Proposal 4: Shareholder Proposal Regarding the Integration of Environmental, Social and Governance (ESG) Metrics into Executive Compensation
We received the following proposal from the International Brotherhood of Teamsters General Fund, 25 Louisiana Avenue, NW, Washington, DC 20001, beneficial owner of 356
shares of our common stock. In accordance with SEC rules, we are reprinting the proposal and supporting statement (the Teamsters Proposal) in this Proxy Statement as they were submitted to us:
Resolved: Shareholders of Republic Service, Inc. (Republic Services), urge the Board of Directors to report to
shareholders, at reasonable cost and omitting proprietary information, if, and how, it plans to integrate environmental, social and governance (ESG) metrics into the performance measures of named executive officers under the Companys
compensation incentive plans. ESG is defined as the framework for understanding how ESG considerations, and related financial impacts, are integrated into corporate strategy over the long-term.
Supporting Statement:
Strong management of ESG risks has a positive effect on long-term shareholder value. Failure to adequately manage and disclose
performance on ESG issues can pose regulatory, legal, reputational and financial risks to a company and its shareholders.
According
to the 2019 UN Global Compact CEO Study, 84% of executives from the worlds largest companies cited a clear link between sustainability and business value and 66% of CEOs would agree to have their compensation linked to sustainability
performance. A recent Mercer study found 30% of respondents use ESG metrics in their incentive compensation plans and 21% more are considering incorporating such metrics.
Effectively managing ESG issues offers positive opportunities for companies and should be a key metric by which executives are judged. By
integrating ESG metrics into executive compensation, companies can reduce risks related to underperformance by incentivizing executives to meet sustainability goals, thereby achieving greater long-term value.
Unfortunately, at Republic Services there appears to be a disconnect between the prominence the Company gives to its ESG-related efforts,
such as its Our Blue Planet initiative, and the Companys senior executive compensation structure, which lacks any ESG-related metrics. The latter is despite the Company stating that our sustainability goals and practices are
core to our business
and support long-term value creation. We certainly applaud the adoption and disclosure of greenhouse gas emission reductions, the Companys charitable giving commitments, and its goals for increasing the recovery
of key materials, but it is unclear how these long-term goals mesh with shorter-term profit-based metrics used in the executive compensation structure.
We are particularly concerned that Republic Services has demonstrated weak performance on health and safety practices tied to the
Covid-19 pandemic, a critical human capital management practice. Various media outlets, including the Fast Company and Vice Magazine, have reported that company workers lack the necessary personal protection equipment. With Business Insider finding
sanitation work to be the fifth most dangerous occupation in the country, and one of most dangerous jobs considered essential amid the pandemic, concerns over the Companys pandemic response heighten the importance of creating a robust
connection between executive compensation and Companys health and safety practices.
Republic Services performance on material
ESG issues can impact long-term value. Republic Services should explain if and how it plans to improve performance by integrating ESG metrics into executive compensation assessments.
Boards Statement Recommending a Vote AGAINST the Teamsters Proposal
The Board of Directors and its Management Development & Compensation Committee and Sustainability & Corporate Responsibility Committee have carefully
reviewed and considered this proposal and, for the reasons discussed below, do not believe it is in the best interests of our shareholders because our current practices already hold management accountable to prioritizing sustainability in our
business practices.
Discussion
Republic
Services senior executives are committed to achieving the Companys ambitious 2030 sustainability goals which are core to our business strategy and long-term financial targets. Sustainable business practices are part of our daily
operations. They enhance our profitability and support long-term value creation for our stakeholders. As a result, there is already a direct line from our ESG initiatives to our business results, our culture and strategy and thus, to our
performance-based executive compensation program.
Republic Services is an industry leader with a long history of sustainable business practices
Republic Services is committed to keeping communities clean in a safe and environmentally responsible way. We believe in the preservation of our Blue Planet... a cleaner,
safer and healthier world where people thrive not just for today, but for generations to come.
Republic Services first published a sustainability platform in
2014, identifying the five elements of sustainability that remain deeply ingrained within our business today safety, people, operations, materials management and communities. At that time, we set three time-bound goals related to recycling
commodities, energy and fleet and an ongoing safety goal. In 2017, we completed our first materiality assessment, surveying 20,000 stakeholders on the importance of, and performance on, our sustainability opportunities. In 2018, we achieved our
time-bound goals, made progress on our safety goal and updated our materiality assessment. In 2019, we unveiled our new 2030 sustainability goals, designed to address critical global macro trends and our most relevant sustainability risks and
opportunities.