Executive Pay Tied to Corporate Sustainability for Another Major Company

Last week, The Clorox Company announced a new initiative that ties executive pay to the realization of environmental, social and governance (ESG) goals. In tying executive pay to sustainability goals The Clorox Company joins oil companies Royal Dutch Shell PLC and BP PLC, corporations that have already implemented similarly inspired executive pay or bonus structures.

Laura Stein, Clorox executive vice president – general counsel and Corporate Affairs, explained, “Now more than ever, a broad spectrum of stakeholders, from investors to consumers, from customers to employees, are increasingly expecting companies to lead in driving positive environmental, social and ethical change, while ensuring they create and deliver value. Our ambitious, integrated IGNITE ESG goals aim to deliver on that aspiration through our focus on innovating for Good Growth.”

In a statement to Dow Jones Newswires, Benno Dorer, chairman and CEO at Clorox, said, “As a mission-driven company, it’s important for us to continue integrating ESG into our overall business strategy.”

According to CFO Magazine, the plan impacts the executive pay of the company’s 14-member Clorox Executive Committee, including CFO Kevin Jacobsen who earned nearly $2.3 million in fiscal 2019 with an incentive plan bonus of $331,650 and CEO Benno Dorer, who earned over $9.3 million and received an incentive plan bonus of $1.2 million. In fiscal year 2018, The Clorox Company recorded sales of $6.1 billion.

“The Clorox Company’s ESG initiative lines up with the Business Roundtables’ ‘Embracing Sustainability’ challenge in which Roundtable CEOs are asked to share on social media how their companies are implementing sustainable programs for the betterment of their employees and local communities,” said Steve Broadbent. “It’s a huge paradigm change from the days when every CEO’s first goal was to create shareholder value. The recent dialogue on sustainability initiatives is just the tip of the iceberg in corporate governance changes that will be seen in the coming years.”

Last February, The Clorox Company was ranked No. 7 on Barron’s List of 100 Most Sustainable U.S. Companies. Since 2011, the company has reduced its greenhouse gas emissions by 32 percent, reduced its energy use by 17 percent, reduced its water consumption by 22 percent and reduced its solid waste to landfill on a per-case-sold-basis by 33 percent. Excluding energy use, The Clorox Company had at that time, already exceeded its goal of achieving a 20 percent reduction in each of these target areas by the year 2020.

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