Gretchen Harders, Susan Gross Sholinsky Quoted in “Tying Executive Bonuses to Diversity Is Gaining Momentum”

Law360

Gretchen Harders and Susan Gross Sholinsky, Members of the Firm in the Employee Benefits and Employment, Labor & Workforce Management practices, respectively, in the firm’s New York office, were quoted in Law360, in “Tying Executive Bonuses to Diversity Is Gaining Momentum,” by Emily Brill. (Read the full version – subscription required.)

Following is an excerpt:

Corporate giants … have blazed a trail for other companies to follow by linking executive bonuses to hitting diversity benchmarks. ... 

"This is one of the hottest topics that is being discussed when it comes to executive compensation philosophy," said Gretchen Harders, a member of Epstein Becker Green's employee benefits and executive compensation practice. "It sends a strong corporate message [about commitment to D&I] when there's senior leadership with skin in the game." …

D&I In Bonus Calculations

Companies generally approach calculating executives' bonuses by considering objective performance metrics, like operating incomes, alongside subjective performance metrics, like development of mentorship programs, attorneys say. ... 

If a company is looking to factor D&I success into bonus calculations, it should consider that a subjective, or qualitative, performance metric, Harders said.

"Make it a clear category of qualitative performance, so it's an incentive," Harders recommended. "Just by giving it a name, it's helpful, because it gets a lot more focused intention."

Part of why attorneys recommend considering D&I goals in the subjective category rather than the objective one is because setting diversity quotas carries potential legal risks.

"Hiring somebody because of their protected characteristic," such as their gender or race, "is against federal, state and local anti-discrimination laws," said Susan Gross Sholinsky, an employment attorney and member of Epstein Becker.

Despite pushes to increase racial and gender diversity at companies, "having quotas and strict numbers is still counter to the actual words of the anti-discrimination laws," Sholinsky said.

"You have these quantifiable goals, but how you get there must comply with all the employment discrimination laws," Epstein Becker's Harders added.

One way to boost corporate diversity without running afoul of discrimination laws is to try to attract a diverse pool of applicants and retain a varied group of employees, Sholinsky said. Corporations could consider executives' success in these areas when calculating their bonuses, she added.

"Are we rewarding people for taking the steps they should be taking to ensure we have a more diverse slate of applicants to look from?" Sholinsky said. "We want to look at retention as well — rewarding people for establishing, or participating in, mentoring programs and diversity training."