1

2

Being a good steward of the environment and our communities and being an efficient and profitable business,

are not mutually exclusive. In fact they are one and the same.

The emphasis placed by more and more companies on corporate social responsibility symbolizes the recognition that prosperity is best

achieved in an inclusive society.

A business that makes nothing but money is a poor kind of business.

Lee ScottFormer ceo, WaLmart

tony BLair, Former prime miniSter, UK

Henry Ford

I

The information included in this report should not be construed as investment advice or as any solicitation, offer, or recommendation to buy or sell any of the securities referred to herein. Moreover, the content of this publication is based on publicly available information and on sources believed to be accurate and reliable. However, no representations or warranties, expressed or implied, are made as to the accuracy, completeness or usefulness

of any such content. Glass Lewis is not responsible for any actions taken or not taken on the basis of this information.

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Zally ahmadinadia boro

Katherine chenandrew debnar

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WrITTen And edITed By

conTrIBuTIons provIded By

ArTWork By MArTIn WIcksTroMhttp://www.benjaminbay.com/

LAyouT And desIGn By jAron scHneIder

For InquIrIes reGArdInG THe conTenTs oF THIs reporT, pLeAse conTAcT esg@glasslewis.com.

copyrIGHT 2012 GLAss LeWIs & co., LLcALL rIGHTs reserved.

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To assist our clients in their efforts to invest responsibly and to further inform our esG research, Glass Lewis has established a partnership

with IW Financial, a leading provider of environmental, social and governance (“esG”) research, consulting and patented technology solutions. Leading asset management firms, institutions, and wealth managers rely on IW Financial to identify and create esG

solutions tailored to meet their organizations specific needs.

II

taBLeoF conTenTs

InTroducTIon & key FIndInGs

What is sustainability?

MeTHodoLoGy

Inclusion/exclusion of companiesdual-Listed companiesclassifying Metricsquality of Linksenvironmental/social performance data

GLoBAL AnALysIs

The Big picturequality of LinksTypes of Metricscase study: Transoceancase study: shiseido co. Ltd.

unITed sTATes

The Big pictureTypes of Metricsenvironmental performancecase study: IntelBoard oversight of sustainability Issuessupport for related shareholder proposals

FInAL THouGHTs

AppendIx A

BIBLIoGrApHy

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InTroducTIon& key findingsexecutive compensation has been the most controversial issue facing companies in recent years. From regulation requiring u.s. companies to provide investors with advisory votes on executive compensation, to the potential of binding say-on-pay votes in the uk, shareholders have a growing role in advising companies on how compensation plans should be structured. As part of this assessment, many investors are focusing on the concept that properly designed executive remuneration programs should incentivize management to focus on long-term, sustainable corporate growth, rather than rewarding the short-termism that was a significant contributing factor in the recent global financial crisis.

In an effort to ensure that companies properly encourage sustainable, long-term growth, there has been a trend among companies to incorporate metrics associated with sustainability into long- and short-term incentive plans. Investors have also become more vocal in encouraging the use of such metrics in determining executive remuneration. For example, in june 2012, the united nations principles for responsible Investment (“un prI”) released guidance for Integrating environmental, social & Governance (“esG”) Issues into executive pay.1 This guidance, which was established through discussion with investors as well as issuers, addresses the three key areas of constructing compensation packages that successfully utilize sustainability metrics: (i) identifying appropriate esG metrics for each 1 united nations principles for responsible Investment, united nations Global compact LeAd. “Integrating esG Issues Into executive pay: Guidance for Investors and companies.” june, 2012.

company; (ii) linking these metrics to executive pay packages; and (iii) providing high-quality disclosure on sustainability-linked compensation plans. please refer to Appendix A for more information regarding this important guidance.

This movement toward the integration of sustainability-related compensation metrics into executive remuneration plans stems from the belief that companies that promote sustainable business practices often outperform those that do not. This belief has recently been further reinforced, as companies such as Tokyo electric power company, Walmart, Bp and Massey energy have suffered massive blows to shareholder wealth based on significant environmental, social or governance-related issues. These issues have highlighted the considerable implications of companies’ failure to appropriately indentify, manage and mitigate their risk exposure to environmental, social and ethical issues. Moreover, the integration of these factors has also resulted in an evolving definition of corporate performance. complementing their traditional analysis of performance metrics, such as stock price movement and eps, many mainstream investors- and a growing number of corporations- are now

2

embracing the importance of including a company’s operational impact on the environment and society in discussions of corporate performance. clearly, various events in the past several decades, including toxic flooding in Hungary, the chernobyl nuclear disaster, and other recent events have demonstrated (if at least anecdotally) that there are very real and tangible bottom-line impacts of poor environmental and social performance.

This growing consensus of the importance of responsible corporate performance is supported by a mounting body of research showing that firms that operate in a more responsible manner may perform better financially. For example, a 2010 study found that analysts are more likely to recommend a stock “buy” for companies that have strong corporate responsibility strategies. Because other studies have shown that analysts’ perceptions are a good proxy for overall investor expectations and perceptions of the long-term earnings potential of a firm, the study’s authors argue that their findings could therefore encourage the linking of strong company-level corporate social responsibility strategies to more value creation in public equity markets.2

Further, a recent study conducted at Harvard Business school found that companies that had voluntarily adopted environmental and social policies exhibited fundamentally different characteristics from a matched sample of firms that had not adopted such policies. For example, the firms that adopted these social and environmental policies were significantly more likely to outperform their counterparts over the long-term, both in terms of stock market and accounting performance and also more likely to tie top executive incentives to sustainability metrics. Further, the study’s authors concluded that this outperformance was stronger in sectors where firms significantly depended on the extraction of large amounts of natural resources and in instances where a firm’s customers were individual consumers or where companies competed on the basis of brands and reputation.3

Another study by researchers at Harvard Business school and the London Business school found that 2 Ioannou, Ioannis, sarafeim, George. “The Impact of corporate social responsibility on Investment recommendations.” Harvard Business school. August, 2010.3 eccles, robert G., Ioannou, Ionnis, serafeim, George. “The Impact of a corporate culture of sustainability on corporate Behavior and performance.” Harvard Business school. May 9, 2012.

the better a firm’s corporate social responsibility performance, the fewer capital restraints it will face. The study determined that better corporate social responsibility performance is the result of improved stakeholder engagement, which reduces the likelihood of opportunistic behavior and compels managers to adopt a more long-term strategy, which, in turn, introduces a more efficient form of contracting with key constituents. Finally, the study concluded that companies that employ positive corporate social responsibility practices are likely to report these practices, thus increasing their overall transparency, which can ease the fears of investors and make these companies more likely candidates for investment.4

perhaps unsurprisingly, a 2005 study found that companies with better environmental and social performance may also have different attitudes toward risk and compensation practices. This study, which examined companies in the domini 400 social Index, which selects companies using a socially responsible screen, compared with comparable companies outside the index, found that the value of stock option grants is strongly related to stock return volatility for firms that are not socially responsible but not for firms that were categorized as performing in a socially responsible manner. The authors suggest that this means that an increase in the value of stock option grants does not influence the ceos of socially responsible firms to take on more risk. Further, the study also found firms that are considered to be socially responsible pay their executives higher annual salaries, but that the ceos of these firms receive significantly less non-traditional compensation, such as perquisites, debt forgiveness and other personal benefits, than do ceos at the firms5 not deemed socially responsible.

Given that, through academic research, it has been demonstrated that stronger corporate social responsibility performance can lead to fewer capital restraints, lower cash pay-performance sensitivity and increased transparency and engagement, it stands to reason that more and more companies would link these sustainability metrics to executive compensation, in efforts to incentivize executive 4 cheng, Beiting, Ioannou, Ioannis, serafeim, George. “corporate social responsibility and Access to Finance.” Harvard Business school. May 9. 2012.5 Frye, Melissa B., nelling, edward, Webb, elizabeth. “executive compensation in socially responsible Firms.” Corporate Governance: An international Review. volume 14, Issue 5, pages 446–455, september 2006.

3

behavior to pursue and achieve an exemplary level of financial and responsible corporate performance. Thus, it is not surprising that our findings in this report show that companies, on a year-over-year basis are consistently increasingly linking pay to sustainability.

However, the jury is still out regarding whether linking pay to sustainability metrics is ultimately beneficial to a company’s bottom-line financial performance. evidence that companies act in a more responsible manner financially outperform their peers is nascent and somewhat ambiguous, as demonstrated in a 2009 study that found u.s. companies with an explicit policy linking compensation to environmental performance and that have board-level committees that oversee environmental issues do not tend to reward sound environmental strategies more than those without such structures, suggesting that these mechanisms play merely a symbolic role. However, the study did find that long-term pay could be an important incentive for pollution prevention and that it is an especially effective instrument for environmental mitigation for companies in highly polluting industries, where emissions are of a greater concern and the environmental impact is more pronounced.6 similarly, a 2005 study of 90 publicly-traded canadian companies found a marginally significant relationship between long-term compensation and corporate responsibility practices and environmental actions. The study also found that companies that use long-term compensation are more likely to mitigate product and environmental risks than those that do not.7 Additionally, a 2011 study of 490 global companies by s.B.M rosendaal from erasmus school of economics found that incorporating sustainability targets in executive compensation schemes does contribute to sustainable development. Moreover, the study found that executives were not incentivized by either a higher percentage of sustainability-related targets or by a specific focus on short- or long-term rewards. rather, the study found that simply including sustainability targets in remuneration packages was sufficient to encourage sustainable development.8

While some may argue that various firms have

6 Berrone, pascual, Gomez-Mejia, Luis r.. “environmental performance and executive compensation: An Integrated Agency-Institutional perspective.” Academy of Management Journal, vol. 52, no. 1, 103-126. 2009.7 Mahoney, L.s., Thorne, Linda. “corporate social responsibility and Long-term compensation: evidence from canada.” Journal of Business Ethics, vol. 57 no. 3, 241-253. 20058 rosendaal, s.B.M. “sustainability Targets in executive remuneration: An Analysis of the contribution of sustainability Targets in executive remuneration to sustainable development.” erasmus school of economics. August 11, 2011.

adopted corporate responsibility approaches that are linked to remuneration packages in order to appease vocal or activist shareholders and stakeholders, others insist that these companies have linked executive pay to sustainability measures and goals in order to drive executive behavior to effectively mitigate risk, increase efficiencies and to increase the long-term financial strength of the company. Irrespective of their motives, there is no disputing that a growing number of domestic and foreign firms operating in disparate industries have chosen to link social and environmental performance to executive compensation.

In this study, we examine the link between executive compensation and sustainability. Glass Lewis reviewed the most recent short- and long-term compensation plans disclosed for the s&p 100, s&p/Tsx 60, FTse 50, s&p/Asx 50, IBrx 50, IBex 35, cAc 40, Aex 25, oBx 25, sMI 20, and dAx 30 as of August 1, 2012. We confined our analysis of executive compensation plans to disclosure provided by companies in standard regulatory filings, such as annual reports and proxy statements or circulars that were intended to inform shareholders about matters subject to a vote at annual shareholders meetings. specifically, we examine companies and sectors to determine which companies link sustainability metrics to executive remuneration, and in what ways this has been accomplished. However, to do this, we must begin with an examination of what sustainability is and how it is to be interpreted for the purposes of this review.

what is sustainability?A commonly cited definition of sustainable development, devised by the Bruntland commission of the united nations in 1987, simply provides that “sustainable development is development that meets the need of the present without compromising the ability of future generations to meet their needs.” However, the word “sustainability” has come to mean many things to many people. While some may employ a board definition, which includes social and environmental issues as well as the treatment of employees, customers, local communities and other stakeholders, some may apply a more narrow definition that deals only with environmental practices. For the purposes of this report, we adopted a broad definition of sustainability, to capture the broadest number of firms that are actively linking

4

executive compensation with environmental and/or social issues. specifically, when determining whether a company incorporated sustainability metrics in its executive compensation packages, we included a wide variety of approaches, including, but not limited to:

• environmental performance

• environmental compliance

• environmental projects

• environmental Goals

• employee satisfaction and/or engagement

• safety

• Health

• reduced Injury rates

• Greenhouse Gas emissions reductions

• corporate social responsibility

• community

• sustainability

• diversity

• product safety

• energy efficiency

• compliance with Internal ethical standards

• performance relative to a corporate responsibility Index (e.g., dow jones sustainability Index)

key FIndInGs FroM THIs revIeW IncLude: Global:

• In 2012, 42% of companies provided a link between compensation and sustainability, up from 40% in 2011;

• Australia, for the third year in a row, maintains the highest proportion of companies that link compensation to sustainability (84%), while Brazil and spain maintain the lowest proportion of companies providing this link (12% and 14%, respectively);

• We observed a year-over-year increase in the proportion of companies providing a link between compensation and sustainability in nearly every market, with the lone exception of the united states;

• There was a slight decrease in the number of

companies providing a “weak” link between compensation and sustainability, indicating better overall disclosure of this link in companies official proxy filings;

• companies are increasingly linking remuneration to environmentally-focused metrics; and

• 52% of all linked companies, or 22% of all companies in our review, provide a link between compensation and safety metrics.

The united states:

• The number and types of links observed in the united states remained remarkably similar year-over-year, despite significant changes in the constituency of the s&p 100 index;

• 42% of s&p 100 companies provide a link between compensation and sustainability, down slightly from 43% in 2011;

• perhaps unsurprisingly, the utilities and energy sectors are leading the way: 100% of utilities companies and 90% of energy companies are using sustainability-related compensation metrics;

• relative to other countries in our review, the u.s. has a high proportion of companies that link compensation to “other” metrics, which typically include measures related to governance and ethics, and a low proportion of companies that link to environmental factors;

• The u.s. has the highest proportion of companies (31% of linked companies) that provide a link between compensation and diversity;

• u.s. companies that provide a link between safety and compensation have lower fines associated with epA violations than those companies that do not provide a link to sustainability; and

• 64% of s&p 100 companies maintain board-level oversight of sustainability issues, either through a separate committee or through explicit language in the charter of a key committee (audit, compensation, nominating and governance);

• This percentage increases when examining those companies with a “strong” link between compensation and sustainability, where 86% of companies maintain explicit board oversight of sustainability issues.

5

inclusion/exclusion of companiesBuilding on the two previous editions of Greening the Green, Glass Lewis has expanded the report to include analysis from companies in Brazil and spain, and increased the number of companies reviewed in Australia and norway.

Glass Lewis reviewed the most recent short-and long-term compensation plans for companies in these indices: s&p 100, FTse 50, s&p/Tsx 60, s&p/Asx 50, IBrx 50, IBex 35, cAc 40, dAx 30, sMI 20, oBx 25, and Aex 25 as of August 1, 2012, as disclosed in official corporate filings, such as annual reports and proxy statements or circulars.

While some firms provide compensation and sustainability information through websites or sustainability reports, those were not reviewed. If the link to sustainability is considered integral to the determination of executive compensation, we believe it should be disclosed in compensation discussions in official filings.

duAL-LIsTed coMpAnIesdual-listed companies, such as ArcelorMittal and rio Tinto, were included in index analysis and thus counted in both countries of listing. However, for cross-market analysis and sector-specific analysis, dual-listed companies were counted only once to

metHodoLoGy

avoid over-weighting.

classifying metricsTo enable comparisons, Glass Lewis grouped all sustainability metrics into three broad categories: “environment,” “social,” and “other.” Metrics that pertained to both environmental and social issues, such as “corporate social responsibility” or “health, safety & environment,” were counted separately in each category, in order to credit companies that encompass multiple sustainable performance criteria.

Quality of linKsWe evaluated the quality of the link between compensation and sustainability at three levels: strong, medium, or weak. A “strong” designation indicates that the percentage of executive compensation linked to sustainability was specifically disclosed. A “medium” classification indicates that sustainability metrics were grouped with other metrics that comprised a specific disclosed percentage of executive compensation. A “weak” rating indicates that the compensation committee stated that sustainability-related metrics were considered when

6

determining executive compensation, but tied no specific percentage of executive compensation to sustainability. The evaluation did not consider the amount or level of compensation awarded for meeting sustainability targets or the level or specificity

of environmental or social performance that must be attained in order to receive compensation. The key issue was whether a specific percentage of linked compensation – regardless of amount – was disclosed.

Verizon (United StateS)

short-term incentive awards are determined based on four factors: (i) adjusted eps (50% of award at target); (ii) revenue (25% of award at target); (iii) free cash flow (20% of award at target); and (iv) diversity (5% of award at target).

Source: 2012 DEF 14A, p. 35

GPT GrouP (aUStRalia)

non-financial performance measures for the purposes of short-term incentive awards represent 30% to 80% of the total award, depending on employment level. non-financial measures include balanced scorecard items that are focused on customers, internal process, and people and knowledge perspectives; they may also focus on the execution of strategy, delivery of key projects and developments, culture change, sustainability, innovation, people management and development, and information technology.

Source: 2011 Annual Financial Report, p. 25

royal DSM (FRance)

sustainability targets represent an on-target pay-out of 20% of base salary. these shared targets linked to sustainability were defined for the short-term incentive: eco+ products - percentage of successful product launches that meet eco+ criteria; energy-efficiency improvement linked to target of 20% increase in energy efficiency in 2020 compared to 2008; and employee engagement index − related to the high performance norm in industry

Source: 2011 Integrated Annual Report, p. 122

GolDcorP (canada)

corporate performance represents 70% to 80% of goldcorp’s short-term incentive program and is determined by three factors: (i) objective performance measures (60%); (ii) specific annual objectives (20%); and (iii) strategic initiatives (20%). strategic initiatives are determined by a general assessment of management success in advancing goldcorp’s strategy and values, including corporate social responsibility (environment, health, safety and sustainability), government affairs, financial and liquidity, and business development.

Source: 2012 Management Information Circular, p.63

StronG

mediUm

eXampLeS

7

environmental performance dataAs a proxy for environmental performance at u.s.-based companies, Glass Lewis used fines paid as a result of penalties levied by the environmental protection Agency (“epA”). The data, which was provided by IW Financial and includes aggregate fines levied on each company since 2009, represents a consistent, quantifiable measurement of a u.s. company’s approach to environmental and social issues. These fines include the value of all violations of: clean Air Act; comprehensive environmental response, compensation, and Liability Act (“cercLA,” or “superfund”); clean Water Act; emergency planning and community right-to-know Act; Federal Insecticide, Fungicide, and rodenticide Act; resource conservation and recovery Act; safe drinking Water Act; and the Toxic substances control Act.

We believed that a uniform calculation that reflected negative performance on an environmental level focused on violations of these regulations could

be an indication of a company’s commitment and adherence to sustainable performance. However, we did not attempt to measure the cost of externalities, i.e., the side effects or consequences of a company’s operations not reflected in the costs of the product or service provided by the company, as they are often impossible to calculate in a uniform and consistent manner.

We recognize that the data included in this report is not all-inclusive, as it does not necessarily represent social or ethical performance or the full extent of environmental penalties, such as fines from state or international governments or payments made in lawsuits that were environmental in nature. Further, we recognize that this data may not be an accurate reflection of a company’s commitment or efforts toward sustainable performance. For example, a company that has severely neglected its safety, health or environmental performance may have significant state or foreign penalties levied against it, or it may not have had any significant environmental or social issues that warranted a fine yet.

Vale S.a. (BRazil)

“the main performance indicators [taken into consideration when determining each element of the compensation package] are the company’s performance in comparison with its main competitors (top mining companies), its cash flow return on gross investments (cfrogi), as well as general productivity, safety and environmental indicators.”

Source: Reference Form 2011, p.242

SaBMiller (United kingdom)

“sixty percent of an executive director’s short-term incentive opportunity is based on the degree of achievement of specified financial performance targets, which for the year ended 31 march 2012 was weighted as to 25% to adjusted eps growth, 25% to management ebitda and 10% to group working capital. the remaining 40% is based upon the degree of achievement of specific strategic and personal performance objectives, agreed at the beginning of each year, and evaluated by the committee at the year end. in determining the resulting bonus amounts, the committee also takes into account overall corporate performance and any other factors that it considers appropriate, including environmental, social, and governance issues.”

Source: 2012 Annual Report, p. 72

WeaK

8

GLoBaLAnALysIs

the big picturesince Glass Lewis first issued a Greening the Green report in 2010, there has been a significant increase in the total number of firms that link compensation to sustainability. year-over-year, the figures show growth of only 2%, but when Brazil and spain, the two new additions, are removed, the figure grows from 29% in 2010 to 52% in 2012. In fact, in every market previously reviewed --- with the exception of the u.s. --- there was an increase in the proportion of firms that link executive compensation and sustainability. part of the increase might be attributed to changes in the constituencies of the indexes, as some companies were taken off and others added. Additionally, some of the increase could be attributed to increased disclosure in proxy statements; the link between compensation and sustainability may have existed, but is only now being reported as disclosure

requirements have become more robust. Given the significant and consistent growth, however, these are likely relatively minor factors in the year-over-year increases.

In some instances, shifting public policy may have played a role in driving growth in the number of companies linking compensation to sustainability. In 2010, for example, the government commission of the German corporate Governance code recommended

that executive pay should be “oriented toward sustainable growth of the enterprise.” Further, the German public companies Act (“Aktiengesetz”) requires that executive compensation structures be aligned with sustainable

development of a company.9 As demonstrated in Figure 1.1, German companies that disclose sustainability-related compensation plans have significantly increased since 2011, likely a direct 9 Friedl, Gunther, springer, verena. “current Topic: sustainable compensation systems for executives.” TuM school of Management. june, 2011.

In 2010

29%oF coMpAnIes LInked

coMpensATIon To susTAInABILITy

In 2011

In 2012

40%

42%

THAT nuMBer juMped To

THAT nuMBer GreW AGAIn To

Since 2010, australia has had the highest proportion of companies that link compensation to sustainability.

factoid:

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0%

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DAX 30 (Germany)

SMI 20 (Switzerland)

CAC 40 (France)

IBEX 35 (Spain)

IBrX 50 (Brazil)

AEX 25 (The Netherlands)

OBX 25 (Norway)

FTSE 50 (UK)

S&P/ASX 50(Australia)

S&P/TSX 60 (Canada)

S&P 100 (United States)

2010 2011 2012

percenT oF LInked coMpAnIes By MArkeT

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Materials

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Energy

Consumer Staples

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LInked coMpAnIes By secTor

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response to these public policy initiatives.

establishing a link between compensation and sustainability has also been a growing trend in the uk, where the proportion of companies that disclosed a link between sustainability and compensation grew significantly from 2010 to 2011, and then slightly from 2011 to 2012. According to research from Hewitt new Bridge street, since 2008, non-financial metrics, including “customer satisfaction” and “health, safety & environment” have ranked third among the most common performance measure in annual bonus plans among uk companies, after personal performance metrics and profit. However, this research notes that non-financial metrics, when used, tend to be a minority element of the bonus plans, typically only accounting for 15-25% of remuneration.10

While there was an overall increase in the number of companies linking compensation to sustainability, there were several sectors that demonstrated a decrease. The most notable declines were in the utilities and Materials sectors. This could, as previously noted, reflect changes in index constituents. It may also be explained by the addition of spain and Brazil to the comparison group, as both countries had a number of companies in these sectors, and, as noted in Figure 1.1, tended to have a lower

10 Hewitt new Bridge street “report on FTse 100 directors’ remuneration 2010.” August, 2010.

number of companies that disclosed a link between compensation and sustainability.

There also were several significant increases in the proportion of companies in certain sectors that linked remuneration to sustainability. notably, companies in the Industrials and consumer discretionary sectors had an increased proportion of companies that provided this link on a year-over-year basis.

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26%

28%

46%

25%

25%

50%

29%

31%

40%

STRONG MEDIUM WEAK

201020112012

quALITy oF LInks

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2010

2011

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32% 59% 9%

53% 7%

29% 69% 2%

Types oF MeTrIcs used By LInked coMpAnIes

11

Quality of linKsFor the third year in a row, “weak” links represented the highest proportion of links between compensation and sustainability. However, there was a slight decrease in the number of companies providing a “weak” link between compensation and sustainability from 2011 to 2012, which may be explained by better disclosure of compensation in many markets. Further, it could potentially be a result of companies employing more specific standards for how sustainability metrics are incorporated into sustainability plans, thereby movingfrom a “weak” to a “medium” or “strong” link.

types of metricsAs in both previous reports, socially related metrics were the predominant metric employed by companies that linked compensation to sustainability, representing 53% of such links. However, it is interesting to note that since 2010, the proportion of socially related links has declined on a consistent basis, from 69% in 2010 to 59% in 2011, and finally 53% in

2012. As previously mentioned, for the purposes of this review, when a company disclosed that it linked compensation to safety metrics, the statement was classified as both “social” and “environmental.” Given that “safety” metrics were counted twice, and the proportion of companies with metrics classified as “other” has decreased, there is an increasing focus on solely environmentally focused compensation metrics.

This review looked specifically at three of the most commonly associated sustainability metrics: safety, diversity, and employee engagement. By far, safety is the most commonly used metric linking compensation to sustainability; in this review, 52% of all linked companies and 22% of all companies considered provided a link to safety. The prevalence of this metric is unsurprising, given that it arguably provides the most direct and visible link to shareholder value. Fatalities, accidents, and injuries have a direct, negative, and observable impact on a firm’s bottom line. The same can be said for environmental

Transocean Ltd., a swiss company listed on the nyse, is the world’s largest offshore drilling company. However, the firm is most famous, or infamous, for being the owner of the deepwater Horizon, the offshore drilling rig that that exploded in 2010, killing 11 workers and spilling an estimated 4.9 million barrels of oil a day into the Gulf of Mexico for 87 days. While Bp shouldered much of the public blame for the deepwater Horizon incident, Transocean’s failure to properly mitigate safety risks has been widely accepted as one of the primary causes for the accident. According to a report issued by the united states coast Guard, the events leading to the sinking of the deepwater Horizon were “set into motion by the failure to prevent a well blowout” and the coast Guard stated that its investigation “revealed numerous systems deficiencies, and acts and omissions by Transocean and its deepwater Horizon crew, that had an adverse impact on the ability to prevent to limit the magnitude of the disaster.” ultimately, the coast Guard concluded that the deficiencies that caused the disaster “indicate that Transocean’s failure to have an effective safety management system and instill a culture that emphasizes and ensure safety contributed to this disaster.”1

Given the firm’s line of business and the risks inherent in its operations, ensuring safety of both its workers and its infrastructure is critical to maintaining profitability and generating new business opportunities. As such, it is unsurprising that Transocean has consistently linked remuneration to safety metrics. According to its 2010 Annual report, 25% of the payouts under its 2010 bonus plans were determined by Transocean’s “safety performance,” which was measured by its Total recordable Incident rate (“TrIr”) and its Total potential severity rate (“Tpsr”) (pp.44-45). While 1 united states coast Guard. “report of Investigation into the circumstances surrounding the explosion, Fire, sinking and Loss of eleven crew Members Aboard the Mobile offshore drilling unit deepwater Horizon in the Gulf of Mexico.” April 20-22, 2010.

case studyTrAnsoceAn

100% of Uk companies in the energy sector link compensation to sustainability.

did you know?

12

nUmBerSby the

safety

9%100%

11%

3%

144

The MoST coMMonly uSeD MeTric by companies linking compensation to sustainability

weakly-linkeD coMPanieS in brazil

increaSe in The nuMBer of coMPanieS linkinG SuSTainaBiliTy To enVironMenTal criTeria

Decline in the number of companies providing a “STronG” link BeTween coMPenSaTion anD SuSTainaBiliTy

between 2010 and 2012

coMPanieS in our reView ThaT link coMPenSaTion To “eMPloyee enGaGeMenT”

42 number of s&p/asx 50 constituents that link coMPenSaTion To SuSTainaBiliTy

nuMBer of coMPanieS in our reView ThaT link coMPenSaTion To enVironMenTal MeTricS

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and social catastrophes resulting from inadequate precautions, maintenance or due diligence. disasters such as spills, toxic releases, explosions and structural collapses often lead to substantial fines, considerable clean-up expenditures, inestimable aftermath costs, and negative media attention that affects reputation and brand. due to the serious nature of the risks associated with lack of attention to safety performance, companies, particularly those in the utilities, energy, and Materials sectors frequently chose to employ such metrics, as they are considered objective measures of company performance and crucial factors in risk mitigation.

Another popularly employed metric was “employee engagement,” which was used by 21% of linked companies in our review. Typically, employee engagement refers to employee morale and employee relations, which are considered direct reflections of how engaged employees are in their work. This metric is important to companies in all markets, but was used most predominantly in the united states, Australia and the united kingdom. Given the expense associated with high employee turnover, as well as the profits that can be associated with strong employee productivity, this metric, while it may be difficult to measure on a consistent basis, has strong ties to bottom-line results. diversity, while harder to directly tie to bottom-line results, was also frequently considered. However, given that many recent studies have tied diverse boards and work forces to better financial performance and that many laws and regulations have mandated increased

FiGUre 1.5

0

20

40

60

80

100

120

Employee Engagment

DiversitySafety

InsTAnces oF FrequenTLy used LInks

this link to compensation is “strong,” according to the methodology used in this report, in practice, Transocean seemed to have failed to implement a compensation scheme that effectively links remuneration to sustainability. Based on certain measures, Transocean claimed in its 2011 proxy filings to have its “best year in safety performance in [the] company’s history” (p.35). As a result, and despite the firm’s involvement in the deepwater Horizon incident, executives were awarded 67% of their safety-related bonus target. Moreover, despite potential losses of $1.2 billion and a severely tarnished reputation following the deepwater Horizon incident, the ceo realized a 57% increase in compensation. In stark contrast, in an effort to “underscore the company’s commitment to safety,” Transocean withheld all executive bonuses in 2009 after experiencing four worker fatalities.2

Transocean showed some responsiveness to the backlash unleashed after it awarded its executives safety bonuses. Following harsh public criticism from Interior secretary ken salazar, Transocean’s managers decided to donate their share of compensation to the families of the victims of the accident.3 Moreover, Transocean instituted a new policy in 2012 whereby safety performance targets for compensation purposes are recommended to the compensation committee by a board-level health, safety, and environment committee, which may better ensure that, going forward, the firm is designing more appropriate safety-related incentives for their compensation schemes.

These recent events highlight several issues that can arise when companies tie compensation to sustainability. First, regardless of whether remuneration is linked to sustainability, it is paramount that compensation plans be structured to ensure that executives are paid for their performance, as this effectively aligns executive and shareholder interests. second, awards should not present perverse incentives or reward undesired outcomes. Awards should encourage behavior conducive to the ultimate goals of the company, which in the case of Transocean, include 2 Gilbert, daniel, Tracy, Tennille. “Transocean cites safety in Bonuses.” Wall street journal. Accessed september 25, 2012. 3 swann, christopher, Larsen, peter Thal. “Transocean Bonuses reflect a Tin ear.” new york Times. Accessed september 25, 2012.

Case Study: Transocean Continued...

14

board diversity in various markets, it is unsurprising that 10% of linked companies, or 4% of all companies considered, linked compensation to promoting diversity within their organization.

safety. While the compensation committee clearly outlined objective metrics by which it assessed safety, the board should have the ability to exercise downward discretion in the event of catastrophic incidents, such as the deepwater Horizon accident. Last, goals must be meaningful. clearly, in the case of Transocean, the original compensation scheme, while objective, was structured to allow a significant payout despite suboptimal performance. This highlights the importance of setting appropriate and meaningful sustainability-related metrics. These metrics should ensure that if executives fail to deliver on performance that supports the sustainability of operations, these executives should not be rewarded, however sustainability is defined by the board and compensation committee.

an individual if it exceeds ¥100,000,000 (approximately $1.27 million) in total compensation. Further, companies only have to disclose directors’ fees, meaning that if an executive were to serve on the board, which is common practice at the vast majority of japanese companies, a company would only have to disclose the fees paid in association with their services as a director, leaving investors with no information regarding payments made to those individuals for their service as executives. Additionally, disclosure regarding the determination of awards is not required, and, as a result, this disclosure is infrequent and often vague. despite a recent movement toward disclosure of ties between corporate performance and remuneration, this disclosure rarely, if ever, provides investors with meaningful information as to how performance is determined or measured.

despite this lack of disclosure, several japanese companies are known to incorporate sustainability metrics into their executive compensation packages. shiseido, for example, states that corporate social responsibility (“csr”) is an important factor in its business activities and encourages employees and directors to raise the corporate brand value through a focus on csr. Moreover, the firm encourages this focus on csr though ties to compensation. specifically, 60% of directors’ and officers’ remuneration is based on performance-linked compensation. one-third of that is composed of an annual short-term performance bonus, awarded based on the following factors: consolidated business performance, relevant business line performance and personal evaluation. executives’ and directors’ personal evaluations include a consideration of csr metrics, on a qualitative basis, which may include human resources, environmental matters, compliance, human rights, diversity and employee engagement. shiseido acknowledges that some csr factors are more important or relevant for some job functions, as some executives have the ability to affect the csr performance of the company to a greater extent than others. However, all employees are responsible for some aspect of company-wide csr performance. shiseido’s commitment to effective oversight of csr-related issues is clearly demonstrated through its leadership structure: the firm’s ceo is the chairman of the csr committee.

shiseido says that its practice of incentivizing the csr performance of executives is still evolving, and that, going forward, it may consider alternate means by which it can more effectively provide a link between compensation and csr metrics.

case studyshiseido co. ltd.

Case Study: Transocean Continued...

japanese regulators generally only require that

firms disclose aggregate compensation to directors and statutory auditors, preventing investors from making informed judgments about individual compensation awards. However, companies are required to disclose compensation awarded to

15

the big picturedespite the fact that 11 index constituents changed in the past year, there was little change in both the percentage and quality of u.s. companies that provided a links between sustainability and compensation.

While s&p 100 companies had the same proportion of linked companies as that observed globally (42%), there was a significantly higher proportion of “weak” links. For example, 69% of linked u.s. companies disclosed “weak” links, compared with 33% in both canada and Australia, 41% in France, and 22% in the netherlands. The united states also had a lower percentage of total linked companies than any of the aforementioned countries, suggesting that the u.s. may be lagging other developed nations in providing a link between executive compensation and sustainability initiatives.

By sector, companies in the Health care, Materials, Financials and consumer discretionary sectors had increases in the link between compensation and sustainability. despite these decreases, the u.s. maintained a higher proportion of linked companies than the global average in all sectors except Materials (25% in the u.s. versus 59% globally), Industrials, (33% in the u.s. versus 42% globally), and Financials (31% in the u.s. versus 38% globally).

types of metrics While the u.s. lags in the compensation-sustainability link, it had a high proportion of companies that linked compensation to “other” metrics, which typically include governance and ethics criteria; some 21% of linked u.s. companies account for these factors in their compensation plans. However, there has been an increase in the number of countries in which companies have begun to associate compensation

United states

linKing compensation

sustainability

to

2010 2012none none58%72%

29%19%6%3%7%6%

WeAk WeAk

MedIuM MedIuM

sTronG sTronG

16

with metrics such as governance and ethics. In 2011, companies in five countries used these metrics, compared with seven in 2012.

The united states appears to lag other markets in providing a link between executive compensation and environmental factors. In some countries, such as Brazil, spain, the uk and the netherlands, more than 90% of linked companies employed environmental measures; in the united states, only 38% of companies provided any environmental link. only two countries, switzerland and Germany, had a lower proportion of companies that provide an environmental link: 5% and 37%, respectively. This may be due to less aggressive environmental regulations, especially regarding greenhouse gas emissions and reporting

requirements.

While the u.s. ranked low in environmental metrics, it fared much better with diversity. some 31% of all linked u.s. companies, or 13% of all u.s. companies reviewed, incentivize executives to ensure diversity within organizations. Further, only two other countries, Australia and spain, explicitly provide for diversity metrics in compensation plans. This is somewhat surprising given the legislative and regulatory efforts of many european nations to increase diversity within organizations, specifically at the board level. For example, both France and norway have mandated board gender diversity quotas, and the eu is considering imposing a similar measure on europe’s largest companies. While spain does have

FiGUre 2.4

ENVIRONMENTAL26%

OTHER14%

SOCIAL60%

Type oF MeTrIc eMpLoyed

FiGUre 2.5

0

3

6

9

12

15

Employee Engagement

SafetyDiversity

InsTAnces oF coMMonLy used MeTrIcs

FiGUre 2.32011 2012

0% 20% 40% 60% 80% 100%

All Sectors

Utilities

Telecommunication Services

Materials

Information Technology

Industrials

Health Care

Financials

Energy

Consumer Staples

Consumer Discretionary

LInked coMpAnIes By secTor

17

nUmBerSby the

$141,799

7.8%

64

14

1%

100%

The Difference in the average fine paid by coMPanieS ThaT link coMPenSaTion To SafeTy and those paid by coMPanieS wiTh no link To SuSTainaBiliTy

number of s&p 100 coMPanieS wiTh exPliciT BoarD oVerSiGhT of sustainability issues

nuMBer of S&P 100 coMPanieS link coMPenSaTion To SafeTy

Decline between 2011 and 2012 in The nuMBer of s&p 100 companies linkinG coMPenSaTion To SuSTainaBiliTy

hiGheST leVel of ShareholDer SuPPorT, excluding abstentions and broker non-votes, received for a resolution

requeSTinG ThaT coMPanieS link coMPenSaTion To SuSTainaBiliTy

25

37

number of current S&P 100 conSTiTuenTS ThaT haVe linkeD coMPenSaTion To SuSTainaBiliTy since at least 2007

S&P 100 coMPanieS wiTh a SeParaTe BoarD-leVel coMMiTTee on SuSTainaBiliTy

S&P 100 coMPanieS in The uTiliTieS SecTor ThaT link coMPenSaTion To SuSTainaBiliTy

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a voluntary board diversity quota, both the u.s. and Australia have no such diversity requirements. This could suggest that these regulatory efforts have taken the onus off companies, to a certain extent, or, alternatively, could suggest that many corporations are ensuring that diversity goals are met through corporate policies rather than regulation.

environmental performanceAs previously noted, Glass Lewis used environmental fine data (provided by IW Financial from the epA’s enforcement and compliance History online database) to serve as a proxy for, but not as an inclusive measurement of, a company’s environmental performance.

Analysis of this data found that companies that provide a link between compensation and sustainability fare far better than those companies that do not provide such a link in terms of epA fines. As shown in Figure 2.6, the average of the total fines levied on companies that link compensation to sustainability is more than $200,000 lower than for companies that do not employ sustainability-linked remuneration plans. Moreover, when analyzing this information on a per-fine basis, or the amount associated with each individual epA violation, linked companies had lower fines than those companies that do not provide a link. The linkage may instill a top-down approach to sustainability issues, resulting in more effective mitigation of sustainability risks and providing for better safety mechanisms to prevent extensive damage when accidents do occur. This is further supported by the fact that those companies that provide an explicit link between remuneration

FiGUre 2.6

$0

$100000

$200000

$300000

$400000

$500000

$600000

$700000

$800000

Unlinked Company Fines

Linked Company Fines

Average Total Fines

$565,029

$407,454

$685,085

AverAGe ToTAL epA vIoLATIon FInes

case studyInTeL

Intel, a u.s. semiconductor chip maker, is widely known for its progressive

and sustainable business practices. consistently recognized globally for its focus on the environment and society, Intel has been listed on the dow jones sustainability Index and the FTse4Good Index for 13 years and 11 years, respectively and it has won numerous awards and recognition for its sustainability initiatives. Further, Intel has consistently had a compensation scheme that ties remuneration, for all employees, to sustainability factors. According to its 2011 corporate social responsibility report, Intel executives are subject to an individual performance adjustment that, since 2008, has included environmental metrics; in 2010, it also included metrics related to operational health and safety and external reputation (p.75).

While it does emphasize corporate social responsibility, Intel does not disclose information regarding the link between compensation and sustainability in proxy filings. For that reason, Intel was not included in this study. However, general information about the nature of the link is provided elsewhere. According to page 33 of its most recent deF 14A, Intel’s compensation philosophy is governed by the following key design priorities:

• Align with shareholder interests;

• Motivate employees to achieve business goals;

• Balance performance objectives and time horizons;

• recruit and retain the highest caliber of employees;

• encourage employee stock ownership;

• Manage cost and share dilution; and

19

and safety have far lower fines, on a per-fine basis, than do the other companies in this review, including those that generally provided a link to sustainability metrics.

board oversight of sustainability issuesBoards of directors, as stewards elected by shareholders, are charged with safeguarding shareholder value. In addition, boards are charged with overseeing management as it seeks to maximize value creation in a competitive and sustainable manner. It is critical that boards are provided with sufficient resources and that proper structures are put in place to thoroughly evaluate and mitigate exposure to environmental and social risks.

This review found that 64% of the s&p 100 maintained board-level oversight of sustainability issues, either

through a separate board committee or through explicit language in the charter of a key committee (defined as the audit committee, compensation committee, or nominating committee). As demonstrated in Figure 2.8, companies that provided a link between compensation and sustainability metrics were significantly more likely to have a board-level committee dedicated to sustainability. Most notably, 86% of companies that provided a “strong” link between compensation and sustainability had explicit board-level oversight of sustainability issues.

We believe that board-level oversight of sustainability issues is a key indicator that a company has placed a priority on overseeing sustainability issues as well as a mechanism by which investors can hold the board accountable for the company’s environmental or social performance. Much like tying compensation to sustainability metrics, the creation of a board-level committee that is charged with oversight of sustainability issues demonstrates that a company considers sustainability a priority.

companies have various types of committees

FiGUre 2.7

$0

$50000

$100000

$150000

$200000

$250000

$300000

Unlinked Company Fine

Safety-Linked Company Fine

Linked Company Fine

Average Fine

$208,097

$129,163$122,679

$264,479

AverAGe per-FIne epA vIoLATIon

FiGUre 2.8

0

20

40

60

80

100

Weakly Linked Companies

Medium Linked Companies

Strongly Linked Companies

Unlinked Companies

Linked Companies

71%

59%

86%

33%

76%

BoArd oversIGHT oF susTAInABILITy Issues

• Maintain consistency in the way that executive officers and the broader employee population are compensated.

Intel states that its pay-for-performance programs include “performance-based cash compensation that rewards strong financial and operational performance, and equity awards that reward stock price and Tsr performance.” Intel determines incentive cash payments based primarily on annual financial results and it ties its equity compensation to stock price performance and total shareholder return performance relative to a comparator group.1

Intel has many laudable compensation practices, including performance-based long-term and short-term incentive plans, anti-hedging and clawback policies, executive share ownership guidelines, and no single-trigger change in control benefits. While these compensation practices protect shareholder interests, Intel could more thoroughly incorporate information regarding its sustainability initiatives and their tie to executive compensation in their official proxy filings.

1 Intel corporation. deF 14A, p. 33. April 4, 2012.

Case Study: Intel Continued...

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that are charged with overseeing issues related to sustainability. This report looked at both dedicated committees established outside of the three key committees (audit, compensation, and nominating and governance) and those committees that explicitly maintained oversight of sustainability issues in their charters. Typically, in the latter situation, responsibility for sustainability fell under the purview of the nominating and governance committee. Types of dedicated committees include:

• corporate social responsibility committee (H.j. Heinz company)

• sustainability and corporate responsibility committee (Monsanto)

• public Issues and contributions committee (exxonMobil corp.)

• public policy and corporate reputation committee (AT&T Inc.)

• environmental committee (occidental petroleum)

• ethics and sustainability committee (Lockheed Martin)

support for related shareholder proposalsduring the 2012 proxy season, three shareholder proposals, or approximately 4% of all compensation-related shareholder proposals, asked companies to include sustainability as one of the performance measures for senior executives when determining annual and/or long-term incentive plans. This proposal topic debuted in the 2011 proxy season, and, as is the case with many new environmental and social shareholder proposals, investor support was rather low, receiving average shareholder support,

excluding abstentions and broker non-votes, of 5.2% and 6.1% in 2011 and 2012, respectively.

Glass Lewis generally recommends shareholders vote against this type of proposal; tying executive compensation to environmental and social metrics is not necessarily appropriate for all companies and shareholders are not in the best position to assess a company’s strategy, sustainability targets, or the construction of its compensation plans, including the associated performance metrics. While we do support company-sanctioned implementation of practices that more effectively tie incentives to performance, both financially and in the context of sustainability, we typically view the advisory vote on compensation and the election of directors, specifically those who sit on the compensation committee, as the appropriate mechanism for shareholders to express their disapproval of board policy on this issue.

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ultimately, the most important facet of a compensation plan is that it properly linked to long-term, sustainable, corporate performance. As such, in order to drive this performance, many companies may find the use of sustainability-related compensation metrics to be beneficial and to drive the behaviors that ensure a focus on long-term performance. companies should employ strategies and incentivize behaviors that leverage their own unique strengths and competitive advantages. It is important that companies assess sustainable opportunities through the lens of long-term growth and shareholder returns. unless companies are profitable and remain in business, they would cease to benefit shareholders and wider groups of stakeholders.

This analysis demonstrates that there is still much room for improvement in companies disclosing links between sustainability and compensation. While there is a definite, and encouraging, trend since 2010 of companies linking compensation to sustainability metrics, much of the growth has been in the number of companies with “weak” links between the two. This progress is important and can easily be furthered by the construction and inclusion of stronger, more specific and value-creating goals. It is likely that, as shareholders push for more information on how companies link compensation to sustainability, and as companies are required to disclose more and better

information regarding compensation packages and associated performance metrics, this link will continue to grow stronger.

As has been the case for several years, the majority of firms that provide a link between compensation and sustainability did so under the category of “safety” performance. This, perhaps, is due to the fact that this metric is the most visible and easily measured. Additionally, this metric can be easily tied to shareholder value through lower fines, reduced accidents and mitigation of environmental risks, among other factors. Furthermore, we found, unsurprisingly, that there are more firms that link compensation to sustainability metrics (often using “safety” as a key metric) in the more production-intensive sectors, such as utilities or energy.

When looking at u.s. firms, we found that, despite rather significant changes in the constituency of the s&p 100 Index, the rates of firms that have linked compensation to sustainability changed little between 2011 and 2012. While the u.s. may lag behind many developed nations in providing a link between executive compensation and sustainability initiatives, it does have the highest proportion of companies that link compensation to metrics such as

FinaLTHouGHTs

22

governance and ethics. Moreover, u.s. companies that provided a link between compensation and sustainability, particularly those that used safety as a sustainability metric, had lower epA violation fees than their unlinked peers, indicating that a top-down focus on sustainability may result in overall better accident mitigation.

sustainability, ultimately, is a moving target. There are no easy answers to what is the best way to incentivize behaviors that will drive performance, benefit shareholders and the environment, and

eventually lead to shareholder returns. Whether it is tying specific environmental or social metrics to executive compensation or developing a board-level committee to review sustainability issues, it is crucial that companies seriously consider the risks that are presented by various environmental and social issues. Moreover, as public policy shifts toward encouraging more sustainable business practices, firms must respond accordingly by finding ways to incentivize executives to behave in accordance with these evolving perspectives and policies.

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guidance points 1. companies should adopt a clear process for identifying appropriate esG metrics that relate to sustainable shareholder returns and company strategy. In an effort to provide further guidance, the following key points have been identified:

1.1. esG metrics should have a clear link to the optimization of shareholder value and be aligned with the long-term business strategy;

1.2. companies are encouraged to develop their own definition of sustainable value creation and use it to select appropriate esG metrics;

1.3. In identifying esG metrics, a company should consult with its shareholders and attempt to achieve a thorough stakeholder mandate to enhance internal and external support;

1.4. companies should focus on esG metrics that are generally forward looking, clear, attainable, replicable, comparable and time-bound; and

1.5. When selecting key esG metrics to be tied to compensation, companies should ensure balance, diversity and relevance.

2. companies should link appropriate esG metrics to reward systems in a way that they form a meaningful component of the overall remuneration framework. key guidance points:

2.1. esG targets should be integrated into an appropriate time horizon that is in line with business strategy;

2.2. esG targets should be stringent and challenging to ensure incentivizing outperformance;

2.3. companies should select appropriate mechanism and structures when creating incentive pay packages to ensure long-term shareholder value creation;

2.4. Incentive compensation should be subject to downward discretionary adjustments by the compensation committee to account for unusual events or unintended consequences as well as claw-back provisions; and

2.5. In quantifying esG metrics and measuring performance, the board may apply a clearly substantiated degree of discretion.

3. companies should endeavor to disclose the rationale, method and challenges presented by the incorporation of esG metrics into executive pay clearly and concisely. key guidance points:

3.1. There should be clear disclosure of the rationale in identifying esG metrics linked to executive compensation and evidence of alignment with business strategy and shareholder value;

3.2. disclosure of metrics and performance targets should be understandable and there should be clear and concise information regarding the structure and mechanisms used in linking esG metrics to compensation;

3.3. disclosure should provide sufficient information to allow investors to assess performance against esG goals; and

3.4. disclosures of relevant esG goals and their associated links to compensation should be integrated into official pay disclosures.

AppendIx Aunited nations principles for responsible Investment’s Integrating Environmental, Social & Governance Issues into Executive Pay: Guidance for Investors and Companies

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Berrone, pascual, Gomez-Mejia, Luis r.. “environmental performance and executive compensation: An Integrated Agency-Institutional perspective.” Academy of Management Journal, vol. 52, no. 1, 103-126. 2009.

cheng, Beiting, Ioannou, Ioannis, serafeim, George. “corporate social responsibility and Access to Finance.” Harvard Business school. May 9. 2012. http://www.hbs.edu/research/pdf/11-130.pdf

eccles, robert G., Ioannou, Ionnis, serafeim, George. “The Impact of a corporate culture of sustainability on corporate Behavior and performance.” Harvard Business school. May 9, 2012. http://www.hbs.edu/research/pdf/12-035.pdf

Friedl, Gunther, springer, verena. “current Topic: sustainable compensation systems for executives.” TuM school of Management. june, 2011. http://www.finexpert.info/fileadmin/user_upload/downloads/pdf/current_Topic/current_topic_sustainable_compensation_2011-06-03.pdf

Frye, Melissa B., nelling, edward, Webb, elizabeth. “executive compensation in socially responsible Firms.” Corporate Governance: An international Review. volume 14, Issue 5, pages 446–455, september 2006.

Gilbert, daniel, Tracy, Tennille. “Transocean cites safety in Bonuses.” Wall Street Journal. Accessed september 25, 2012. http://professional.wsj.com/article/sB10001424052748703806304576236661289767034.html?mg=reno-wsj

Hewitt new Bridge street “report on FTse 100 directors’ remuneration 2010.” August, 2010. http://www.rc.luiss.it/executive_compensation/pdf/FTse-100-2010-%28sept%29.pdf

Intel corporation. deF 14A, p. 33. April 4, 2012.

Ioannou, Ioannis, sarafeim, George. “The Impact of corporate social responsibility on Investment recommendations.” Harvard Business school. August, 2010. http://www.hbs.edu/research/pdf/11-017.pdf

Mahoney, L.s., Thorne, Linda. “corporate social responsibility and Long-term compensation: evidence from canada.” Journal of Business Ethics, vol. 57 no. 3, 241-253. 2005

rosendaal, s.B.M. “sustainability Targets in executive remuneration: An Analysis of the contribution of sustainability Targets in executive remuneration to sustainable development.” erasmus school of economics. August 11, 2011. http://www.eumedion.nl/nl/public/kennisbank/scriptieprijs/winnende_scriptie_2011.pdf

BIBLIoGrApHy

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swann, christopher, Larsen, peter Thal. “Transocean Bonuses reflect a Tin ear.” New York Times. Accessed september 25, 2012. http://www.nytimes.com/2011/04/07/business/07views.html?_r=1&ref=transoceanltd

united nations principles for responsible Investment, united nations Global compact LeAd. “Integrating esG Issues Into executive pay: Guidance for Investors and companies.” june, 2012. http://www.unpri.org/files/Integrating%20esG%20issues.pdf

united states coast Guard. “report of Investigation into the circumstances surrounding the explosion, Fire, sinking and Loss of eleven crew Members Aboard the Mobile offshore drilling unit deepwater Horizon in the Gulf of Mexico.” April 20-22, 2010. http://media.nola.com/2010_gulf_oil_spill/other/FInAL%20redAcTed%20versIon%20dWH.pdf

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sAn FrAncIsco HeadquartersGlass, Lewis & co., LLcone sansome streetsuite 3300san Francisco, cA 94104Tel: +1 415-678-4110Tel: +1 888-800-7001Fax: +1 415-357-0200

neW yorkGlass, Lewis & co., LLc48 Wall street15th Floornew york, n.y. 10005Tel: +1 212-797-3777Fax: +1 212-980-4716

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