Two Dutch companies are to link senior executive pay to social and environmental performance.
Life sciences group DSM and mail business TNT will join a growing band of companies that have introduced similar policies in the Netherlands, where investor pressure on the executive remuneration has been especially strong.
DSM, which had a turnover of €9billion ($11.9bn, £7.8bn) last year, says half the short-term bonuses for its management board will be linked to targets such as greenhouse gas reductions and energy use, the introduction of environment-friendly products, and employee satisfaction.
Last year DSM was the target of shareholder activists concerned at the way it pays senior executives. Since then it has consulted widely on the new policy, which was adopted at its annual meeting on 31 March.
The €10.4bn-turnover TNT, which revealed its new remuneration policy at its annual meeting last month, will now pay 50 per cent of remuneration for board members based on factors such as the level of employee engagement as measured in surveys (15 per cent), carbon dioxide efficiency and health and safety objectives (15 per cent), and customer satisfaction (20 per cent).
Other Netherlands-based groups, such as Royal Dutch Shell, the insurance giant ING, and Akzo Nobel, the paint company, have also recently brought non-financial indicators into remuneration packages.
Corneel Maes, a Porter Novelli consultant, said: ‘It looks like the Dutch are claiming a leadership role in linking variable pay to sustainability, environmental care, employee welfare and customer satisfaction.’
Carola van Lamoen, senior engagement specialist and pay expert at the Dutch investor Robeco, said she was pleased to see companies acting after years of cajoling. She said linking pay to sustainability was more likely to produce ‘stable, above-average results’ for a firm.