Business Ethics Unit VIII Journal
Walmart Inc.
Memo
To: |
Board Chairperson |
From: |
Daniel Johnson, Member |
Date: |
3/17/2025 |
Re: |
CEO Compensation ESG Metrics |
Walmart is one of the largest multi-channel retail stores in the US, operating physical stores, neighborhood markets, warehouse clubs, and e-commerce platforms. The company offers a wide range of products, including consumables, health and wellness, technology, grocery, and apparel, among others. The growing interest in corporate social responsibility (CSR) principles has led to companies like Walmart coming up with environmental, social, and governance (ESG) variables that will be used to gauge CSR initiatives: Business Ethics Unit VIII Journal.
To ensure that there is goodwill to achieve CSR goals from the top, most global companies now tie CEO compensation with ESG goals (Cohen et al., 2023). One of the reasons firms tie ESG metrics with CEO pay is to enhance their reputation, improve customer loyalty, and attract equity shares. For instance, a company that releases greenhouse gas emissions or other forms of environmental pollution affects the surrounding environment more than the company itself.
A company’s decision-makers do not internalize the cost of such environmental pollution, but rather the society. To that end, a company’s leaders may not pay attention to curbing such pollution because it does not directly impact the company’s profitability. By tying CEO pay to ESG metrics, the company’s top leadership will pay attention to its social and environmental footprint, potentially bolstering customer loyalty and enhancing equity share attractiveness.
| Metric Name | Description | Goals | Measurement |
| Reducing carbon footprint (Environmental) | This metric seeks to reduce Walmart’s greenhouse gas emissions that occur due to the store’s operations and activities along the supply chain (Hartman et al., 2021) | Reduce Walmart’s greenhouse gas emissions by 20% by 2030. This will be based on a 2015 baseline. | Several measurement methods will be applied to track this objective, including tracking emissions data recorded in the company’s annual sustainability report. Also, the company will leverage third-party audits to ensure accurate categorization into different emission scopes. |
| Diversity and inclusion (Social) | This metric seeks to ensure that there is a diverse and inclusive workplace at Walmart from the top leadership all through to low-level employees. It seeks to ensure that the company’s employees represent all dimensions, including gender, race, and ethnicity. | Achieve at least 25% diverse representation in top management positions within the next three years. Also, the company seeks to achieve at least 20% diverse hires for entry-level and mid-level management positions. | Walmart will track the demographic composition of its employees at quarterly intervals.
Collect employee feedback on whether the workplace meets the standards of an inclusive work environment (Hartman et al., 2021) |
| Supply chain transparency (Governance) | This metric seeks to ensure that Walmart’s supply chain operations can be traced, and that the retailer’s sourcing practices meet established ethical standards (Budler et al., 2023). | Achieve 100% supply chain visibility for Walmart’s leading 50 suppliers. | One of the methods that will be used to assess supply practices is to audit supplier data and annual reports (Budler et al., 2023).
Also, the company will track suppliers’ compliance with Walmart’s sustainability standards. |
Tying CEO compensation to ESG metrics will go a long way to helping Walmart Inc. achieve its CSR objectives. As indicated above, Walmart’s ESG metrics include reducing carbon footprint, diversity and inclusion, and attaining supply chain transparency. By tying CEO pay to these metrics, the company’s leadership will be committed to implementing strategies that will help it achieve these objectives.
For instance, reducing carbon footprint will require the company to adopt renewable and efficient energy sources. On the other hand, bias training and establishing employee resource groups will foster a diverse and inclusive workplace. To achieve supply chain sustainability, Walmart needs to issue third-party certification, which will help the retailer assess a supplier’s practices to ensure they align with ethical and regulatory standards.
References
Budler, M., Quiroga, B. F., & Trkman, P. (2023). A review of supply chain transparency research: Antecedents, technologies, types, and outcomes. Journal of Business Logistics, 45(1). https://doi.org/10.1111/jbl.12368
Cohen, S., Kadach, I., Ormazabal, G., & Reichelstein, S. (2023). Executive compensation tied to ESG performance: International evidence. Journal of Accounting Research, 61(3), 805-853.
Hartman, L. P., DesJardins, J., & MacDonald, C. (2021). Business ethics: Decision-making for personal integrity & social responsibility (5th ed.). McGraw-Hill Education.
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Question 
This assignment measures your mastery of ULOs 3.4, 4.2, 5.3, and 5.6.
For this journal assignment, choose a real or fictional company or other organization of interest to you. In our scenario, the organization is conducting a search for a new chief executive officer (CEO). As a board member of this organization, you are in charge of drafting the environmental, sustainability, and governance (ESG) section of the CEO executive compensation package. If the organization performs sufficiently on these metrics in the first 12 months after hire, the CEO will receive the full bonus or equity award (specified in a different section of the compensation package drafted by someone else).
Begin by researching ESG executive compensation metrics in the CSU Online Library. Then, write a memorandum by completing the Unit VIII Journal Template with the information listed below.
Business Ethics Unit VIII Journal
- Header: Complete the Company Name, To, From, and Date sections.
- Introduction: Describe your organization. Explain why environmental, sustainability, and governance considerations are important in the selection and compensation of the next CEO. This section should be one paragraph.
- ESG Metrics Table: Provide three ESG metrics tied to the compensation package for the next CEO. For each metric, provide a short Metric Name, a 1-3 sentence Description, a quantifiable Goal (or goals), and a process of Measurement for determining the extent to which the goal was achieved. Aim to be as clear and precise as possible in this table to avoid any disputes over the interpretation of these metrics during negotiations with a CEO candidate.
- Conclusion: Describe what actions the organization must now take to implement your plan, including whether diversity should be a consideration in hiring a CEO. This section should be one paragraph.
Your memorandum should be a minimum of one but no more than two pages in length. You are required to use at least two outside sources, one of which may be your course textbook.