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Company: Walgreens Boots Alliance
Subject: Sustainability Executive Compensation
Year: 2017
Sector: Retail Multi-Line
Lead Filer: Clean Yield Asset Management, Singing Field Foundation
Outcome: Vote: 23%

RESOLVED: Shareholders request the Board Compensation Committee prepare a report assessing the feasibility of integrating sustainability metrics into the performance measures of senior executives under the Company's compensation incentive plans.  Sustainability is defined as how environmental and social considerations, and related financial impacts, are integrated into corporate strategy over the long term.

SUPPORTING STATEMENT:

Effectively managing for sustainability offers positive opportunities for companies and should be a key metric by which executives are judged.

Linking sustainability metrics to executive compensation could reduce risks related to sustainability underperformance, incent employees to meet sustainability goals and achieve resultant benefits, and increase accountability. Examples relevant to our company could include: corporate-wide energy efficiency targets, the amount of toxic materials contained in products sold, and GHG emissions from transportation fuel.

WHEREAS:

Numerous studies suggest companies that integrate environmental, social and governance factors into their business strategy reduce reputational, legal and regulatory risks and improve long-term performance.

A large and diverse group of companies has integrated sustainability metrics into executive pay incentive plans, among them CVS, Unilever, Koninklijke DSM, Walmart, and Mead Johnson.

The 2016 Glass Lewis report In-Depth: Linking Compensation to Sustainability, finds a "mounting
 body of research showing that firms that operate in a more responsible manner may
perform better financially.... Moreover, these companies were also more likely to tie top executive incentives to sustainability metrics."  

A 2012 guidance issued by the United Nations Principles for Responsible Investment and the UN Global Compact found "the inclusion of appropriate Environmental, Social and Governance (ESG) issues within executive management goals and incentive schemes can be an important factor in the creation and protection of long-term shareholder value."

A 2011 study of 490 global companies found that including sustainability targets in remuneration packages was sufficient to encourage sustainable development.

In 2013, CH2MHill found that firms that set tangible sustainability goals are more likely to tie executive compensation to the achievement of sustainability goals.

The increasing incorporation of sustainability metrics into executive pay evaluative criteria stems from the growing recognition that sustainability strategies can drive growth, and enhance profitability and shareholder value.

According to the largest study of CEOs on sustainability to date (CEO Study on Sustainability 2013, UN Global Compact and Accenture):

o   76 percent believe embedding sustainability into core business will drive revenue growth and new opportunities.

o   93 percent regard sustainability as key to success.

o   86 percent believe sustainability should be integrated into compensation discussions, and 67 percent report they already do.

A 2012 Harvard Business School study concluded that firms that adopted social and environmental policies significantly outperformed counterparts in long terms stock market and accounting performance.

In 2013, the Carbon Disclosure Project and Sustainable Insight Capital Management found companies with industry-leading climate change positions exhibited better return on equity, cash flow stability and dividend growth than their peers.

A 2010 study found analysts are more likely to recommend a stock "buy" for companies that have strong corporate responsibility strategies.

 


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