SRI investors urge sustainability metrics for executive pay and more diverse board at Discovery Channel

Shareholders in US cable network channel Discovery Communications will next month vote on two proposals from SRI investors, including one that calls for the integration of sustainability metrics when calculating senior executive pay and another that urges greater diversity of Discovery’s board.

The proposal regarding sustainability metrics for executive pay comes from Clean Yield Asset Management, a Vermont-based firm with $290m (€255m) in assets. Boston-based Trillium Asset Management ($2bn in assets) is behind the board diversity proposal.

In a supporting statement for the proposal, Clean Yield noted that Discovery’s David Zaslav was the most highly paid CEO in 2014, earning $156m. The figure for 2014 includes a retention bonus worth $94m and reflects that the 56-year-old was paid 22 times more than Discovery’s second highest-paid officer.

For 2015, Zaslav’s pay was reduced to $32.4m following a decline of 23% in its stock price and a 9% drop in net profit. However, Clean Yield said Zaslav’s pay “remained in the upper reaches of CEO compensation,” and added: “Incentivising the CEO to meet sustainability performance objectives would ensure that the company’s sustainability efforts are treated as a strategic business opportunity. Such a linkage would (also) better enable the board to evaluate CEO performance.”Clean Yield also said Discovery should join other big corporate names like Pepsi, Alcoa, Walmart and Unilever in using sustainability metrics for senior executive pay, adding that several studies showed that firms which did so outperformed those that did not.

But Discovery doesn’t see a problem with its CEO pay and hence is asking shareholders to vote against Clean Yield’s proposal. In its proxy statement, Discovery said: “While it may be appropriate from time to time to incorporate new performance measures into our executive compensation, the board believes that it is most appropriate for the compensation committee to determine which specific measures to implement.”

Discovery also recommends that shareholders reject Trillium’s diversity motion that is calling for the addition of directors who are female and/or of “minority” backgrounds. Trillium noted that while Discovery pledged in 2012 to commit to a more diverse board, it still did not have any female directors. “Numerous studies suggest that a critical mass of at least three women directors strengthens corporate governance,” Trillium said.

Discovery’s board countered that Trillium’s proposal was unnecessary, as diversity, along with skills and experience, were already being taken into account in the selection of directors. It called the obligations in the proposal “distracting and time consuming”. The Maryland-based firm will hold its annual general meeting on May 19.