Firms Set ‘Rigorous’ Diversity Targets for Senior Roles

An increasing number of companies are now setting aspirational and rigorous diversity targets, in a bid to hire and promote more qualified underrepresented employees – especially women and people of colour – into management and leadership roles, confirmed a new study.

The findings, recently released by Equilar and the HR Policy Association, revealed a push to increase diversity in management, along with a focus on diversity, equity and inclusion (DE&I) in employee engagement surveys; as well as more companies tying executive compensation to environmental, social and governance (ESG).

In particular the survey revealed a push for women and people of colour in management. The most common approach to promoting diversity in the workforce was increasing the number of women and people of colour in management roles by setting specific percentage targets; with 71.4% focused on women and 62.5% on people of colour.

TYING EXECUTIVE COMPENSATION TO ESG GOALS

Many companies now require a diverse slate of candidates for all roles, with about half of all companies requiring diversity in management roles specifically. “Companies are making diversity and inclusion a top priority for 2022,” shared Ani Huang, President and CEO of HR Policy Association’s Center On Executive Compensation. “The survey results show that most companies aim for rigorous diversity goals, even if they don’t necessarily tie those targets to pay.”

In fact, the survey revealed that most respondents approve of tying executive compensation to ESG issues. Although their companies may not have taken this step yet, most participants felt that tying executive compensation to ESG issues was at least moderately important; with some saying it was very important. In their reasoning, respondents cited accountability, focus and the importance of measuring in order to make progress. However, only two out of five respondents currently do so; 41.6% of survey participants tie ESG to pay in an explicit, quantitative way. A third of survey participants said they don’t currently tie ESG metrics to the annual plan at all, with another 19% including ESG metrics, but not setting explicit goals.

DRIVING DIVERSITY

 “The joint survey provides more granular data on how companies are addressing these critical issues,” stated David Chun, CEO and Founder at Equilar. “The insights shared by CHROs at surveyed organisations show the varied methods companies use to drive employee engagement and diversity initiatives, the importance of ESG and candid thoughts on tying ESG metrics to compensation.”

Other key findings on topics revealed that:

• Regular pay gap analyses are becoming the standard: 71.9% of survey participants reported performing pay gap analyses periodically, either annually or otherwise.
• Employee engagement surveys highlight DE&I topics: 90% of participants reported conducting a periodic employee engagement survey. When asked which topics they highlight in engagement surveys and discussions, 87% said they focus on DE&I topics. Another 81.5% focus on current business and operational issues, with 79.4% highlighting mental health and wellbeing.

Directors with environmental, social and governance (ESG) and human capital skills are highly sought after by company boardrooms, according to a recent study. Click here to read more.