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[Question]
How effective are financial incentives for reaching D&I goals? Should EA orgs emulate this practice?
1 min read
Several companies have implemented policies that provide financial incentives for their executives and employees to help meet diversity and inclusion (D&I) goals. For example, Microsoft and Intel both base 50% of executive compensation on "strategic performance goals," including diversity. Intel also offers a double referral bonus to employees who refer underrepresented candidates. Anecdotal evidence suggests that Intel's D&I policies are working, and I've heard that financial incentives are among the few policies that do work. Intel claims it reached "full representation in its U.S. workforce" in 2018, which means that its workforce "mirrors the current talent pool", but not necessarily the general U.S. population.
How much more diverse are companies that implement these financial incentives than companies that do not? Should EA organizations emulate these policies?
Using the links you provide, 50% of cash incentives comes from Strategic Performance Goals in three categories (product & strategy, customers & stakeholders, culture & organizational leadership), and of one of those categories diversity and inclusion(D&I) is one of three parts listed, so at a rough guess 5% of annual cash incentives is tied to D&I. Cash incentives at Microsoft for the executives analyzed are about a fifth of total compensation, so about 1% of executive compensation is tied to D&I.
I think that having a headline "base 50% of executive compensation", when the actual fraction seems to be 1%, is actively deceptive, and think that this question should be rewritten.
I would hope that, if EA orgs gave bonuses to leadership for success in diversity and inclusion, it would be more than 1% of total pay.
At Intel, 7% of total compensation (50% the cash incentive is "operational performance", and cash incentive is about a seventh of total pay for the CEO) which is adjusted by D&I, but how much adjustment there is is not made clear. Given that operational performance goals include many other targets, I would be surprised if Intel was substantially different from Microsoft here.