Is it a good idea to link DE&I objectives to executive compensation?

Is it a good idea to link DE&I objectives to executive compensation?

Establishing leadership buy-in is the cornerstone of a company’s successful Diversity, Equity and Inclusion initiatives. However, motivating people to do anything is as complex as people themselves. Amongst the many carrots and sticks employers are adopting to this end, the concept of tying executive compensation to progress on DE&I goals is setting corporate America abuzz. The problem with connecting pay and diverse hiring is that the hiring manager has been handed a financial incentive to make a hiring decision based on race, gender or some other protected characteristic. In the context of anti-discrimination law, hiring decisions should be made based on qualifications and other relevant business considerations. A monetary incentive, however, can make those legitimate business-related criteria secondary in nature. Specifically, the concern is that executives and managers will discriminate to get their bonus.

As an alternative, a monetary incentive given to a recruiter can be acceptable since the recruiter isn’t making hiring decisions. Instead the recruiter is being incentivized to broaden the applicant pool. Broadening the pool of candidates isn’t a hiring decision and therefore, there is a reasonable argument that it could be a viable alternative. Nevertheless, we always caution reaching out to partner with counsel before implementing any such incentive.

Which brings us right back to the question of securing executive buy-in. Is compensation an entirely unusable tool in this space? Not at all. One possibility is to reward pro-DE&I behavior, not numbers. In that vein, executives who substantively participate in Employee Resource Groups as members and allies should be rewarded as should those who make the extra effort to meaningfully support mentorship programs. Similarly, executives who enhance the Company’s reputation by spearheading internal company-approved DE&I initiatives or community-based DE&I efforts could receive monetary and corporate recognition for their efforts.

Ultimately, tying executive compensation to diversity and anti-discrimination initiatives is just one tool in what should be a comprehensive DE&I strategy to give all employees (and applicants) an equal shot to succeed. Key among these tools is to educate and embolden senior leaders in the organization to also be leaders when it comes to embodying DE&I values. When leaders walk the DE&I talk within the workplace, they make clear through their actions and words that equal opportunity is a core value of the company that all employees should work towards.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.