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

BlackRock, the largest asset manager in the world, has noted that “ESG factors relevant to a company's business can provide essential insights into management effectiveness and thus a company's long-term prospects.”

United Airlines Holdings (“United”) has taken steps to address ESG issues and provide public disclosure, including concerning its efforts to reduce greenhouse gas emissions, address the substantial risk that climate change poses to its operations, respect human and worker rights in its operations and supply chain, and prevent human trafficking through employee training. However, United has not explicitly linked sustainability goals with senior executive incentives. Investors seek clarity on how United drives sustainability improvement and how that strategy is supported by executive accountability.

Many multi-national companies, including Intel, Alcoa, PepsiCo, and Mead Johnson, have integrated sustainability metrics into their executive pay incentive plans. Another prominent example is Royal Dutch Shell, which announced in December 2018 its plans to tie a portion of executive pay to concrete targets linked to the company’s net carbon footprint.

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

The 2016 Glass Lewis report, In-Depth: Linking Compensation to Sustainability found 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 Harvard Business School study of S&P 500 executives’ pay packages found a positive relationship between the presence of explicit incentive compensation for corporate social responsibility and firms’ social performance.

A 2012 guidance issued by the United Nations Principles for Responsible Investment and the UN Global Compact found that including ESG issues “within executive management goals and incentive schemes can be an important factor in the creation and protection of long-term shareholder value.”

Effectively managing for sustainability offers positive opportunities for companies and should be a key metric by which senior executives are judged. Linking sustainability metrics to executive compensation could reduce risks related to sustainability underperformance, incentivize employees to meet sustainability goals and achieve resultant benefits, and increase accountability. Metrics relevant to United could include indicators related to pressing issues such as: environmental impacts, energy and fuel efficiency, supply chain human rights and risk management, worker health and safety, diversity and inclusion, and data privacy and security.

RESOLVED: Shareholders request the Board Compensation Committee prepare a report assessing the feasibility of integrating objective sustainability metrics into performance measures, performance goals or vesting conditions that may apply to senior executives under United’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.