Cadence Updates Executive Compensation Structure to Incentivize Diversity


Many companies have official workplace diversity, equity, and inclusion (DEI) policies and goals. However, often these goals are not tied to any concrete sticks or carrots, incentives, or penalties. This means that when DEI goals may conflict with other corporate initiatives (even when it’s simply a time conflict), DEI goals can be put on the back burner.


Tech Company Makes Bold Move


One tech company, however, has taken a bold step toward addressing those potential conflicts. Cadence, a company the provides electronic design of semiconductor chips and systems, recently added a DEI-focused compensation incentive designed to improve its workplace diversity.


“A substantial portion of an executive’s variable pay is now tied to increases in the representation and engagement of Black, Latinx and women employees in addition to the progression of environmental and social initiatives,” writes Russ Banham in an article for Forbes. “The new plan initially affects the compensation of the company’s top 100 leaders who are in the best position to evolve the demographics of the company’s workforce.”


Diversity Just the First Step: Inclusion and Equity Must Follow


This compensation policy change will put Cadence in a small group of companies that have implemented such incentives, but they certainly aren’t the only ones. “A 2021 survey by asset management firm Mercer showed that only 15% to 20% of S&P 500 companies align diversity, equality and inclusion (DE&I) objectives with executive pay,” writes Banham.


Aligning workplace DEI goals with executive pay is a great strategy for adding teeth to an organization’s workplace DEI efforts and making them top of mind for the executives who have the authority to make real change but who are often strapped for time and pulled in a variety of different directions when pursuing company objectives.


DEI Is a Long Game


Cadence genuinely sees its DEI efforts as a key element of its long-term success. “It is foundational that we attract and retain the industry’s best talent,” Cadence President and CEO Anirudh Devgan said about the incentive plan. “As leaders, we need to ensure that we are offering opportunities to people who come from varying backgrounds and can be great contributors to our success.”


Once on board, of course, Cadence and other organizations must make a strong, visible, and real commitment to the “E” and “I” of workplace DEI. Diversity is meaningless if diverse staff members aren’t treated equitably and don’t opportunity for input which is valued.


Many companies have come up with and publicly announced ambitious DEI goals. However, in many cases, there is little incentive to take concrete action to achieve those goals. This isn’t necessarily due to any lack of will on the part of corporate leaders. Instead, it’s often a result of a lack of incentives and competing priorities.


As more companies take the DEI compensation incentive approach of Cadence and others, we can expect to see ever more concrete action on improving corporate DEI—not just in terms of numbers, but in terms of ongoing action.


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Inclusion: The New Competitive Business Advantage

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