Link employee compensation (salaries, wages, incentives and commissions) to the achievement of set sustainability objectives.
To what extent do you link employee compensation to the achievement of set sustainability objectives?
In this TED Talk, Dan Pink outlines some key findings of social science experiences focused on the impact of pay-for-performance on task fulfilment. Using the conclusion that pay-for-performance incentives work well for well-defined but not for those that involve more cognitive thought, he suggests that there is a disconnect between business compensation and motivational science. A greater focus on intrinsic motivation within employee compensation structures could yield more effective results over structures that only focus on extrinsic motivations.
This comprehensive paper from UN-backed Principles for Responsible Investment initiative and Global Compact LEAD (a leadership platform within the UN Global Compact) facilitates discussions between a diverse group of institutional investors and companies to identify the rationale, feasibility, and effectiveness of corporate practices, which include environmental, social, and governance factors within executive management goals and incentive schemes.
The main objective of the resulting guidance is to support and enhance the investor-company dialogue on these practices. The recommendations and guidance presented aspire to reflect a common understanding of major opportunities and challenges, as well as practical examples. This document provides a tangible engagement tool to guide dialogue between shareholders and investee companies on this topic, and will help improve corporate boards’ practices to the benefit of both companies and their investors.
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