Audit and Compensation Committee Chair Advisory Councils: ESG Reporting and Non-GAAP Measures Included in Incentive Compensation Plans

As the debate over the purpose of the corporation continues, some people have lined up behind the 2019 Business Roundtable Statement on the Purpose of a Corporation, and others behind shareholder primacy. The evolution of environmental, social, and governance (ESG) issues into metrics often highlights this schism, with institutional shareholders focused on gaining better insight into companies’ ESG practices. 

With this backdrop, NACD, KPMG, Farient Advisors, and Sidley Austin convened NACD’s Audit Committee Chair and Compensation Committee Chair Advisory Councils in Washington, DC, to discuss ESG reporting and Non-GAAP metrics. 

ESG continues to be part of a broad, follow-on discussion regarding the use of non-GAAP and nonfinancial metrics, including the use of these metrics in executive compensation. Takeaways ranged from consistency in using non-GAAP measures to an important finding about simplicity in CEO compensation plans.

This resource can help your board to

  • evaluate tools to track ESG metrics,
  • use non-GAAP metrics to evaluate executive compensation, and
  • understand where non-GAAP and ESG metrics overlap.

Most relevant audiences: audit committee chairs, compensation committee chairs, sustainability officers, and risk committee members