Executive Pay | KPMG Study Finds 78% of Global Companies Now Tie Executive Compensation to Sustainability Goals
A recent KPMG study reveals that 78% of major global companies now link executive compensation to sustainability targets, with 88% of these firms focusing on material ESG issues such as emissions reduction, workforce diversity and safety.
- 78% of major global companies now integrate sustainability metrics into board-level pay packages.
- 88% align ESG targets in pay to material sustainability topics like emissions, workforce diversity, and safety.
- 37% include ESG metrics in both short- and long-term incentives, with EU firms leading in long-term integration.
Tying executive compensation to sustainability isn’t just a governance trend—it’s a powerful lever to drive long-term value. A global review of 375 large publicly listed companies reveals that nearly 8 in 10 already incorporate ESG goals into boardroom pay. “A company’s strategic course is set by its management, yet it is these managers who must help ensure that this course is adhered to in their daily decisions.” By embedding ESG performance into variable pay, businesses are sharpening executive focus on climate, diversity, safety, and other material risks and opportunities that may fall outside traditional business cycles. The data:
- 375 companies across 15 countries (including US, UK, China, and EU members) were reviewed by KPMG using 2023 public disclosures.
- 78% link executive compensation to sustainability-related targets.
- 88% of those aligning pay to ESG focus on topics core to their business.
Climate goals often target emissions reductions, while workforce-linked goals include employee engagement, gender diversity among managers, and injury rates. Breakdown of ESG integration in pay:
- 37% use both short- and long-term sustainability targets
- 23% use long-term only
- 40% use short-term only
EU companies are more likely to blend both time horizons. “Remuneration is one strategic pillar of a robust governance model.” Strong alignment between pay and ESG performance can signal disciplined long-term governance. Materiality is key—companies are most effective when sustainability incentives reflect the risks and opportunities central to their business strategy. “Linking strategic priorities to the key governance setup of a company remains an aspect of utmost importance to stakeholders, particularly investors.” Methodology at a glance:
- Companies analyzed: 375 (25 largest by market cap in each of 15 countries).
- Sources: 2023 annual, sustainability, and compensation reports.
- Conducted: July–August 2024 by KPMG professionals.
- All findings were based on public data; no direct company submissions.
- Builds on KPMG’s earlier May 2024 report that showed similar patterns, particularly in the Netherlands.
“We hope this report can serve both as an inspiration and a contribution to debates within companies and between stakeholders.” Read More.
Board Diversity, Equity And Inclusion | An Outline Of The DEI Rollback And The Areas Where It May Extend Next
The new US government signed several executive orders changing diversity, equity and inclusion (DEI) programs within the federal government. Since then, numerous companies have followed suit by announcing major overhaul of their DEI policies.
Which US firms have ditched the diversity and inclusion policies opposed by Donald Trump and will UK follow suit? Co-op: ditching diversity policies ‘risks undoing decades of progress’
Last month Donald Trump signed a slew of executive orders overturning diversity, equity and inclusion (DEI) programmes in the federal government, in a backlash against measures to help underrepresented groups. Since then, many large US corporates have followed suit and announced they are dropping or overhauling policies or schemes. Here we examine what has changed and how far the rollback might go.
Which sectors are dropping DEI?: So far, the most prominent names to announce changes are from the US finance and tech sectors. This week, the bank Goldman Sachs scrapped a policy that stipulated it would only take on a company’s initial public offering if it had at least one board member from a diverse background. The consultancy firm Accenture said last weekend it was ending the global diversity and inclusion goals it set in 2017, along with career development programmes for “people of specific demographic groups”.
Earlier this month, Google said it was reviewing some diversity initiatives and scrapping a goal to hire more employees from historically underrepresented groups, and has since removed references to events including Black History Month, LGBTQ+ Pride and Women’s History Month from its online and mobile calendars. Is this a new trend?: Wall Street banks last year became some of the first firms to publicly distance themselves from diversity initiatives, including Goldman Sachs. Photograph: Joan Cros/NurPhoto/Re/Shutterstock No, rightwing campaigners have been pushing for some time for organisations to scrap the more inclusive policies that were created in response to the protests after the police killing of George Floyd in 2020, claiming they result in “reverse discrimination”. Those efforts moved up a gear after a US supreme court ruling in 2023 that banned affirmative action in university admissions decisions, prompting Conservative groups to launch a wave of legal action against companies over their diversity programmes.
Last year, Wall Street banks became some of the first companies to publicly distance themselves from diversity initiatives, including Bank of America and Goldman Sachs, opening up the diversity programmes previously aimed only at people from ethnic minorities. The change gathered pace after Trump’s election in November, with a swathe of firms dropping DEI in the run-up to the president’s inauguration on 20 January, including Walmart, McDonald’s, Ford, Amazon and Meta, which also overhauled its content moderation to remove restrictions on topics such as gender and immigration.
Has it reached the UK yet?: So far the main impact of the changes in Britain have been on users of Silicon Valley-based tech and social media platforms. The policy changes have also prompted some splits within organisations that operate in both countries, as their US and UK arms follow different paths. This week, the consultancy and accounting firm Deloitte instructed staff working on contracts for the US government to remove pronouns from their emails, while also announcing the end of its DEI programme. However, the boss of Deloitte UK informed staff its British operations would remain “committed to [its] diversity goals”. A memo from Richard Houston said changing government priorities in the US would not change its “commitment to building an inclusive culture” at its UK arm.
Employment lawyers have warned that if companies embrace the Trumpian trend they could open themselves up to legal risk in the UK. British companies have “always had a merit-based approach” for hiring employees, as affirmative action does not apply, said Lucy Lewis, a partner at the law firm Lewis Silkin. However, she warned that “it is a big unknown if the federal government will require contractors who they are working with to go further and row back on diversity and inclusion in other ways”, which could create problems when working with some US firms. UK employers will continue to be required by law to report on certain diversity metrics, such as the requirement to disclose the representation of women and ethnic minorities on the board and in the executive teams of listed companies.
Companies which announce changes to diversity schemes may also find it harder to recruit younger staff, according to multiple surveys of workers belonging to Gen Z – born between 1997 and 2012 – which have highlighted their desire to work for organizations that align with their values. “They only want to join companies which they see pay attention to these issues,” said Pavita Cooper, UK chair of the 30% Club, which campaigns globally to boost the number of women in boardrooms and in the leadership of companies. “The war for the very best talent has not gone away, and this is what matters to them.”
Who is fighting back? The GMB unions ‘worried’ that ‘multinational companies will bring a rightwing, regressive, anti-worker approach to their UK operations’. Trade unions oppose the shift but are concerned that international companies may follow US policies, even within their UK businesses. The GMB union said it was worried that “multinational companies will bring a rightwing, regressive, anti-worker approach to their UK operations”, said Eleanor Saunders, GMB’s equality and inclusion organiser. “Employer diversity initiatives often don’t push hard enough against the causes of workplace discrimination, bias and harassment,” Saunders said. “But they are essential for employers to meet their legal obligations and to go beyond the bare minimum to make work accessible, fair and rewarding for all.”
The Prospect union, which represents professionals including engineers, scientists, and tech workers, is concerned that the rollback of schemes in large US-based tech companies could have a direct impact on British employees, despite the different legal framework. It has written to the chair of the UK parliament’s women and equalities committee to ask it to call in tech executives for questioning on the changes. The bosses of large companies including Barclays and Unilever have in recent days reaffirmed their commitment to diversity programmes, with Barclays’ chief executive CS Venkatakrishnan saying the lender wanted “to provide equality of opportunity” and to “create that inclusive environment”. Meanwhile, the strategic communications adviser Kekst CNC believes many companies are reassessing, not scrapping, their diversity and inclusion policies. “What they’re working towards are policies that are better bound to commercial strategy, and so stronger and more durable,” said Meghan Sheehan, head of environmental, social and governance (ESG) and sustainability at Kekst CNC. Read More.
Board Composition And Independence | Women Independent Directors Are Nearly Three Times As Prevalent As Women Non-Independent Directors At Large Companies
A study shows that women hold 29% of the large boards’ independent director roles, a 2% increase from last year and 11% of the non-independent director positions, a 1% increase from last year. Building on the foundation set by last year’s inaugural analysis, Russell Reynolds Associates proudly presents the second annual Board Matters: India Board Analytics Report. This year’s report continues to delve into the composition of the top 200 National Stock Exchange (NSE) listed companies in India, hereafter referred to as the TOP 200.* Our analysis extends to compare these demographics with other leading markets globally, offering a wider perspective and deeper insights into how India’s boards are evolving.
Industry and market capitalization breakdown The TOP 200 companies represent approximately 75% of the total market capitalization of the 500 largest NSE-listed companies in India. The industrial sector is the most prominently featured, representing 39% of the TOP 200 and 36% of its total market capitalization, making it the largest sector. It’s closely followed by financial services, consumer, technology, and healthcare sectors. Though technology firms only account for 10% of the TOP 200, they command a notable 17% of the total market capitalization. In contrast, healthcare companies—also 10% of the TOP 200—account for just 6% of the total market capitalization.
India board size and independence: How does India compare to other countries? The TOP 200 saw a marginal decrease in average board size that aligned with other geographies In 2024, the average TOP 200 board size is 9.8 directors, down from 10.2 in 2023. We observed this reduction across all industries, with the technology sector seeing the most notable decrease from 10.1 to 9.3 directors. Despite these changes, board sizes remained relatively consistent across the industries, ranging from 9.3 to 10.2 directors. The reduction in board size may be attributed to 2023/4’s mandatory retirement rule for non-executive directors, in accordance with regulatory stipulations governing term limits and tenure. Companies appear to have used this regulation as an opportunity to reassess and streamline their board composition, consequently leading to a decrease in the number of board members. India’s average board size aligns with those in other geographies. Companies on Singapore’s STI 30 average 10.1 directors per board, and the UK’s FTSE 100 averages 10.4 directors. In contrast, boards in the US’s S&P 100 are larger, averaging 11.9 directors.
Market capitalization vs. board size in the TOP 200 Companies with market capitalization below Rs. 500,000 crore ($60 billion) have an average board size of 9.7 directors, while those above Rs. 500,000 crore ($60 billion) average 12.1 directors. The correlation between market capitalization and board size is generally weak, except for the nine organizations that fall into this market capitalization over Rs. 500,000 crore range. However, given the limited sample size, it’s challenging to derive robust conclusions from this alone. Despite over-boarding perceptions, directors in India don’t hold significantly more board seats than their global peers SEBI regulations limit directors to serving on a maximum of seven listed company boards.
While there is a perception that directors in India are over-boarded, our analysis shows that the average director among India’s TOP 200 companies hold 2.1 listed board seats, which aligns closely with their global counterparts, where directors typically hold 1.9 to 2.0 listed board seats. However, independent directors in the TOP 200 companies hold slightly more, with an average of 2.5 listed board seats, compared to 1.8 to 2.1 seats in other markets. TOP 200 board independence Independent board chair representation behind other markets The proportion of independent board chairs among the TOP 200 companies stands at 21%. The financial services sector maintains the highest proportion of independent board chairs at 38%, driven by specific regulatory requirements. For instance, the Reserve Bank of India mandates that the board chair of commercial banks be an independent director.
While there is not an equivalent mandate for insurance companies, as of May 2024, these organizations must seek prior approval from the Insurance Regulatory and Development Authority before appointing their board chair. TOP 200 board independence lags behind global peers Within the TOP 200, 53% of directors are independent. By comparison, this is lower than other markets, as 64% of STI 30 directors, 74% of FTSE 100 directors, and 86% of S&P 100 directors identify as independent (Figure 3c). SEBI regulations stipulate that boards must include at least 50% independent directors if the chair is an executive, and one-third if the chair is non-executive. In India, there has been a significant cultural and regulatory shift toward ensuring publicly listed companies maintain a majority of independent directors on their boards. However, while the proportion of independent directors in India might appear modest compared to other countries, it’s important to recognize the context within which Indian businesses operate.
Many companies in India are family-owned, which inherently influences board composition. Consequently, direct comparisons with countries where family-owned businesses are less prevalent may not provide an accurate conclusion. TOP 200 board diversity Incremental progress towards gender parity on India’s boards India is making gradual progress in enhancing gender diversity within its boardrooms. As of this year, women account for 21% of all directors in the TOP 200, up from 19% in 2023. Despite these gains, India remains behind global standards, where women make up 44% of FTSE 100 directors and 34% of S&P 100 directors. The Companies Act of 2013 mandated that all listed companies must have at least one woman director. Further, the SEBI regulations require the top 1,000 listed entities to include at least one independent woman director. While these regulations mark a significant step forward, India’s journey towards gender parity on boards is comparatively recent, especially when viewed against longer-standing efforts in the UK and US, where organizations like Catalyst and the 30% Club have been advocating for increased women representation on boards since the early 2000s.
As corporate India continues to promote gender diversity in its C-suite, we expect these efforts to positively influence boardroom compositions over time. Women independent directors are nearly 3x more common than women non-independent directors in the TOP 200 Women’s representation on TOP 200 boards highlights a significant disparity between independent and non-independent roles. Women hold 29% of the TOP 200’s independent director roles, a 2pp increase from 27% last year. In contrast, women hold only 11% of the non-independent director positions, a nominal increase from last year’s 10%. While small, these improvements in the independent director segment can largely be attributed to the “at least one independent woman director” mandate. This directive has evidently begun to influence board compositions, enhancing gender diversity more substantially in independent roles than in non-independent ones. Women independent directors in India are younger than their male counterparts
The average age of independent directors in India’s TOP 200 companies is 64.1 years, roughly in line with other markets. On average, women independent directors in these Indian companies are 4.5 years younger than their male counterparts. We observe similar age gaps between men and women board directors in other geographies as well, with the largest gap occurring in the STI 30 (where men are, on average, 7.7 years older than women directors) and the smallest in the S&P 100 (with a 2.1-year difference). TOP 200 board committees demographics Women are better represented across committee chair roles In India’s TOP 200 companies, there has been a notable increase in women’s representation across key committee chair roles (Figures 5a and 5b): NRC chairs have seen the most significant growth, with women’s representation rising to 33% from 26% in 2023 Women hold 31% of CSR chair roles, up from 28% last year Women hold 14% of audit chair roles, up from 10% last year Board chairs have also seen an increase, with women holding 9% of these positions, up from 7% While women saw better representation in CSR chair roles in 2023, the 2024 data reveals that the NRC chair role has taken the lead on gender diversity, indicating a shift in where women leadership is most prevalent. While incrementally improving, HR expertise among NRC chairs remains low In India’s TOP 200 companies, 5% of NRC chairs now bring chief people officer or head of HR experience to the role, up from 4% in 2023 (Figure 5d). Notably, the TOP 200’s technology industry, which did not include any NRCs with HR expertise in 2023, now see 5% of its NRCs bringing this skillset to the table.
The role of the NRC chair is crucial, covering essential governance areas such as C-suite succession planning, executive compensation, organizational culture, and DE&I initiatives. These tasks are critical for aligning corporate strategy with the challenges and opportunities of modern business. Given the complex nature of these responsibilities, it’s beneficial for boards to have NRC chairs with extensive HR experience. Organizations should aim to increase the share of HR leaders in NRC roles, as experience managing complex human capital issues is key to fostering strategic alignment and supporting sustainable business success. More than half of CSR chairs are independent, highlighting a modest decline from last year In India, companies above certain financial thresholds are mandated to spend at least 2% of their average net profits from the last three years on CSR initiatives. This emphasizes the necessity for effective governance in overseeing CSR spending. Despite a modest 3pp decline in the proportion of TOP 200 independent CSR chairs since 2023, the majority remain independent. This ensures that CSR committees are led by those who can provide objective oversight. Furthermore, the data shows that 26% of TOP 200 board chairs are CSR chairs, consistent with the previous year. This underlines the critical importance attributed to CSR roles, showcasing the strategic commitment of top executives to uphold and advance CSR objectives within their governance practices. This ongoing dedication is pivotal for aligning CSR initiatives with broader corporate strategy and ensuring their effective execution.
Mid-term NSE board cessation Across all NSE-listed companies (not just the TOP 200), there are approximately 9,500 independent director positions. In the first three quarters of the year, 3.2% (or 304) of these independent directors terminated their positions prematurely, with 94% of them (285 directors) resigning (Figure 6a). Of the 285 independent directors who resigned in 2024, 54% cited preoccupation with other commitments as their reason, up from 47% in 2023. Other common reasons included personal issues (27%) and health or age (6%). Notably, 2% (5 directors) mentioned conflicts such as disagreements with management, up from 1% (2 directors) in 2023. SEBI requires companies to disclose detailed reasons for the premature resignations of independent directors. Companies must report these reasons to the stock exchanges within seven days, including the full resignation letter.
Furthermore, directors are required to affirm that there are no undisclosed reasons beyond those provided, aiming to prevent evasive explanations. If reasons such as pre-occupation or personal reasons are stated in the resignation letter, then a one-year cooling off period is required before the individual can seek appointment in another listed entity. With SEBI’s oversight, more directors are addressing governance and ethical issues. This is evidenced by the slight increase in the number of directors citing disagreements with management, although the overall number remains small. Still, this push for transparency is expected to foster a culture of accountability and ethical governance within corporate boards.
Looking Forward: The Future of India’s TOP 200 Boards Regulatory reforms in India have continuously evolved, redefining and enhancing the importance of independent directors. The role of independent directors is crucial in navigating the rapidly changing business landscape and ensuring effective governance. This report has outlined key trends and demographics within India’s TOP 200 boards, including insights into independence, board diversity, and independent director mid-term cessation. We hope that this report can serve as a benchmark for organizations aiming to elevate governance standards. We are encouraged by the improvements in most of the metrics assessed, some of which now align with other leading markets. These regulations are fostering a culture of excellence that we expect to continue advancing in the coming years. Read More.
Board Effectiveness | The Importance Of Board Committees In Corporate Governance
Board committees are essential in enhancing a board’s efficiency and strategic direction by enabling focused oversight on complex, evolving corporate issues. The business of business is no longer only profit maximisation.
It has been redefined to focus on generating value not just for shareholders but for all stakeholders, promoting the long-term sustainable success of the company, and contributing to society. Business is now more complex.
Digital transformation, cybersecurity, artificial intelligence, recruitment and retention, climate change, geopolitics are just some of the more recent issues that boards need to address. Boards deal with this evolving and ever-expanding list through board committees that allow for enhanced decision-making. Read More.
Corporate Governance Trends | Top 10 Governance And Leadership Trends In Current Times
Unconventional developments in geopolitics, ethics, economies and technology may reshape corporate governance and leadership in the current times, beyond traditional concerns like ESG and shareholder activism. A series of unconventional developments may impact corporate governance and leadership initiatives in 2025. These extend beyond the usual topics such as shareholder activism, cybersecurity, regulatory enforcement, and ESG. Rather, they reflect a tier of unique ethical, economic, technology, global and political concerns poised to affect board members in significant and perhaps unanticipated ways.
1. Addressing Continued Volatility. Directors must confront the implications of continued political, social, global, economic and regulatory volatility. This will be driven in part by the prospect of significant change in federal policies and programs, including tariffs, government efficiency and immigration. It may also reflect broader concerns with economic growth; international conflict and continued societal fragmentation. To address these challenges will require directors to exercise heightened attentiveness and closer interaction with management.
2. Board Oversight of AI. New recommendations from the National Association of Corporate Directors provide a strong platform from which the board of directors may formalize its oversight of artificial intelligence and related technology. This would include internal structures for board education, monitoring, risk prevention and regulatory compliance. Boards will also need to confront internal philosophical disputes between the benefits of AI and the speed with which it should be implemented, and the risks of AI and its responsible deployment.
3. Pressure on the Board/Management Dynamic. Directors and executives will need to reconfirm their respective roles and relationships in order to reduce the potential for internal tension. This, as increasing pressures on directors to become more engaged clash with related concerns of executives with board micromanagement. Clarity will be sought on the lines of decision-making, to avoid disagreement and dispute over what is properly the responsibility of the board, and what is properly the responsibility of management.
4. Intra-Board Collegiality. Increasing concerns with governance effectiveness will motivate boards to confront barriers to intra-board collegiality and supportive behavior. This may include re-evaluating ground rules for the conduct of board business; activating all board voices in support of constructive discussions; helping the board withstand stress and discord within the context of disagreement; setting clear expectations for director conduct; enforcing existing board codes of conduct, and helping attract and retain top board talent.
5. Board member Commitment. Directors should anticipate renewed scrutiny of their individual ability to commit the necessary amount of time and energy to their board duties. Influential third party groups are encouraging a new, more structured approach to director engagement, particularly as it may apply to overcommitted directors. This approach often incorporates both a requirement that company directors only serve on a certain number of outside boards, as well as a process to confirm annual compliance with such a service limitation.
6. CEO Succession Protocols. The dramatic increase in CEO turnover will focus particular attention on the adequacy of board oversight of executive succession practices. Attention will be drawn to factors such as the existence of a standing succession committee and its composition; the availability of outside search firm resources; up-to-date evaluation matrices; a compensation and benefits framework; the process for considering internal candidates, including those from the board; and the existence of emergency succession protocols.
7. Conflicts of Interest Policies. Judicial decisions, media reports and third party ethics and contracting standards will combine to prompt leadership to assure the effectiveness of existing conflicts of interest policies. Particular focus will extend to the scope of disclosure (financial and nonfinancial interests); formal standards of review; the independence of the review process; policy application to “potential” as well as “actual” conflicts; policy enforcement; and limitations on both policy waivers and on conflicts management plans.
8. Board Composition and Refreshment. Notable new data will encourage boards and their nominating committees to adopt a board composition philosophy that is long term in nature, to better assure the availability of core competencies to address challenges into the future. Such efforts may include greater emphasis on critical director qualifications, such as business strategy experience; depersonalized director succession planning; targeted use of age and term limits; discrete application of “offboarding” mechanisms; and “fitness to serve” policies.
9. Corporate Compliance Challenges. Boards will face unique challenges to their oversight of corporate compliance should the new administration shift its law enforcement focus away from corporate prosecutions and criminal sanctions against corporations. The expectation of relaxed white collar regulation may require additional board commitment to maintain appropriate levels of compliance oversight, resources and practices. Delaware courts are unlikely to relax their own Caremark oversight standards for officers and directors.
10. Workforce Culture Concerns. The preservation of a positive workforce culture – an important corporate asset – will require the renewed attention of corporate boards. This, given increasing political pressures on corporate support of diversity, equity and inclusion policies, and lingering barriers to gender equity progress. Corporate leaders will be called upon to overcome self-satisfaction with progress made in the advancement of gender parity for women, especially those in senior and middle management. Read More.
Featured Blog
Navigating Board Evaluations: A Vital Component Of Effective Governance
In the world of corporate governance, board evaluations are a crucial practice which help organizations assess their board as well as the overall organization’s effectiveness and performance. These evaluations, when conducted rigorously and thoughtfully, can lead to improved decision-making, enhanced transparency, and ultimately, the overall success of the organization. Effective evaluations help boards align their activities with the organization’s strategic goals, ensuring good governance practices. Read More.
Readworthy Resources
Strategies To Make Board Meetings More Interactive And Efficient.
The Increasing Focus Of Organizations On Sustainability And Long-Term Value Creation.
The Evolving Role Of Board Of Directors And Management Teams.
