Barbara Strozzilaan 336
1083 HN Amsterdam
The Netherlands
gssbsecretariat@globalreporting.org

Item 05 – GRI Universal Standards
Project – Revised governancedisclosures
For GSSB review
Date

6 April 2021

Meeting

29 April 2021

Review by

19 April 2021

Project

GRI Universal Standards Project

Description

This document presents the revised draft of Section 4. Governance in GRI 102:
About the Organization following the public comment feedback and feedback
received from ICGN during peer review.
An interim version of this draft has been shared with the GSSB for review on 17
March 2021, with its subsequent discussion in a GSSB meeting on 25 March
2021.
New changes have been marked with the code ‘NEW’ in the comment boxes.
ICGN’s feedback and the Standards Division’s responses and proposals areincluded in table 1. A draft tracking new changes to the text has been included in
the Annex.
The GSSB members are invited to review and comment on the new changes aswell as any and all changes they have not been able to comment on during themeeting on 25 March 2021.
The public comments can be found here.

Page 1 of 27

Barbara Strozzilaan 336
1083 HN Amsterdam
The Netherlands
gssbsecretariat@globalreporting.org

1

Contents

2

Feedback received from ICGN on governance disclosures............................................. 3

3

Section 4. Governance ..................................................................................................... 10

4Disclosure GOV-1 Governance structure and composition ........................................... 10

5Disclosure GOV-2 Nomination and selection of the highest governance body .............. 11

6

Disclosure GOV-3 Chair of the highest governance body ............................................. 1178Disclosure GOV-4 Role of the highest governance body in overseeing the managementof impacts .................................................................................................................... 129Disclosure GOV-5 Delegation of responsibility for managing impacts ........................... 13

10

Disclosure GOV-6 Role of the highest governance body in sustainability reporting ...... 13

11

Disclosure GOV-7 Conflicts of interest.......................................................................... 13

12

Disclosure GOV-8 Communication of critical concerns ................................................. 14

13

Disclosure GOV-9 Collective knowledge of the highest governance body .................... 14

14

Disclosure GOV-10 Evaluation of the performance of the highest governance body .... 15

15

Disclosure GOV-11 Remuneration policies ................................................................... 15

16

Disclosure GOV-12 Process for determining remuneration ........................................... 16

17

Disclosure GOV-13 Annual total compensation ratio .................................................... 17

18

Annex. Revisions with track changes ............................................................................. 19

19

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20

Feedback received from ICGN on governance disclosures

21
22
23

The Standards Division reached out to ICGN to provide clarifications on several comments received during the public comment and to review
the draft governance disclosures based on ICGN’s latest revision to Global Governance Principles. The questions shared with the ICGN, thecomments received from ICGN and the proposed responses from the Standards Division in response to these comments are presented below.

24

Table 1. Comments received from ICGN with proposed responses from the Standards Division#

Disclosure

Question to ICGNICGN response

SD proposed response1

All disclosures

The use of ‘sustainable development
topics’ has been replaced with ‘impacts on
the economy, environment, and people,
including on human rights’ because thisterminology aligns more strongly with theconcept of ‘impact’ in the GRI Standards.

The revision to focus on “the economy,
environment and people” comes across as
broader in scope than the former use of“sustainable development topics”. But for
ICGN the role of directors in the first instanceis to promote the long-term success of thecompany itself. Sustainable development ispart of that role, but not an end unto itself. And
to do that directors need to manage
appropriately stakeholder relations andmaterial ESG issues. So the latest GRI version
is probably closer to ICGN’s own approach,but there still seems to be a fundamental
difference in emphasis, which reflects GRI’s
stakeholder focus.

No further change.

2

Disclosure GOV-1
Governance structure
and composition

Respondents to the public commentsuggested to expand diversity criteria toage, disability, marriage and civil
partnership, civil registration gender, race,

Not sure what is meant by “authoritative list”.
Diversity can be tricky to define, particularly as
different issues present themselves inparticular jurisdictions. For example, in the US
ethnic diversity is an important issue to focus

No further change to requirements
given the existing requirements:

Page 3 of 27

religion or belief, sex and sexual
orientation, geographical diversity.
ICGN revised its principle 3.1 which now
emphasizes importance of board diversity.
Can ICGN offer an authoritative list ofgenerally accepted diversity criteria that
relevant to board composition?

3

Disclosure GOV-1
Governance structure
and composition

Respondents to public comment suggested
that the term ‘significant roles’ neededclarification.
ICGN refers to ‘significant roles on nonprofit/ charitable organizations’.
Does ICGN define or can it offer further
explanation on when a role/position issignificant? Would it be correct to define
this as ‘being an executive or nonexecutive member of a governance body ofon but in France it is apparently illegal to focus
on ethnicity in a diversity context. In the current
redrafting of our own Global GovernancePrinciples (GGP) our language on diversity is:

Boards, and the workforce, should comprise adiverse group of individuals to ensure effective
and inclusive decision-making in alignment
with the company’s purpose and values, andtaking into consideration the interests of key
stakeholders. This includes individuals fromdifferent genders, ethnicities (in jurisdictions
where it applies), nationalities, social andeconomic backgrounds, professional skills andpersonal attributes. In the case of gender
diversity boards should at least aspire tohaving 30% representation by the least
represented gender. Boards should discloseand report against the company’s policy ondiversity which should include measurable
targets and period for achievement. The report
should include an explanation of how thediversity policy aligns with the company
strategy and succession planning for the board
and workforce.
The main point about “significant” roles is theextent to which they demand time andattention from the director that could potentiallydistract the director from fulfillment of his/herduties at the individual company. We don’t
provide any further definition, and it is probably
not tenable to cover all possible situations. But
your suggested wording should capture most
instances of this.

Page 4 of 27

1) GOV-1-c-iv to report
representation of underrepresented groups;
2) GOV-2-b-ii to report on how
diversity is considered whennominating and selecting thehighest governance body.
Added a guidance note recommending
an organization specify groups
reported under requirement GOV-1-civ based on GRI’s existing definitionand examples of ‘indicators ofdiversity’ in the Glossary.
See lines 64-67.
The SD proposes to defer further
refinement of reporting related todiversity to the revision of GRI 405:
Diversity and Equal Opportunity 2016
during phase 2 of the Human Rightsrelated Standards project.

Added guidance clarifying the term.
See lines 60-63.

another organization during the same
reporting period’?

4

GOV-5 Delegation of
responsibility for
managing impacts

Respondents suggested that the term
‘internal resources’ is unclear and is not
feasible to report due to resources being
dispersed across the organization andfunctions.

Not sure we have any specific guidance on thesustainable development function beyond what
you might see in our existing GGP.

Can ICGN offer any guidance?

Deleted the requirement to report oninternal resources.
The requirement was included
following ICGN’s feedback prior to the
public comment which suggested thatorganizations should disclose:
1) Who has responsibility for
managing risks related toeconomic, environment andsocial topics: does sustainability
integration in everyday operations
come from executives or from thehighest governance body?
2) Does the company have in-houseenvironment and social
sustainability/corporate social
responsibility person? What is
this person’s role?
3) Does the reporting organization
have internal capabilities to deal
with environment and social risks(time, people, knowledge)?
The SD suggests that these points are
sufficiently covered by requirements
GOV-5-a. ICGN’s GGP do not include
further guidance on the scope ofinternal resources beyond what isalready covered by GOV-5-a.
See lines 435-437.

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56Disclosure GOV-6 Roleof the highest
governance body insustainability reporting

Disclosure GOV-6 Roleof the highest
governance body insustainability reporting

Can a position within a committee review
sustainability reporting (e.g., the Chair) or isit always a committee?

Following ICGN’s revision to the Global
Governance Principle and the inclusion ofprinciple 7.6, should any further changes
de made to this disclosure?

In addition. should the focus be on‘reviewing and approving’ theorganization’s sustainability reporting
processes or on the reported
sustainability information?

The board should be responsible for reviewing
and approving sustainability reporting. Your
language suggests that this could be done bya senior executive who is not part of the board.
We would discourage that interpretation. The
board as a whole is accountable for thisoversight, not an individual or individualcommittee. But the board may wish to have acommittee to take the lead on this for the
benefit of the whole board.

Reformulated the disclosure based on
the feedback to accurately reflect the
HGB’s sole accountability for thereporting process and its outcomes.

You can see what revisions we arecontemplating with regard to sustainability
reporting in our GGP consultation document of
30 November 2020. The focus should be on
the end result of sustainability information, but
having a robust process may be important toachieving a quality outcome.

Reformulated the disclosure based on
the feedback to reflect the equal
importance of the HGB’s accountability
for the reporting process next to its
outcomes.

A guidance note has been added toreflect potential delegation of
implementation of the reporting
process to a committee.
See lines 141-153.

See lines 145-148.

7Disclosure GOV-7
Conflicts of interest

Can ICGN clarify whether disclosure of theconflicts of interest themselves is important,or only of the process how they aredisclosed to stakeholders?

Disclosing all potential conflicts publicly may
not be feasible. But the emphasis should be on
disclosing conflicts that are potentially material,
and to disclose more generally how the board
reviews any conflicts, whether or not they are
all disclosed publicly.

No change.

8Disclosure GOV-7
Conflicts of interest

Can ICGN clarify this terminology - does
‘cross-board membership’ refer tomembership in governance bodies of otherorganizations or to conflicts of interest

By cross board memberships we would meancases when two directors are both directors ofCompany A and Company B.

No change as the term is considered
to be broadly understood.

Page 6 of 27

among committee members on the sameboard?

9Disclosure GOV-7
Conflicts of interest

Respondents to public comment submitted
that the term ‘related parties’ is unclear.
Can ICGN offer guidance on the correct
terminology of ‘related parties’?

10Disclosure GOV-8
Communication ofcritical concerns

GRI Standards cover communication andresolution processes of concerns related to:•anti-corruption (GRI 205: Anticorruption 2016);•

tax (GRI 207: Tax 2019);•

due diligence and conduct (RBC-5
Mechanisms for seeking advice
and raising concerns and RBC-4
Grievance mechanisms and otherremediation processes);•

Our GGP language relating to RPTs is covered
in sections 9.3-9.5 in the consultation
document of 30 November 2020. Relatedparties are those who are captured in theconflicts of interest discussion in section 9.3 of
the GGP.

A reference is provided to ICGN GGP.

The list of potential concerns could be very
long, relating both to individual stakeholders
and systemic risks that affect economies andmarkets generally (eg climate change, humanrights, income inequality, etc). But for your own
purposes these are probably captured underthe bullet points relating to due diligence andconduct and impacts.

Deleted requirement GOV-8-c due toduplication with:

No change as the term is considered
to be broadly understood.

••

Disclosure SPP-4 Grievancemechanisms and otherremediation processes;
Disclosure SPP-5
Mechanisms for seeking
advice and raising concerns.

See line 483.
Added guidance clarifying the scope of
critical concerns.

impacts (MT-1 Identification ofmaterial topics and related
impacts).

See lines 179-183.

Are there any other types of concerns thatare unique to governance and governanceof sustainability that need to becommunicated to the board?

11

Disclosure GOV-12
Process for determining
remuneration

Respondents to public comment submitted
that ‘relationships between the
remuneration consultants and theorganization’ is not clear.

I agree that the wording is a bit unclear in how
it is drafted. I think the key is to look for an
independent remuneration consultant or todisclose any other relationships with

Page 7 of 27

Reformulated the requirement to speakof the leading issue of ‘independenceof remuneration consultants’.

Can ICGN offer any guidance on this?

12

Disclosure GOV-13
Annual totalcompensation ratio

Several respondents to the public comment
raised concerns about the feasibility of thisdisclosure and its meaningfulness as anindicator of fair compensation and income
inequality.
ICGN revised principle 6.1 states that“Societal norms reflect concerns about
income inequality and call for executive
remuneration levels to take into
consideration the level of pay of theaverage company worker and relative tothe average median income of thecompany’s place of domicile”.
Can ICGN share further insight from its
consultation process in support of theapproach to measure income inequality
comparing level of pay of the averagecompany worker to the average medianincome of the company’s place of domicile?

management that might cloud this relationship.
We do not try to define this relationship, but wesay that the Remuneration Committee is
responsible for “appointing any independent
remuneration consultant including theirselection and terms of engagement. This
includes scrutiny of the rationale for
consultancy proposals (particularly if levels
appear industry benchmarked). The
consultant’s identity and fees should also be
publicly disclosed.”

See lines 256-257.

These sorts of pay ratios are well-intended toreflect disparities and extremes of executive
pay, but they are at best crude and can be
subject to gaming. We add national medianincome to provide for a common denominatorin comparing companies across industries.
The average pay of employees in a mass
market retailer is likely to be much lower than
the average pay of an investment banker.
Average median income is one way to getaround industry bias. Note that we may be
dropping or rephrasing the reference to“societal norms” in our GGP, as we havegotten feedback from our members that thisterm is not clear.

Made the following decisions andchanges to the disclosure:1) Retained the disclosure as
designing remuneration policies
and determining remuneration are
one of board’s key responsibilities
in ensuring effective governancebalanced with long-term interestsof the organization and societal
norms and expectations;
2) Retained the highest-paid
individual in the numerator but
added a recommendation todisclose the title of the individual;
3) Retained the median total annualcompensation in the denominatoras more representative than the
average and aligned with themethodology used in other
instruments (see Annex 2 in GSSB
paper from 17 March 2021);

Page 8 of 27

4) Changed the requirement to report
one ratio – of the total annualcompensation of the highest paid
individual to the median total
income of all employees globally:i.
this approach is alignedwith existing statutory
reporting (see Annex 2 in
GSSB paper from 17
March 2021);
ii.
it encourages theorganization to understandthe scale and drivers ofpay disparity internally andimprove its remuneration
policies and practices.
5) Added a requirement to disclose
contextual information tounderstand the data and how it
has been compiled addressconcerns about the level of insightthat the pay ratio provides about
the organization’s remuneration
practices;
6) Retained the requirement to report
the change in the pay ratio tounderstand changes and trends inthe organization’s remuneration
practices;
See lines 265-313.

25
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26

Section 4. Governance

27
28
29
30
31
32

The disclosures in this section provide transparency on an organization’s governancestructure and composition, roles, and remuneration. The information reported under these
disclosures is important to ensure the accountability of governance bodies and senior
executives with respect to the organization’s impacts on the economy, environment, andpeople, including impacts on human rights, and their contribution to sustainable
development.

34

Disclosure GOV-1 Governance structure andcomposition

35

Requirements

36

The organization shall:

37
38

a. describe its governance structure, including committees of the highest
governance body;

39
40
41

b. list the committees of the highest governance body that are responsible fordecision-making on and overseeing the management of impacts on the economy,
environment, and people;

42

c. describe the composition of the highest governance body and its committees by:

33

43

i.

executive and non-executive members;

44

ii.

independence;

45

iii.

tenure of members on the governance body;

46
47

iv.

number of other significant positions and commitments held by eachmember, and the nature of the commitments;

48v.

gender;49

vi.

representation of under-represented social groups;

50
51

vii.

competencies relating to sustainable development that are relevant to theorganization and the sector in which it operates;

52

viii.

stakeholder representation.

53

Guidance

54

Guidance to GOV-1-b-ii

55
56‘Independence’ refers to conditions that enable the members of the highest governancebody to exercise independent judgement free from any external influence or conflicts ofPage 10 of 27

57
58

interest. See reference X in the Bibliography section for more information on independence
criteria for governance bodies.

59

Guidance to GOV-1-b-iv

60
61
62

A position or commitment held by a governance body member is significant when the timeand attention it demands compromises the member’s ability to perform its duties in theorganization. Significant positions can include cross-board memberships.

63

Guidance to GOV-1-b-vi

64
65
66
67

The organization can specify under-represented social groups reported under GOV-1-b-vi
based on additional indicators of diversity such as age, ancestry and ethnic origin,citizenship, creed, or disability; or based on any other indicators of diversity used in its own
monitoring that are relevant for reporting.

69

Disclosure GOV-2 Nomination and selection of thehighest governance body

70

Requirements

71

The organization shall:

72
73

a. describe the nomination and selection processes for the highest governancebody and its committees;

74
75

b. describe the criteria used for nominating and selecting highest governance bodymembers, including whether and how the following are taken into consideration:

68

76

i.

views of stakeholders (including shareholders);

77

ii.

diversity;

78

iii.

independence;

79
80

iv.

competencies relating to sustainable development that are relevant to theorganization and the sector in which it operates.

81

Guidance

82

Guidance to GOV-2-b-iii

83
84
85
86

‘Independence’ refers to conditions that enable the members of the highest governancebody to exercise independent judgement free from any external influence or conflicts ofinterest. See reference X in the Bibliography section for more information on independence
criteria for governance bodies.

87
88

Disclosure GOV-3 Chair of the highest governancebody
Page 11 of 27

89

Requirements

90

The organization shall:

91
92

a. report whether the chair of the highest governance body is also a senior
executive in the organization;

93
94
95

b. if the chair is also a senior executive, explain their function within theorganization’s management, the reasons for this arrangement, and how conflictsof interest are prevented and mitigated.

97

Disclosure GOV-4 Role of the highest governancebody in overseeing the management of impacts

98

Requirements

99

The organization shall:

100
101
102

a. describe the role of the highest governance body and of senior executives indeveloping, approving, and updating the organization’s purpose, value or mission
statements, strategies, policies, and goals related to sustainable development;

103
104
105

b. describe the role of the highest governance body in overseeing the organization’s
due diligence and other processes to identify and manage the organization’s
impacts on the economy, environment, and people, including:

96

106
107

i.

the role of any committees of the highest governance body that havespecific responsibilities in relation to these processes;

108
109

ii.

whether and how the highest governance body engages withstakeholders to support these processes;

110
111

iii.

how the highest governance body considers the outcomes of theseprocesses;

112
113
114

c. describe the role of the highest governance body in reviewing the effectiveness ofthe organization’s processes as described in GOV-4-b, and report the frequency ofthis review.

115

Guidance116

See references X in the Bibliography section.

117

Guidance to GOV-4-b-ii

118
119
120
121

GOV-4-b-ii requires the organization to report information on the role of the highest
governance body in stakeholder engagement. The organization is also required to report on
stakeholder engagement under Disclosure SE-1 in this Standard, and under MT-1-a-iii andMT-3-f in GRI 103: Material Topics.

122
123
124
125

The organization can describe the frequency of engagement between the highest
governance body and stakeholders as well as the means of consultation. If stakeholder
engagement is delegated, the organization can report to whom it is delegated, and how the
feedback received is provided to the highest governance body.

Page 12 of 27

127

Disclosure GOV-5 Delegation of responsibility for
managing impacts

128

Requirements

129

The organization shall:

130
131
132

a. describe how the highest governance body delegates responsibility for identifying
and managing the organization’s impacts on the economy, environment, andpeople, including:

126

133
134

i.

whether it has appointed any senior executives with responsibility for the
management of impacts;

135
136

ii.

whether it has delegated responsibility for the management of impacts toother employees;

137
138
139

b. describe the process and frequency for senior executives or other employees toreport back to the highest governance body on the management of impacts on
the economy, environment, and people;

141

Disclosure GOV-6 Role of the highest governancebody in sustainability reporting

142

Requirements

143

The organization shall:

144
145
146

a. describe the process undertaken by the highest governance body to review andapprove the organization’s sustainability reporting, including the organization’smaterial topics.

147

Guidance

148
149
150
151
152

The organization can report whether the highest governance body has established acommittee with responsibility for sustainability reporting. The organization can also report
whether the highest governance body has set up and maintains internal controls tostrengthen the integrity and credibility of the organization’s sustainability reporting. See
Section 5 of GRI 101: About the Organization for more information.

153

Disclosure GOV-7 Conflicts of interest

154

Requirements

155

The organization shall:

156
157

a. describe the processes for the highest governance body to ensure that conflictsof interest are prevented and mitigated;

140

Page 13 of 27

158
159

b. report whether conflicts of interest are disclosed to stakeholders, including, at aminimum, conflicts of interest relating to:

160

i.

cross-board membership;

161

ii.

cross-shareholding with suppliers and other stakeholders;

162

iii.

existence of controlling shareholders;

163

iv.

related parties, their relationships, transactions, and outstanding balances.

164

Guidance165

See reference X in the Bibliography section.

166

Guidance to GOV-7-b-iii

167
168

The organization should use the definition of controlling shareholder applied in theorganization’s consolidated financial statements or equivalent documents.

170

Disclosure GOV-8 Communication of criticalconcerns

171

Requirements

172

The organization shall:

173
174

a. describe whether and how critical concerns are communicated to the highest
governance body;

175
176

b. report the total number and the nature of critical concerns that werecommunicated to the highest governance body during the reporting period.

177

Guidance

178
179
180
181
182

Critical concerns include concerns about the organization’s potential and actual negative
impacts on stakeholders raised through grievance mechanisms. They also include concerns
about responsible business conduct in the operations of the organization and its business
relationships, identified through other mechanisms and processes. See Guidance toDisclosures SPP-4 and SPP-5 of this Standard for more information.

169

184

Disclosure GOV-9 Collective knowledge of thehighest governance body

185

Requirements

186

The organization shall:

187
188

a. report measures taken to advance the collective knowledge, skills, andexperience of the highest governance body on sustainable development.

183

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190

Disclosure GOV-10 Evaluation of the performance ofthe highest governance body

191

Requirements

192

The organization shall:

193
194
195

a. describe the processes for evaluating the performance of the highest governancebody in relation to overseeing the management of impacts on the economy,
environment, and people;

196
197

b. report whether the evaluations are independent or not, and the frequency of theevaluations;

198
199
200

c. describe actions taken in response to the evaluation, including, at a minimum,changes to the composition of the highest governance body and organizational
practices.

201

Disclosure GOV-11 Remuneration policies

202

Requirements

203

The organization shall:

204
205

a. describe the remuneration policies for members of the highest governance bodyand senior executives, including:

189

206

i.

fixed pay and variable pay;

207

ii.

sign-on bonuses or recruitment incentive payments;

208

iii.

termination payments;

209

iv.

clawbacks;

210

v.

retirement benefits;

211
212
213
214

b. describe how the remuneration policies for members of the highest governancebody and senior executives relate to their objectives and performance in relation
to overseeing the management of impacts on the economy, environment, andpeople.

215

Guidance

216

Guidance to GOV-11-a-i

217
218

Fixed pay and variable pay can include performance-based pay, equity-based pay, bonuses,and deferred and vested shares.

219
220

If the organization uses performance-based pay, it should describe how remuneration forsenior executives is designed to reward long-term performance.

221

Guidance to GOV-11-a-iii

Page 15 of 27

222
223
224
225

Termination payments are all payments and benefits given to a departing member of thehighest governance body or senior executive whose appointment is terminated. Termination
payments extend beyond monetary payments, from transferring property to automatic or
accelerated vesting of incentives.

226

If the organization provides termination payments, it should explain whether:

227
228

•

notice periods for highest governance body members and senior executives aredifferent from those for other employees;

229
230

•

termination payments for highest governance body members and senior executives
are different from those for other employees;

231
232

•

departing highest governance body members and senior executives receive
payments other than those related to the notice period;

233•

any mitigation clauses that are included in the termination arrangements.

234

Guidance to GOV-11-a-iv

235
236
237

Clawbacks are repayments of previously received compensation that a highest governancebody member or senior executive is required to make to their employer in the event thatcertain conditions of employment or goals are not met.

238

Guidance to GOV-11-a-v

239
240
241

The organization should report the differences between the retirement benefit schemes andthe contribution rates for the highest governance body members and senior executives, ascompared to other employees.

243

Disclosure GOV-12 Process for determining
remuneration

244

Requirements

245

The organization shall:

246
247

a. describe the process for designing its remuneration policies and for determining
remuneration, including:

242

248
249
250

i.

whether independent highest governance body members or an
independent remuneration committee oversees the process fordetermining remuneration;

251
252

ii.

how the views of stakeholders (including shareholders) regarding
remuneration are sought and taken into consideration;

253
254
255

iii.

whether remuneration consultants are involved in determining
remuneration and, if so, whether they are independent from theorganization, its highest governance body and senior executives;

256 ii.

report the results of votes on remuneration policies and proposals, if applicable.

257

Guidance258

Background

Page 16 of 27

259
260
261
262

Remuneration policies are established to ensure that the remuneration arrangements help
recruit, motivate, and retain highest governance body members, senior executives, andother employees, while supporting the organization’s strategy and its contribution tosustainable development, and aligning with the interests of stakeholders.

263

Disclosure GOV-13 Annual total compensation ratio

264

Requirements

265

The organization shall:

266
267
268

a. report the ratio of the annual total compensation for the organization’s highestpaid individual to the median annual total compensation for all employees(excluding the highest-paid individual);

269
270
271
272

b. report the ratio of the percentage increase in annual total compensation for theorganization’s highest-paid individual to the median percentage increase inannual total compensation for all employees (excluding the highest-paid
individual);

273
274

c. report contextual information necessary to understand the data and how the data
has been compiled.

275

Guidance

276

Guidance to GOV-13-a and GOV-13-b

277
278
279
280
281

Annual total compensation includes salary, bonus, stock awards, option awards, non-equity
incentive plan compensation, change in pension value, and nonqualified deferredcompensation earnings provided during the reporting period. When calculating the ratio, theorganization should, depending on the organization’s remuneration policies and availabilityof data, consider all of the following:

282
283

•

base salary, which is the sum of guaranteed, short-term, and non-variable cash
compensation;

284
285
286

•

total cash compensation, which is the sum of the base salary and cash allowances,bonuses, commissions, cash profit-sharing, and other forms of variable cash
payments;

287
288
289
290

•

direct compensation, which is the sum of total cash compensation and total fair valueof all annual long-term incentives, such as stock option awards, restricted stock
shares or units, performance stock shares or units, phantom stock shares, stock
appreciation rights, and long-term cash awards.

291
292
293

This disclosure covers all employees as reported under Disclosure ACT-2 in this Standard.
The organization is required to report contextual information necessary to understand how
the data has been compiled under requirement GOV-13-c, including:

294
295

•

whether any employees have been excluded from the calculation, e.g., part-time
employees are excluded;296•

whether full-time equivalent pay rates are used for each part-time employee.

297
298

The organization should also:•

report the title of the highest-paid individual;

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299

•

list types of compensation included;

300

Guidance to GOV-13-c

301
302
303
304
305

Quantitative information about the annual total compensation ratio may not be sufficient on
its own to understand pay disparity and its drivers. For example, pay ratios can be influenced
by the size of the organization (e.g., revenue and number of employees), its sector, labor
sourcing strategy (e.g., reliance on outsourced workers or part-time workers, or a highdegree of automation), or currency volatility.

306
307
308
309

The difference in pay disparity reported over the years may be the result of the change in theorganization’s compensation policy or the level of compensation for its highest paid
individual or employees, the change in calculation methodology (e.g., selection of themedian employee, inclusions or exclusions) or improvement in data collection processes.

310
311
312

For this reason, the organization is required to report contextual information to help
information users interpret the quantitative information and understand how it has been
compiled.

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313

Annex. Revisions with track changes

314

Section 4. Governance

315
316
317
318
319
320

The disclosures in this section provide transparency on an organization’s governancestructure and composition, roles, and remuneration. The information reported under these
disclosures is important to ensure the accountability of governance bodies and senior
executives with respect to the organization’s impacts on the economy, environment, andpeople, including impacts on human rights, and their contribution to sustainable
development.

322

Disclosure GOV-1 Governance structure andcomposition

323

Requirements

324

The organization shall:

325
326

a. describe its governance structure, including committees of the highest
governance body;

327
328
329

b. list the committees of the highest governance body that are responsible fordecision-making on and overseeing the management of impacts on the economy,
environment, and people;

330

c. describe the composition of the highest governance body and its committees by:

321

331

i.

executive and non-executive members;

332

ii.

independence;

333

iii.

tenure of members on the governance body;

334
335

iv.

number of other significant positions and commitments held by eachmember, and the nature of the commitments;

336

v.

gender;337

vi.

representation of under-represented social groups;

338
339

vii.

competencies relating to sustainable development that are relevant to theorganization and the sector in which it operates;

340

viii.

stakeholder representation.

341

Guidance

342

Guidance to GOV-1-b-ii

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343
344
345
346

‘Independence’ refers to conditions that enable the members of the highest governancebody to exercise independent judgement free from any external influence or conflicts ofinterest. See reference X in the Bibliography section for more information on independence
criteria for governance bodies.

347

Guidance to GOV-1-b-iv

348
349
350

A position or commitment held by a governance body member is significant when the timeand attention it demands compromises the member’s ability to perform its duties in theorganization. Significant positions can include cross-board memberships.

351

Guidance to GOV-1-b-vi

352
353
354
355

The organization can specify under-represented social groups reported under GOV-1-b-vi
based on additional indicators of diversity such as age, ancestry and ethnic origin,citizenship, creed, or disability; or based on any other indicators of diversity used in its own
monitoring that are relevant for reporting.

357

Disclosure GOV-2 Nomination and selection of thehighest governance body

358

Requirements

359

The organization shall:

360
361

a. describe the nomination and selection processes for the highest governance bodyand its committees;

362
363

b. describe the criteria used for nominating and selecting highest governance bodymembers, including whether and how the following are taken into consideration:

356

364

i.

views of stakeholders (including shareholders);

365

ii.

diversity;

366

iii.

independence;

367
368

iv.

competencies relating to sustainable development that are relevant to theorganization and the sector in which it operates.

369

Guidance

370

Guidance to GOV-2-b-iii

371
372
373
374

‘Independence’ refers to conditions that enable the members of the highest governancebody to exercise independent judgement free from any external influence or conflicts ofinterest. See reference X in the Bibliography section for more information on independence
criteria for governance bodies.

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376

Disclosure GOV-3 Chair of the highest governance
body

377

Requirements

378

The organization shall:

379
380

a. report whether the chair of the highest governance body is also a senior executive
in the organization;

381
382
383

b. if the chair is also a senior executive, explain their function within theorganization’s management, the reasons for this arrangement, and how conflictsof interest are prevented and mitigated.

375

385

Disclosure GOV-4 Role of the highest governancebody in overseeing the management of impacts

386

Requirements

387

The organization shall:

388
389
390

a. describe the role of the highest governance body and of senior executives indeveloping, approving, and updating the organization’s purpose, value or mission
statements, strategies, policies, and goals related to sustainable development;

391
392
393

b. describe the role of the highest governance body in overseeing the organization’s
due diligence and other processes to identify and manage the organization’s
impacts on the economy, environment, and people, including:

384

394
395

i.

the role of any committees of the highest governance body that havespecific responsibilities in relation to these processes;

396
397

ii.

whether and how the highest governance body engages withstakeholders to support these processes;

398
399

iii.

how the highest governance body considers the outcomes of theseprocesses;

400
401
402

c. describe the role of the highest governance body in reviewing the effectiveness ofthe organization’s processes as described in GOV-4-b, and report the frequency ofthis review.

403

Guidance404

See references X in the Bibliography section.

405

Guidance to GOV-4-b-ii

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406
407
408
409

GOV-4-b-ii requires the organization to report information on the role of the highest
governance body in stakeholder engagement. The organization is also required to report on
stakeholder engagement under Disclosure SE-1 in this Standard, and under MT-1-a-iii andMT-3-f in GRI 103: Material Topics.

410
411
412
413

The organization can describe the frequency of engagement between the highest
governance body and stakeholders as well as the means of consultation. If stakeholder
engagement is delegated, the organization can report to whom it is delegated, and how the
feedback received is provided to the highest governance body.

415

Disclosure GOV-5 Delegation of responsibility for
managing impacts

416

Requirements

417

The organization shall:

418
419
420

a. describe how the highest governance body delegates responsibility for identifying
and managing the organization’s impacts on the economy, environment, andpeople, including:

414

421
422

i.

whether it has appointed any senior executives with responsibility for the
management of impacts;

423
424

ii.

whether it has delegated responsibility for the management of impacts toother employees;

425
426
427

b. describe the process and frequency for senior executives or other employees toreport back to the highest governance body on the management of impacts on
the economy, environment, and people;

429

Disclosure GOV-6 Role of the highest governancebody in sustainability reporting

430

Requirements

431

The organization shall:

428

432
433
434
435

a. describe the process undertaken by the highest governance body to review
and approve the organization’s sustainability reporting, including theorganization’s material topics.

436

Guidance

437
438
439

The organization can report whether the highest governance body has established acommittee with responsibility for sustainability reporting. The organization can also report
whether the highest governance body has set up and maintains internal controls toPage 22 of 27

440
441

strengthen the integrity and credibility of the organization’s sustainability reporting. See
Section 5 of GRI 101: About the Organization for more information.

442

Disclosure GOV-7 Conflicts of interest

443

Requirements

444

The organization shall:

445
446

a. describe the processes for the highest governance body to ensure that conflictsof interest are prevented and mitigated;

447
448

b. report whether conflicts of interest are disclosed to stakeholders, including, at aminimum, conflicts of interest relating to:

449

i.

cross-board membership;

450

ii.

cross-shareholding with suppliers and other stakeholders;

451

iii.

existence of controlling shareholders;

452

iv.

related parties, their relationships, transactions, and outstanding balances.

453

Guidance454

See reference X in the Bibliography section.

455

Guidance to GOV-7-b-iii

456
457

The organization should use the definition of controlling shareholder applied in theorganization’s consolidated financial statements or equivalent documents.

459

Disclosure GOV-8 Communication of criticalconcerns

460

Requirements

461

The organization shall:

462
463

a. describe whether and how critical concerns are communicated to the highest
governance body;

464
465

b. report the total number and the nature of critical concerns that werecommunicated to the highest governance body during the reporting period.

466

Guidance

467
468
469

Critical concerns include concerns about the organization’s potential and actual negative
impacts on stakeholders raised through grievance mechanisms. They also include concerns
about responsible business conduct in the operations of the organization and its business

458

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470
471

relationships, identified through other mechanisms and processes. See Guidance toDisclosures SPP-4 and SPP-5 of this Standard for more information.

473

Disclosure GOV-9 Collective knowledge of thehighest governance body474

Requirements

475

The organization shall:

476
477

a. report measures taken to advance the collective knowledge, skills, andexperience of the highest governance body on sustainable development.

472

479

Disclosure GOV-10 Evaluation of the performance ofthe highest governance body

480

Requirements

481

The organization shall:

482
483
484

a. describe the processes for evaluating the performance of the highest governancebody in relation to overseeing the management of impacts on the economy,
environment, and people;

485
486

b. report whether the evaluations are independent or not, and the frequency of theevaluations;

487
488
489

c. describe actions taken in response to the evaluation, including, at a minimum,changes to the composition of the highest governance body and organizational
practices.

490

Disclosure GOV-11 Remuneration policies

491

Requirements

492

The organization shall:

493
494

a. describe the remuneration policies for members of the highest governance bodyand senior executives, including:

478

495

i.

fixed pay and variable pay;

496

ii.

sign-on bonuses or recruitment incentive payments;

497

iii.

termination payments;

498

iv.

clawbacks;

499

v.

retirement benefits;

Page 24 of 27

500
501
502
503

b. describe how the remuneration policies for members of the highest governancebody and senior executives relate to their objectives and performance in relation
to overseeing the management of impacts on the economy, environment, andpeople.

504

Guidance

505

Guidance to GOV-11-a-i

506
507

Fixed pay and variable pay can include performance-based pay, equity-based pay, bonuses,and deferred and vested shares.

508
509

If the organization uses performance-based pay, it should describe how remuneration forsenior executives is designed to reward long-term performance.

510

Guidance to GOV-11-a-iii

511
512
513
514

Termination payments are all payments and benefits given to a departing member of thehighest governance body or senior executive whose appointment is terminated. Termination
payments extend beyond monetary payments, from transferring property to automatic or
accelerated vesting of incentives.

515

If the organization provides termination payments, it should explain whether:

516
517

•

notice periods for highest governance body members and senior executives aredifferent from those for other employees;

518
519

•

termination payments for highest governance body members and senior executives
are different from those for other employees;

520
521

•

departing highest governance body members and senior executives receive
payments other than those related to the notice period;522•

any mitigation clauses that are included in the termination arrangements.

523

Guidance to GOV-11-a-iv

524
525
526

Clawbacks are repayments of previously received compensation that a highest governancebody member or senior executive is required to make to their employer in the event thatcertain conditions of employment or goals are not met.

527

Guidance to GOV-11-a-v

528
529

The organization should report the differences between the retirement benefit schemes andthe contribution rates for the highest governance body members and senior executives, as

530

compared to other employees.

531

Disclosure GOV-12 Process fordetermining remuneration

532

Requirements

533

The organization shall:

534
535

a. describe the process for designing its remuneration policies and for determining
remuneration, including:Page 25 of 27

536
537

i.

whether independent highest governance body members or an independent
remuneration committee oversees the process for determining remuneration;

538
539

ii.

how the views of stakeholders (including shareholders) regarding
remuneration are sought and taken into consideration;

540
541
542

iii.

whether remuneration consultants are involved in determining remuneration
and, if so, whether they are independent from the organization, its highest
governance body and senior executives;543

b. report the results of votes on remuneration policies and proposals, if applicable.

544

Guidance545

Background

546
547
548
549

Remuneration policies are established to ensure that the remuneration arrangements help
recruit, motivate, and retain highest governance body members, senior executives, andother employees, while supporting the organization’s strategy and its contribution tosustainable development, and aligning with the interests of stakeholders.

550

Disclosure GOV-13 Annual total compensation ratio

551

Requirements

552

The organization shall:

553
554
555

a. report the ratio of the annual total compensation for the organization’s highestpaid individual to the median annual total compensation for all employees(excluding the highest-paid individual);

556
557
558
559

b. report the ratio of the percentage increase in annual total compensation for theorganization’s highest-paid individual to the median percentage increase inannual total compensation for all employees (excluding the highest-paid
individual);

560
561

c. report contextual information necessary to understand the data and how the data
has been compiled.

562

Guidance

563

Guidance to GOV-13-a and GOV-13-b

564
565
566
567
568

Annual total compensation includes salary, bonus, stock awards, option awards, non-equity
incentive plan compensation, change in pension value, and nonqualified deferredcompensation earnings provided during the reporting period. When calculating the ratio, theorganization should, depending on the organization’s remuneration policies and availabilityof data, consider all of the following:

569
570

•

base salary, which is the sum of guaranteed, short-term, and non-variable cash
compensation;

Page 26 of 27

571
572
573

•

total cash compensation, which is the sum of the base salary and cash allowances,bonuses, commissions, cash profit-sharing, and other forms of variable cash
payments;

574
575
576
577

•

direct compensation, which is the sum of total cash compensation and total fair valueof all annual long-term incentives, such as stock option awards, restricted stock
shares or units, performance stock shares or units, phantom stock shares, stock
appreciation rights, and long-term cash awards.

578
579
580

This disclosure covers all employees as reported under Disclosure ACT-2 in this Standard.
The organization is required to report contextual information necessary to understand how
the data has been compiled under requirement GOV-13-c, including:

581
582

•

whether any employees have been excluded from the calculation, e.g., part-time
employees are excluded;583•

whether full-time equivalent pay rates are used for each part-time employee.

584

The organization should also:585•

report the title of the highest-paid individual;

586•

list types of compensation included;

587

Guidance to GOV-13-c

588
589
590
591
592

Quantitative information about the annual total compensation ratio may not be sufficient on
its own to understand pay disparity and its drivers. For example, pay ratios can be influenced
by the size of the organization (e.g., revenue and number of employees), its sector, labor
sourcing strategy (e.g., reliance on outsourced workers or part-time workers, or a highdegree of automation), or currency volatility.

593
594
595
596

The difference in pay disparity reported over the years may be the result of the change in theorganization’s compensation policy or the level of compensation for its highest paid
individual or employees, the change in calculation methodology (e.g., selection of themedian employee, inclusions or exclusions) or improvement in data collection processes.

597
598
599

For this reason, the organization is required to report contextual information to help
information users interpret the quantitative information and understand how it has been
compiled.

Page 27 of 27