The topic of Diversity, Equity, and Inclusion (DE&I) - see definition in the right-hand box - has gained increasing attention in the corporate world as shareholders, proxy advisors, and the public acknowledge its significance for business and society as a whole. DE&I is tied to the broader ESG1 discussion and the evolving role of businesses in society which sees companies moving toward a broader stakeholder approach.
Besides reputational considerations, there are also numerous tangible and economically-related arguments that speak in favour of an increased awareness of DE&I in Board of Director (Board) discussions.
Recent studies show that diverse firms (on an executive level, encompassing both ethnical and gender diversity) are more likely to financially outperform relatively less diverse firms.
Additionally, a study by the World Economic Forum (2020) has shown that diverse firms are associated with having (on average) a 20% higher innovation rate, 30% greater ability of spotting and reducing business risks, and increased employee engagement, as well as retention in workplaces.
It is also considered a matter of fact that GenZ2 prioritizes diversity more than previous generations. This provides DE&I with the connotation of a focus factor necessary to attract the young talents of tomorrow into the workforce.
Companies wanting to act proactively on these topics are starting to plan DE&I’s integration into strategic plans. As with other topics relating to compensation, a large part of implementing these strategies is about tying the wished-for behaviour to the appropriate incentives. Based on our recent GECN Group study on ESG Plus™, this commitment and the strategic importance can be observed by the increased linking of DE&I to variable compensation for executives.
Overall, already 35% of global3 companies disclose a link between DE&I and variable compensation. In Europe (excl. the UK) it amounts to 51%, and for US companies to 46%. For Switzerland, the topic has only recently started to emerge in executive compensation, especially with the new “comply or explain” legislation for gender diversity for Board and Executive Committees effective as of 2026/2031
There are not only geographical differences but also different degrees of implementation when it comes to the different sectors. While almost half of the Financial and Information Technology sector has included DE&I metrics into their compensation schemes, others, such as Materials and Consumer Staples, are at approximately 20%.
