Only 6% of CEOs’ pay is linked to environmental performance

These are some of the findings of the annual survey on the remuneration of CEOs in Belgian listed companies, conducted by the Executive Remuneration Research Centre at Vlerick Business School. The sample consisted of all 90 companies in the Bel 20, Bel Mid and Bel Small. The research was conducted by Professor Xavier Baeten and researcher Marthe Van Hove and was based on the 2021 remuneration reports. The specific focus of the research this year was sustainability indicators (ESG).

Evolution of top salaries in Belgium

The survey gives an annual overview of the most important remuneration data and how this data evolves over time. The median total remuneration in 2021 (including fixed salary, bonus, and long-term remuneration) was €2,430,492 for the Bel 20, €908,115 for the Bel Mid and €587,482 for the Bel Small. Compared to the previous year, there was a particularly striking increase (23%) among the Bel 20 companies. Bel Mid companies also experienced an increase (13%). Conversely, Bel Small firms experienced a decrease of 5%.

Xavier Baeten, Professor of Reward & Sustainability at Vlerick Business School, tells us more: “What's most notable of all is that the Bel 20 companies are clearly in a league of their own. The remuneration of CEOs in those companies is many times higher than in the smaller listed companies, mainly because long-term remuneration (stock options, performance shares, etc.) is much more prevalent in the Bel 20 companies (75% versus 66% in the Bel Mid and 37% in the Bel Small). Moreover, that long-term remuneration has a higher value (€2,096,532 in the Bel 20, €189,000 in the Bel Mid and €207,897 in the Bel Small).”

Only a limited link between environmental performance and variable remuneration

This year, the research paid specific attention to the performance factors used to determine the variable remuneration. To begin with, it is striking that non-financial factors (such as sustainability, quality and innovation) have an average weighting of 32% in the bonus and 16% in the long-term remuneration. More concretely, with regard to specific criteria, we note that only 5% of companies include environmental performance to determine the bonus, and 26% do so for long-term remuneration.

Xavier Baeten: “This stands in stark contrast to the pressing need to take action for the environment. The fact that 26% of companies use the environment as a performance indicator for long-term remuneration is a sign of hope, but we must not forget that these are only those companies that use any performance factors at all for long-term remuneration. That is not the case, for example, with companies that grant stock options, which are still an important form of reward in Belgium. In addition, we see a certain one-sidedness among the companies that do consider environmental performance: it is almost always about CO₂ emissions, although energy consumption, water consumption, waste processing and packaging can also be very significant for some companies.”

Solvay and Umicore in the vanguard of sustainability

The research also reveals 2 companies where sustainability plays a decisive role in determining remuneration for top management. At Solvay, sustainability performance contributes a third to the determination of group performance, with attention for a wide range of measures: emissions, income from sustainable products, water abstraction, waste, accidents and the proportion of female managers. Umicore takes things even further: starting this year, half of its long-term remuneration is determined by sustainability performance, in line with the company’s ‘Let’s Go for Zero’ strategy. The company is aiming to be emission-free by 2035 and has set interim targets to meet in the meantime. Furthermore, it intends to work with its suppliers to set targets for indirect emissions. In addition, its strategy includes measures for well-being in the value chain, the ethical extraction of raw materials and gender equality in management.