Principles of Responsible Renumeration: bridging the gap between purpose and pay
We are honored to have been part of this year’s World Economic Forum. During a session we co-hosted on January 19th, we launched our Principles of Responsible Renumeration (PRR).
CEOs and board members are increasingly expected to lead a positive change and contribute to a more sustainable economy, which requires making different corporate decisions. Executive remuneration is a lever for guiding corporate behavior and is the truest expression of a corporation’s real priorities.
Why are the Principles of Responsible Renumeration necessary?
We have developed the Principles of Responsible Renumeration to support and accelerate a positive global transition and to stimulate progress on the UN SDGs. The PRR are fundamental but pragmatic guidelines that can support businesses in their transition to becoming more sustainable and responsible.
Let me share some of the fundamental considerations to develop the PRR. Or actually, the necessity and rationale to do so. Of the world’s 200 largest economies, 157 are corporations. Corporate supply chain emissions generate 60% of all global emissions. Climate change and environmental degradation could jeopardize 1.2 billion jobs, which means nearly 40% of the global workforce.
Managing Director, Reward Value Foundation
The gap between purpose and pay
As we all know, it is fashionable to see corporate scale as a negative thing. We believe that is the wrong way to look at it. We believe that using the scale of corporations and the creativity and good will of the millions of smart, dedicated and driven people working for them is undoubtedly our best chance of achieving a sustainable and future-proof economy. And corporations themselves seem to agree. Most of them claim, quite publicly, that they are led by a higher purpose than profit alone.
However, when you look at the incentives offered to the executives of most large corporations across the globe, a very different picture emerges. In nearly all public companies we’ve looked at as Reward Value, there is a – sometimes significant – gap between the commitments made to people and the planet and the results for which its executives are rewarded. In other words: there’s a gap between purpose and pay.
Principles of Responsible Renumeration as a pragmatic instrument
Traditionally, remuneration policies are often established less by design but more by convention. That’s the way it has always been. Rather than making me cynical, this gives me a great deal of hope. There’s no dark force creating the gap. It’s just a habit, mixed with a fear of being the first to change.
With the PRR, we have created a pragmatic instrument to help corporations design rewards that encourage their executives to live up to them. A step forward on the path to positive change and the realization of the UN Sustainable Development Goals.
To find out more about the PRR and Reward Value, please visit: www.rewardvalue.org