Good morning. Recent headlines may suggest that DEI is dead. But it turns out many top executives still have DEI-adjacent goals to hit if they want to take home their full pay package.
In the wake of George Floyd’s murder five years ago, and subsequent calls for racial justice, many big companies began increasing executive commitments to DEI. According to the data and analytics firm ESGAUGE, some of the largest companies—like Apple, Allstate, and PepsiCo—wove diversity and inclusion metrics into their compensation plans for senior leaders in various ways. The plans called for rewarding executives either through annual cash bonuses or long-term incentive plans.
The number of S&P 500 companies with DEI-related metrics embedded into compensation plans surged from 170 companies in 2021 to 251 in 2022 among all senior executives, according to ESGAUGE data. For just S&P 500 CEOs, the prevalence of DEI metrics in comp plans rose from 149 to 224 during the same period.
However, mounting legal and political pushback has since caused some to retreat from the practice. ESGAUGE told Fortune that many firms are still incorporating DEI metrics into their executive compensation plans, although not as frequently as before. Nearly half of companies still included such incentives for CEOs and CFOs. In 2023, among CFOs at S&P 500 companies, 48% had their compensation linked to ESG and DEI metrics, compared to 45% in 2024, according to the data.
There’s a growing list of big companies that are pulling back from certain DEI practices. However, a recent report from The Conference Board revealed that while more than 60% of corporate executives view the current landscape for DEI as challenging, only 10% said their companies are reducing their DEI resources over the next three years.
Meanwhile, some companies are beginning to refashion their packaging of DEI, including terminology. They’re adjusting language to broader concepts like fostering “inclusion,” “belonging,” and “engagement,” which are less prone to legal challenge, according to the report.
On January 6, McDonald’s leadership team announced the company is retiring some of its DEI initiatives, such as “aspirational representation goals” and supplier diversity targets. But McDonald’s annual incentive plan continues to hold the CEO and senior executive officers accountable for efforts that drive employee engagement and values, including inclusion.
On a broader level, research suggests companies are responding to the new political and legal climate by tethering any DEI goals to long-term business strategy.
My colleague Amanda Gerut and I did a deep dive on this topic. You can read the complete report here.
Sheryl Estrada
sheryl.estrada@fortune.com
Leaderboard
Alexander Shen, CEO of TechPrecision Corporation (Nasdaq: TPCS) will serve as the interim principal financial officer and principal accounting officer of the company, effective Feb. 14. The company previously disclosed the resignation of Richard Roomberg, the former CFO. TechPrecision is conducting a search for Roomberg's successor.
Kristian Pullola, CFO of Finnair, a network airline, has announced that he will leave the company. The recruitment of a new CFO has begun, and Pullola will continue in his current role until he leaves by Aug. 12.
Big Deal
Amid ongoing economic and geopolitical uncertainty, CFOs are planning technology budget increases, viewing digital investments as necessary for growth and efficiency, according to a new Gartner report.
A survey of 301 CFOs and other senior finance leaders found that 77% of respondents plan to boost spending in the technology category with almost half (47%) of CFOs intending to increase spending by 10% or more in 2025 compared to last year.
This year, most sectors are prioritizing technology spending. For example, in the banking sector, compensation and external services are prioritized to attract technical talent and outsource non-strategic work, according to Gartner. And in the retail sector, the cost of goods sold and compensation are likely to see increases as organizations aim to enhance product quality and customer interactions.
Going deeper
In an episode of Knowledge at Wharton’s Ripple Effect podcast, Wharton professor Daniel Rock discusses the impact of AI on productivity, economic growth, and workforce transformation. Rock also discusses what’s standing in the way of widespread AI implementation. This episode is part of a series on innovation that was produced in cooperation with the Mack Institute for Innovation Management.
Overheard
“It’s conceivable that AI agents will eventually have a place in almost every business—not unlike Bill Gates’ original vision of putting a PC on every desk and in every home.”
—Informatica CEO Amit Walia writes in a Fortune opinion piece. Walia argues that success with AI agents will depend on having the right data in the right place at the right time.
