professor of Entrepreneurship and Finance, University of Chicago Booth School of Business
11. Reflections on pay and performance - Discussion
Conversation about CEO pay led by Will Hutton, Principal of Hertford College, University of Oxford
Concluding remarks by Paul Coombes, Chair of CCG and Director of The Investor Forum
We would like to thank all our Academic Contributors
We would also like to thank our panellists and moderators:
This one-day, invitation only, event rigorously examined approaches to corporate decision making and the realities of corporate ownership.
Issues addressed included:
Through short introductory talks and panels, we debated how effectively different ownership options confer primacy and balance the interests of different stakeholder constituencies.
The event also reviewed the existing evidence concerning employee rights and how far these are appropriately addressed through current governance mechanisms in the UK and elsewhere.
The conference explored these questions and provided perspectives from both academic research and business experience. The programme included introductory remarks on academic evidence from Professors Diane Denis, Clifford Holderness and Ernst Maug, followed by panel discussions with business practitioners as following:
It closed with a keynote address by Professor David Yermack, Albert Fingerhut Professor of Finance and Business Transformation, NYU Stern, followed by David Yermack in conversation with Andrew Palmer, Executive Editor, The Economist.
We gratefully acknowledge the generous support for this event provided by NBIM and thank Clifford Holderness for his contribution to creating the event.
This event aimed to debate the fundamental concepts behind the current drive to make business more responsible.
The Centre for Corporate Governance hosted this one-day expert event to explore these questions and provide perspectives from both large-scale research and business experience.
Introductory remarks from Professors Alex Edmans and Ioannis Ioannou were followed by discussions on the following topics:
In 2017, the Government announced its intention to introduce a new corporate governance reporting requirement for large private companies. To complement this, the Government appointed James Wates CBE to lead a coalition, including the Financial Reporting Council, to develop corporate governance principles to enhance transparency and accountability in large private companies.
What are the distinctive governance challenges facing large private companies where there is typically limited separation of ownership and control?
The Centre for Corporate Governance and the Financial Reporting Council hosted an evening event, including introductory comments from James Wates CBE, followed by a panel discussion led by academics and expert practitioners, debating the issues with a range of experts in the audience.
On 5 December, the CCG hosted a full-day event on Investor Stewardship to explore these issues.
The debate was led by some of the world’s leading academics and practitioners.
Why have executive pay practices created such public concern and led many institutional investors, professional bodies and commentators to voice their unease? Experts at this CCG event debated the way forward.
The Purposeful Company and the CCG hosted a Policy Forum to finalise policy recommendations initially set out in TPC’s Interim Report published in May 2016.
This event explored how the financial sector will be transformed by disruptive technologies and the relevant regulatory and policy responses to the effects on the industry. It was held in collaboration with the Bank of England and AQR Asset Management Institute.
LBS welcomed practitioners, policy makers and academics to explore the benefits and challenges of mutual and co-operative ownership and debate the relevant policy making and governance considerations.
Practitioner and academic thought leaders debated topics such as the consequences of fragmented versus block ownership and the oneshare, one-vote issue and the role and importance of market liquidity. This event was hosted together with the Financial Reporting Council.
This event presented and debated the academic report ‘Returns to Hedge Fund Activism: An International Study’ by Marco Becht, Julian Franks and Jeremy Grant.
In partnership with the Bank of England, the CCG invited 50 major international decision-makers and academics to debate global financial regulation. Keynote speeches covered the status quo global financial regulation and the key concerns that need to be addressed by policy makers, regulators and the regulated.