It’s All About the “S” – Social Gets More Airtime During Earnings Calls
The S—historically the most elusive element in the ESG trilogy—has finally had its day. Social topics received more attention than ever this earning season, likely sparked by the SEC’s recent revisions to the Reg S-K calling for enhanced disclosure around human capital in the 10-K.
From our vantage point, investors are not pressuring for this information to be included in earnings calls. But ESG stewardship teams are looking for more proof that the S pillar is being integrated into daily operations. Executives are obliging, leveraging the fresh language in their new 10-Ks to share the details of their companies’ social efforts.
Some companies spoke to Diversity, Equity, and Inclusion (DEI). Others tied their social dialogue to COVID-19. Some even shared how social issues are now linked to executive compensation. No matter how companies chose to address the topic, it’s clear that S is now on par with E and G when it comes to effective financial reporting and investor communications.
Here are some of our favorite snippets from this season’s calls:
Cars.com CEO, Alex Vetter, took a victory lap for diversity at his company, announcing that executive compensation is now partially tied to DEI goals.
“We are proud to have one of the most diverse executive teams and companies in our industry, with 46% of Cars’ employees identifying as female and 23% identifying as racially or ethnically diverse… In 2021, we will continue to focus on DEI, reflecting the important role these actions play in maintaining Cars’ strong corporate culture and ensuring we retain the industry’s best and brightest talent. Additionally, each of our executive team members’ compensation will now be linked to DEI.”
CEO Lynn Wood identifies employee engagement as a catalyst for change and speaks to her company’s response to employees and customers affected by COVID-19.
“And I’m not sure there’s been a stronger call to action than 2020. As we think about the tragic death, the George Floyd and others, it’s been an opportunity for us at Duke to have conversations. We’ve held over 400 of them. We call them pathways to inclusion conversations. It’s an opportunity for our employees to talk about how these events have impacted them. And I believe it will be a catalyst for change, for us to continue driving diversity in our supply chain and diversity in our leadership, our work is not done… And I’m not sure there’s a better example of how all this comes together than our response to COVID, where we focus on health and safety of employees and really health and safety of their well-being, with paid time off, and stipends and other things to help employees during this time. And also work with our customers, waiving fees, discontinuing disconnects and working generously and flexibly around deferred payment arrangements.”
Hewlett Packard Enterprise
President and CEO Antonio Neri highlights high employee engagement scores and new human capital goals tied to management compensation.
“So we’ve significantly increased investment in human capital, which includes training and competitive benefits… And it really shows in record high employee engagement scores… as well as declining turnover rates. Management goals and executive compensation, in the case of HPE, are actually tied to human capital factors related to talent retention and organizational diversity targets.”
Chairman and CEO Mike Lamach highlights broad-based employee ownership as a key differentiator at his company.
“Our 2020 accomplishments, especially in the area of human capital management, are a differentiator. We see a broad-based employee ownership as a game-changer. It takes performance to a new level. We’re thinking and acting like no other. That’s one of our core values. It changes the mindset from this is a company I work for to this is my company. It’s a massive shift. Employees are highly engaged and active participants in our journey to create long-term value.”
Johnson & Johnson
CEO Alex Gorsky focused on board oversight of human capital.
“The Executive Committee is directly accountable for the creation and execution of our sustainability strategy and delivering against commitments. The EC annually reviews progress against our Health for Humanity strategy and goals, and several EC members review the annual Health for Humanity Report prior to publication. The Board has overall accountability for oversight of our sustainability strategy, programs, and practices through the Science, Technology & Sustainability Committee of the Board. The STSC reviews annual progress against our Health for Humanity strategy and goals as well as our overall ESG efforts.”
CEO Mitchell Butler discussed additional payments made to front-line workers and corporate community giving in response to the pandemic.
“In light of the significant challenges throughout 2020 we also took additional measures in support of our employees and communities. We provided additional compensation and benefits in the early stages of the pandemic to reduce the financial impact on employees and some of the hardest hit regions. We provided supplemental payments to our frontline workers to thank them for their courage and agility in serving our customers’ essential needs. And we stepped up our level of community engagement including an additional $10 million contribution for charitable causes.”
Chairman and CEO Craig Menear addressed enhanced compensation for associates during the COVID-19 crisis.
“At the end of the day, it is our people and culture that make us unique. As a result, investing in our associates during this time was one of the easier decisions we made this year. During fiscal 2020, in addition to record-success sharing payouts, we invested a total of approximately $2 billion on enhanced compensation and benefits for our associates.”
Give Your S Its Due
Now more than ever, investors, employees, and customers want to know how companies are investing in and caring for their people. Take your cue from the leaders who are proactively making Social part of their earnings dialogue. And start giving your S story the airtime it deserves.