YDAU Limited designs comfortable garments for older people. YDAU has a goal to promote their climate change credentials. So to increase the focus on their carbon footprint and encourage the clothes to be manufactured by their third party suppliers in a more environmentally friendly way, they have recently added a target to their long term incentive plans, which make up 70% of the CEO pay (the remainder being fixed pay).

The incentive plan now vests in full if the CEO achieves:

● 50% reduction in scope 1 and 2 emissions (the added target), and
● 5% per annum growth in revenue (which is aligned to the market expectations)

The measures are tested 3 years after being set and are weighted equally.

Questions:
A) Clearly explain one disadvantage of each of these incentive measures. 

B) Suggest an alternative to the 50% reduction in scope 1 and 2 emissions target that YDAU Limited could include in the long-term incentive plan, which may better align executive behaviour with stated goals. Explain why this alternative measure could improve alignment.

C) You are an institutional shareholder in YDAU Limited. Outline a stewardship strategy that could be used to influence YDAU Limited to improve their remuneration plan, specifying the tool(s) you would use.

Answer rating: 100% (QA)

A 1 Disadvantage of 50 Reduction in Scope 1 and 2 Emissions One disadvantage is that achieving a specific percentage reduction may not fully capture t... View the full answer