Center on Executive Compensation Exclusive – DEI Metrics

A slew of 2024 proxy studies have reached the same conclusion: the prevalence of DEI in executive compensation is “not only widespread, but increasing in prevalence.” So what, if anything, is changing? 

Metrics up, detail down: According to a new Teneo study, some (not all, not even most) companies are disclosing less detail in order to pacify anti-DEI activists, but this risks angering investors.  

• Teneo found 69% of the S&P 500 now use DEI metrics, up from 66% last year – and only 10 companies removed DEI disclosures while 16 companies added them.  

• Of those disclosing DEI metrics, 55% provided the same level of detail as last year while a third scaled back disclosures. This included removing the specific metrics or goals used, changing the term to inclusion or belonging, and broadening from diversity to talent.  

• About half of companies still use objective, rather than subjective, DEI metrics, and these companies were less likely to reduce the level of detail disclosed. 

• Although representation metrics remain by far the most common, others included inclusive culture, supplier diversity, belonging scores, talent initiatives and DEI strategy execution. 

• About 42% of companies now formalize DEI metrics as a weighted component or modifier (up from 38% last year) and the impact is limited to 5-10% of incentive payout. 

What’s next: Semler believes DEI prevalence may soften in response to political pressure, while Teneo argues that investor and proxy advisor constraints make this unlikely. 

• As this NACD blog notes, the majority of successful anti-DEI initiatives have been directed at diversity trainings, fellowships, grants, and the like, rather than the use of reasonable DEI metrics in executive pay. 

• However, some risk remains – clearly state the connection between use of DEI metrics and business objectives “to minimize the chance that such efforts appear performative.”