Companies Are Increasingly Pinning Executive Comp to HR Metrics

Human capital metrics have become board-level priorities directly linked to C-suite bonuses, according to a recent ESG Incentive Metrics Study by consulting firm WTW.

Analyzing 1,070 public companies across 18 markets, the data found up to 81% of global organizations now tie executive compensation to people-related metrics, such as employee retention and turnover.

In North America, 71% of companies included at least one people-related metric in executive incentive plans, while 81% of European companies did.

According to Kenneth Kuk, WTW’s senior director of work and rewards, people-related metrics have steadily increased from around 50% to 60% when the firm started measuring its use in 2018. The COVID-19 pandemic then brought a utilization spike as organizations began to realize how important human capital is to business productivity and performance, he said.

“Years ago, compensation committees would have only focused on executive pay, not employee pay. We now see an increased emphasis on succession planning, talent development and even culture.”
— Bill Reilly, managing director, Pearl Meyer

An Increased Emphasis

Based on disclosures filed in 2025, the WTW report found 34% of S&P 500 companies continue to pay a portion of executive incentives based on standalone diversity, equity and inclusion (DEI) and environmental, social and governance (ESG) incentive plan metrics, a decline from 55% last year. Additionally, 23 (or 5%) of the S&P 500 companies disclosed plans to remove DEI metrics from their executive incentive plans for the current plan year.

That trend aligns with a recent study conducted by executive compensation advisory firm Pearl Meyer, which cited “a restrained use” of discretion in incentive payouts and “a notable pullback” in standalone DEI and ESG incentive plan metrics.

“That’s largely due to the external backlash to DEI and ESG from the [current U.S. presidential] administration and external forces in general,” said Bill Reilly, a managing director at the firm.

Nonetheless, he said, companies are increasingly recognizing the importance of board oversight of human capital to ensure they can attract, retain and motivate workers with the right skill sets.

“Years ago, compensation committees would have only focused on executive pay, not employee pay,” Reilly explained. “We now see an increased emphasis on succession planning, talent development and even culture.”

To that end, more than half of the board respondents reported in the Pearl Meyer survey that their involvement in their organization’s human capital matters and metrics was “moderate to high,” which Reilly said is “trending in the right direction.”

A Pair of Principles

When it comes to selecting the appropriate human capital metrics to tie to your organization’s executive compensation packages, there are two main considerations, said Ron Seifert, a senior client partner at consulting firm Korn Ferry.

“Line of sight and metrics that matter — those are the two big principles you want to address when you’re putting these things into a comp program,” he said.

Metrics around succession planning, retention and culture are indicate whether the human capital outlook is positive and aligned with the strategic intent of the organization, he added.

“Boards are asking those questions,” Seifert said, noting there’s still no magic bullet answer to the question of which metrics to consider.

“Different industries and models will have different viewpoints around what matters,” he said.

“Companies should consider how talent connects to business strategy. Leaders need to be rewarded for outcomes that advance what the organization cares about the most.”
— Sue Holloway, content director, WorldatWork

What’s Next

As organizations continue to embrace artificial intelligence (AI), Sue Holloway, a content director at WorldatWork, expects to see continued growth in the importance of related performance metrics in executive incentive plans as more companies are faced with increasing pressure to demonstrate how AI:

• Drives efficiency;
• Improves productivity; and,
• Promotes innovation.

“This is more prevalent in short-term incentive plans and emerging but less common in long-term incentive plans,” she said.

Overall, if you’re looking to bolster your metrics program, start with clarity about what the organization is trying to achieve, said Holloway.

“Companies should consider how talent connects to business strategy,” she said. “Leaders need to be rewarded for outcomes that advance what the organization cares about the most.”

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics:

• Executive Compensation
• Finance and Budgeting
• Organizational Performance