A recent study conducted by Willis Towers Watson PLC (NASDAQ: WTW) highlights a significant trend in executive incentive plans, emphasizing the persistent importance of human capital metrics. As environmental, social, and governance (ESG) considerations continue to evolve, U.S. investors are increasingly refining their policies to align with sustainable and responsible business practices that enhance shareholder value. The findings from WTW's annual study shed light on how companies are adjusting their executive incentive frameworks to prioritize human capital, even as the focus on diversity, equity, and inclusion (DEI) metrics has waned.

2. Key Findings of the WTW Study

The study, which analyzed 1,070 public company disclosures from major stock exchange indices globally, revealed that a significant majority of S&P 500 companies are embedding ESG metrics into their executive incentive plans. Notably, 76% of S&P 500 firms reported incorporating at least one ESG metric in their proxies, representing a slight decline of 1% from the previous year. However, only 9% of these metrics were included in long-term incentive plans (LTI).

Globally, the trend mirrors that of the U.S., with 80% of companies worldwide integrating at least one ESG metric into their incentive structures, reflecting a moderate decrease compared to the previous year. Within this global dataset, 75% of companies reported using ESG measures in their short-term incentive (STI) plans, while 32% included them in LTI plans.

3. Decline in Emphasis on DEI Metrics

A notable shift observed in the study is the decline in the prevalence of DEI metrics in executive incentive plans, particularly in the U.S. This decline is attributed to recent court rulings and policy changes. According to the 2025 disclosures, only 34% of S&P 500 companies continued to link executive compensation to DEI metrics, a significant drop from 55% the previous year. Moreover, 23 companies (5% of the S&P 500) disclosed intentions to eliminate DEI metrics from their incentive plans for the current year, indicating a trend that may persist as firms often do not announce forward-looking changes to their incentive strategies.

4. Human Capital Metrics Remain a Priority

Despite the reduced focus on DEI, human capital metrics have emerged as a paramount consideration for companies. The study found that 71% of North American firms incorporated at least one people-related metric in their executive incentive plans, compared to an impressive 81% in Europe. Common people-related metrics referenced include employee engagement, succession planning, workplace culture, and employee retention.

Kenneth Kuk, Senior Director of Work and Rewards at WTW, commented on the findings, stating, “The broad use of people metrics is consistent with the focus of boards as they continue to prioritize their role in the oversight and governance of people risks, investments, and opportunities. They are concentrating on developments in labor markets, skill shortages, employee retention, and labor costs, all of which they view as critical to company strategy and competitive advantage amidst geopolitical shifts and technology-driven business transformation.”

5. Conclusion

The WTW study underscores a pivotal moment in executive compensation strategies as companies navigate the complexities of ESG considerations and human capital management. As the corporate landscape evolves, the emphasis on human capital metrics is likely to remain a focal point, shaping the future of executive incentive plans. The findings serve as a valuable resource for organizations aiming to refine their incentive structures in a way that aligns with both shareholder expectations and responsible business practices.

Willis Towers Watson continues to position itself as a leader in providing data-driven insights and solutions that empower organizations to thrive in a rapidly changing environment.

Original press release