The payout says nothing
until you know the floor.
The broad use of people metrics is consistent with the focus of boards. They are concentrating on developments in labour markets, skill shortages, employee retention, and labour costs.Hannah Summers, Board Advisory Director, WTW, 22 January 2026
A discretionary ESG measure creates two exposures: executives claim sustainability alignment without a threshold anyone can audit, and the people who vote on pay cannot see whether the incentive changed a decision. The CHRO and the remuneration committee must decide whether the measure is a signal or a commitment.
Sightis reads the 112% WTW reported as a question to put to each plan, since WTW itself finds goal-setting rigour comparable to the financial measures. The number a committee owes itself is different: before the year starts, what result would make the component pay zero? Schneider Electric prints that floor; a committee without that answer has approved a weight it cannot defend.
Five questions
before the committee signs.
Threshold set in advance
Is each ESG target written with a number, a minimum and a maximum before the performance period opens, by the body that will read the result, or is the achievement assessed after the fact by committee judgement? Who can see the scale, and when?
Written and numbered before the year starts, with the scale published after it. Schneider Electric's Board approves measurable targets at the start of each performance period (2025 URD, p. 458); it set the 2026 targets on 25 February 2026 and will print them, with the outcome, ex post (p. 477).
Independent test
Is the score behind the payout tested by someone the payout does not reward, and to which standard: management reporting, internal audit, or external assurance? Does the assurance cover the score, or also the ambition of the target?
Test each indicator the payout rests on; external assurance where the weight justifies it. A Schneider Electric statutory auditor gives limited assurance on the Sustainability Impact indicators, all but one in 2025; the score is covered, the Board owns the ambition (2025 URD, p. 84).
Horizon
Does the long-term plan carry a sustainability measure over three years or more, with its own vesting scale, or does ESG live in the annual bonus only? 70% of the 300 largest listed European companies place one in the long-term plan (WTW, January 2026).
At least one multi-year measure with a vesting scale. Schneider Electric's 2026 plan ties 25% of the shares to carbon: half on an absolute Scope 1 and 2 budget for 2028, half on a 7.3% yearly cut in Scope 3 upstream intensity (2025 URD, p. 478 and 479).
Weight
What share of the annual bonus and of the long-term plan depends on the ESG outcome? Has that share ever moved a published payout, up or down? A weighting that has, to date, never moved a published payout is decorative, whatever the policy says.
A weight that can move the total award: 20% of the annual bonus and 25% of the three-year share plan at Schneider Electric. In 2025 the sustainability criterion contributed 19.7 points of a 72.7% bonus, on a scale to 40, while the margin criterion contributed zero (2025 URD, p. 462).
Disclosure
Does the sustainability statement say whether and how sustainability performance enters incentive schemes, and what share of variable pay it carries (ESRS 2 GOV-3, Delegated Regulation (EU) 2023/2772; GOV-2 from 2027, Delegated Regulation (EU) 2026/1563) for companies in the scope of Directive (EU) 2026/470? Does the remuneration report show result, target and payout per criterion?
A published path from threshold to payout, in one table. Schneider Electric's 2025 report prints a floor of 7.76, a target of 8.88, a result of 8.86, a 98.5% achievement rate and a contribution of 19.7 points against 20 at target, beside a margin criterion at zero (2025 URD, p. 462).
Schneider Electric
French industrial group, Euronext Paris, CAC 40, with sustainability in executive pay since 2011 and at a 20% weight since 2019 per its 2025 Universal Registration Document, page 82. First in the Corporate Knights Global 100 in 2021 and in 2025.
of the Chief Executive Officer's annual bonus at Schneider Electric depends on the Schneider Sustainability Impact score, on which one of the statutory auditors gives limited assurance; in a separate three-year plan, carbon targets carry 25% of the long-term shares, the 2025 Universal Registration Document states (pages 458, 478 and 84).
Schneider Electric gives the sustainability component of executive pay the same structure as the financial criteria. Its 2025 Universal Registration Document, page 458, sets the Chief Executive Officer's 2025 bonus on criteria the Board approved at the start of the performance period: organic growth at 35%, adjusted EBITA margin at 25%, cash conversion at 10%, net satisfaction at 10% and the Schneider Sustainability Impact at 20%, a score more than 80,000 employees also carry in their variable pay, page 331. Each of the five carries a minimum, a target and a maximum, and the report prints the outcome on page 462: a near-target 8.86 against 8.88, a 98.5% achievement rate, 19.7 points against 20 at target on a scale to 40, beside a margin criterion that paid zero and a total bonus at 72.7%. The floor is printed too: at 7.76 the sustainability criterion pays zero. On 25 February 2026 the Board closed 2025 and set the 2026 targets, page 477; the long-term plan keeps 25% on carbon, page 478.
The full case
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