The Dawn of AI’s Impact on Comp Committees | Farient Briefings IN FULL
January 13, 2026
The Dawn of AI’s Impact on Comp Committees
Artificial intelligence isn’t just transforming business models—it’s reshaping the way boards think about executive pay. While no regulations currently mandate linking compensation to AI oversight, the technology’s strategic weight is undeniable. Companies across industries are racing to harness AI, and compensation committees—once focused narrowly on pay and performance—now face an even broader governance role related to talent management and AI. The question is no longer if AI will influence incentive design, but how and how soon.
Oversight Responsibilities
Some boards have explicitly added AI oversight to their committee charters or board agendas. A 2024 survey by ISS-Corporate found that 31% of S&P 500 companies disclosed board committee oversight of AI risks, signaling that governance norms are evolving quickly. In a few cases, some aspect of AI governance falls within the remit of the compensation or talent committee. Comp committees may discuss whether management is appropriately addressing AI opportunities and risks—especially those related to human capital such as reskilling employees for AI use or implementing ethical AI practices to avoid reputational harm.
Incentive Design & Metrics
While standalone AI metrics remain rare, many companies now weave AI objectives into broader performance assessments. Notably, Microsoft’s compensation committee explicitly stated in its 2024 proxy that it “enhanced the FY2025 executive compensation program to align [it] to [the] key strategic priority” of the ongoing AI platform shift.
In practice, Microsoft did not create a separate “AI quota” in the CEO’s bonus formula; instead, the committee adjusted the incentive structure and goals to ensure that success in AI innovation (e.g., deploying generative AI across products) meaningfully impacts pay outcomes. Microsoft’s proxy explained that, to recognize the importance of AI opportunities and challenges, the company wanted a “specific connection of compensation to this key strategic priority.” Microsoft calibrated financial and strategic targets for both annual cash incentives and stock-based awards to consider AI-related growth prospects and execution. If management delivers on AI-driven results, executives are rewarded.
In its 2025 proxy statement, Salesforce disclosed the redesign of its FY26 incentive program to directly link rewards to the strategic execution of Agentforce, its AI agent platform. The CEO’s equity awards are now weighted toward performance targets that include AI-driven “digital labor” transformation.
Most companies—particularly those outside of the tech sector—have not yet adopted explicit AI performance metrics into their incentive plans. Unlike the wave of ESG metrics—for example, diversity or carbon reduction goals that over half of large companies incorporated by 2022—AI metrics remain largely implicit. For instance, many companies use broad innovation or transformation objectives in annual scorecards—AI initiatives often fall under these, without being named “AI” goals. A tech consulting firm might tie a portion of the CEO’s bonus to “digital solutions revenue growth,” which inherently includes AI-powered services, or a bank might include a strategic objective around “technology modernization,” which covers AI deployment in operations. These goals influence pay but aren’t labeled purely as “AI metrics.”
Below is a side-by-side comparison of six non-tech S&P 500 companies showing how AI factored into their 2024 proxy disclosures on executive compensation or strategy, and the nature of that integration.
| Company | 2024 AI-Related Proxy Highlights | Nature of AI Integration |
|---|---|---|
| JPMorgan | CEO/Board letter flags AI as a transformative tech requiring investment and risk mitigation. No discrete AI pay metric, but AI noted as strategic priority. | Strategic Initiative & Risk Oversight: Board emphasizes AI’s transformative role; indirectly ties to long-term strategy for pay. |
| Pfizer | CEO letter describes AI accelerating R&D and manufacturing. Short-term incentive includes ESG; AI-driven innovation supports hitting those goals. | Operational Efficiency & Innovation: AI touted for boosting performance (faster research, higher output) that leads to better results that support pay outcomes. |
| ExxonMobil | No explicit AI citations in proxy narrative; focus on efficiency, cost, and emissions. Board notes oversight of disruptive tech. AI likely used in ops to achieve cost and emissions targets, which would factor into bonuses. | Efficiency & Risk Management: Implicit use of AI to drive operational goals (safety, cost, emissions) that are part of incentive metrics. |
| Johnson & Johnson | No direct AI mention in 2024 proxy text. Innovation goals in pharma/medtech divisions are implicitly supported by AI (e.g., drug discovery, digital surgery). Incentives that AI can enable are tied to new-product launches. | Innovation & Product Development: AI is part of background strategy and not explicitly cited in pay discussion but helps achieve R&D and innovation objectives that compensation rewards. |
| Honeywell | Lead Director letter: digitalization (including AI) underpins all three strategic pillars. Showcased double-digit growth in digital/AI-driven offerings. Performance goals included portfolio moves aligned with automation trend. | Digital Transformation & Strategic Alignment: AI seen as value driver in core businesses (automation, software). Qualitative consideration in evaluating CEO’s strategic execution. |
| Coca-Cola | Its 2024 proxy does not explicitly mention AI. Focus on digital marketing and analytics. Possibly using AI in consumer data analysis and supply chain, but not overt in comp discussion. | Data Analytics & Marketing: Implied use of AI for consumer insights and efficiency, which can indirectly influence performance metrics such as growth and margins tied to pay. |
How Boards Factor AI into CEO Evaluations
Even without a formal AI metric, boards frequently discuss management’s progress on AI as part of their qualitative performance assessment. For example, if a CEO successfully integrates AI into product lines or improves efficiency through AI, the compensation committee may exercise its discretion to award a higher annual bonus or an equity grant.
Conversely, if a company falls behind in AI innovation or experiences an AI-related ethics scandal, the committee could reduce payouts or apply a negative modifier for leadership lapses. In 2025, many companies (especially in tech) highlighted AI accomplishments in their business overviews; those achievements often factored into how boards judged the CEO’s strategic leadership for the year. At IBM, for instance, the board’s proxy communications emphasize that IBM’s transformation toward hybrid cloud and AI leadership is a core strategic focus.
While IBM’s incentive plans use traditional financial metrics, the board’s Compensation & Management Resources Committee considers the CEO’s success in advancing IBM’s AI strategy (developing AI offerings and doing so responsibly) as part of the holistic performance review that determines annual pay outcomes. In IBM’s words, “the board is actively engaged in overseeing… [IBM’s] approach to its business, including AI, which we believe must be trustworthy, transparent, and explainable.” This oversight ethos indirectly feeds into how the board sets objectives and evaluates management for compensation; that is, executives are expected to integrate those AI values into business results.
AI-Related Talent and Retention
Compensation committees also find themselves addressing AI from a human capital angle. Increased demand for AI expertise has led some companies to recruit high-priced AI specialists and upskill their workforce. OpenAI provides one example. The company’s equity-based pay is exceptionally high, averaging approximately $1.5 million per person for its 4,000 employees, according to a recent Wall Street Journal/Equilar comparison. This figure is roughly 34 times the average seen at 18 other major tech firms during their pre-IPO phases over the last quarter-century, the WSJ reports.
Additionally, existing executives taking on major AI initiatives may receive retention bonuses or higher pay to reflect their new responsibilities. For example, if the CTO is now also driving an enterprise AI transformation, the committee might increase that CTO’s long-term incentive target to keep them on board in a hot talent market. These actions aren’t always detailed in proxy materials, but they represent a direct way in which AI is shaping committee decisions on pay.
AI’s Ripple Effect on Workforce Incentives
Many compensation committees have, in recent years, expanded their oversight beyond the C-suite to the wider workforce, often renaming themselves to “Compensation and Talent Committee.” In this context, committees are considering how AI will impact jobs, skills, and incentive structures at all levels. The rapid adoption of generative AI in business processes presents a double-edged sword: efficiency gains but also employee anxiety about job security and skills.
Proactive committees overseeing company-wide pay and benefits are beginning to discuss how to incentivize reskilling in AI and ensure that performance metrics don’t inadvertently discourage prudent AI use. For instance, a sales team might use an AI tool to generate leads; a committee overseeing sales compensation plans will want to ensure the plan rewards effective integration of such tools, not just raw sales, so that employees aren’t penalized for spending time learning new AI systems.
According to KPMG’s Board Leadership Center, in 2025 compensation committees should ask whether management has strategies to address “the impact that GenAI and other emerging technologies will have on the company’s workforce, including recruitment and retention strategies for necessary technological expertise [and] employee concerns about job elimination.” Such oversight falls squarely under the committee’s responsibilities for human capital oversight. Some comp committees are also reviewing whether incentive goals remain appropriate in an AI-augmented environment (e.g., if AI automation dramatically boosts productivity, should performance targets be raised?) The overall pay philosophy may shift to emphasize innovation and adaptability. In short, comp committees are thinking not only “Do we pay competitively to AI experts?” but also “Are we creating the right incentives for our entire workforce to embrace AI-driven change?”
Risk Management and Clawbacks
Another angle is ensuring that compensation does not encourage irresponsible AI behavior. Just as boards don’t want pay plans that encourage excessive risk-taking in finance, they also don’t want to inadvertently push executives to deploy unproven AI recklessly to hit a short-term goal. With the Securities and Exchange Commission’s (SEC) new clawback rules and long-standing malus provisions, compensation committees have tools to recoup pay in the event of a major compliance or ethical failure. If, say, a company’s AI product caused a legal or reputational crisis, the compensation committee could exercise discretion to reduce payouts.
Glass Lewis’s 2024 policy update on clawbacks suggests boards should have the power to cancel or recoup pay for “evidence of problematic decisions or actions,” including material risk management failures. One could envision the inclusion of AI-related oversight failures. While hypothetical, the ability to claw back or rescind pay for such failures underscores the role of the compensation committee as part of the essential governance checks and balances around AI.
Regulatory Guidance and Investor Views
As of 2025, there are no specific SEC mandates linking AI oversight to executive compensation. The SEC’s focus on AI has been around disclosure (e.g., urging transparency of AI risks and opportunities in filings) and warning against “AI hype.” That said, general principles of disclosure and risk management apply. If AI materially changes a company’s risk profile or strategy, boards should disclose how they’re overseeing it, including how they incentivise management to address it. For example, if AI is central to a company’s future, the SEC would expect discussion in the 10-K Management Discussion & Analysis (MD&A) or proxy about that strategy; part of that might include whether executive pay programs are aligned to executing the AI strategy.
In Microsoft’s 10-K, the company touted massive AI investments and launches, and in the proxy, it coherently showed how the board linked those to CEO incentives. This consistency between narrative and pay design is viewed positively by regulators and investors.
Proxy advisers and institutional investors are also signaling expectations. Glass Lewis, in late 2023, updated its voting guidelines to note that boards should be equipped to oversee emerging risks like AI. The proxy advisor flagged that it would monitor failures of oversight, which could include mismanagement of AI, as possible reasons to recommend against directors (i.e., potentially members of relevant committees). While Glass Lewis did not say “tie CEO pay to AI,” it expects boards to manage AI risk. Investors might question a company with significant AI exposure if there is no mention of board oversight or alignment in strategy.
So far, shareholders have not introduced proposals seeking AI-linked pay metrics, unlike in climate governance, where some investors asked to tie executive compensation to emissions targets. The AI-related shareholder proposals in 2023–2024 instead sought governance transparency (e.g., reports on AI ethics or risks). For example, at Apple’s 2024 meeting, investors proposed a report on AI governance. Apple’s board opposed it, explaining that its existing risk oversight by the full board covers AI issues. The proposal received about 40% support, a sign of substantial investor interest. Notably, Apple’s response did not mention executive compensation; it focused on board oversight through committees, suggesting that, at least for now, investors are pushing for oversight structures and disclosure on AI rather than an explicit pay-for-AI-performance linkage. Nonetheless, by establishing that AI is overseen at the highest levels, boards implicitly assure shareholders that management will be held accountable should they fail to navigate AI properly. Such accountability could include consequences for what’s been paid (clawbacks) or what is promised to be paid (malus).
Looking ahead, more explicit connections are to be expected. If AI becomes a key driver of long-term corporate value in an industry, compensation committees may introduce related metrics, akin to how some companies added cybersecurity objectives after high-profile breaches, or how ESG metrics were integrated when sustainability rose on the board’s agenda.
As board oversight mechanisms mature, they could evolve into concrete features of an incentive plan. For instance, a company might set a goal for “AI-driven revenue growth” or “the percentage of products with embedded AI” as a formal bonus criterion once they have a baseline to measure against. Any such metric would need to be carefully designed to drive the desired behavior and discourage recklessness.
Actionable Takeaways
- Reward responsible AI adoption: Ensure incentive plans recognize executives who successfully integrate AI into strategy—while maintaining ethical and risk-aware practices
- Signal alignment in disclosures: Follow best practices like Microsoft by clearly linking AI priorities to pay programs in proxy statements for transparency and investor confidence
- Secure AI talent strategically: Approve competitive packages for critical AI roles and retention bonuses for executives leading major AI initiatives—while balancing cost and governance
- Future-proof pay philosophy: Reassess performance metrics and incentive structures to reflect AI-driven productivity gains and innovation, avoiding outdated targets
- Address workforce impact: Incorporate reskilling incentives and review company-wide pay plans to encourage adoption of AI tools without penalizing learning time
- Embed risk controls: Use clawbacks and malus provisions to deter reckless AI deployment and protect against compliance or reputational failures
- Stay ahead of investor expectations: Monitor evolving shareholder and proxy advisor guidance on AI oversight and be prepared to demonstrate accountability in both governance and compensation
New Year Forecast: Our Top 5 Predictions for Remuneration Committees
2025 was a year of change, with significant transformation in the executive remuneration landscape. Many of the developments we outlined in our 2025 predictions article materialised:
- Increase in commercially led decision making: 25% of new Remuneration Policies in the FTSE 350 changed the structure of incentives, demonstrating an increase in companies adopting bespoke pay structures, driven by what works commercially for the business. The use of positive discretion has also become more prevalent, with three companies applying positive discretion to bonus outcomes and two to LTIP awards.
- Adoption of hybrid incentive plans: 50% of companies that made structural changes as part of their new Policy implemented a hybrid LTIP (consisting of annual grants of performance shares and restricted shares). We believe this trend will continue in 2026.
- Greater flexibility in governance rules: the discontinuation of the Investment Association (IA) Public Register was recently announced, which is one of the governance changes we called for over the last year.
- Uplift in quantum: 58% of new policies proposed an incentive increase. Of those companies that proposed a new Policy, 41% increased incentive opportunities by more than 100%, with the median LTIP increase being 150% of salary for FTSE 100 companies.
- Contentious AGM season: The 2025 AGM season saw an increase in the number of companies receiving a vote below 80% for their Remuneration Policy votes. In addition, two companies withdrew their proposed policies due to shareholder concerns.
Farient believes that these trends will continue into the 2026 AGM season, when we expect more than half of FTSE 350 companies to put their Remuneration Policies to a shareholder vote. Against the backdrop and the ongoing debate around UK competitiveness, we have set out our predictions for the 2026 AGM season below:
1. Hybrid Adoption Will Continue to Increase
Hybrid incentive plans are expected to remain the most common emerging approach in the market. This is already evident, with one of the first 2026 Policies already proposing a hybrid. With more companies now adopting hybrid plans, we expect their use to increase further this year.
Hybrids balance performance alignment with retention by combining performance share plans (PSPs) with restricted share plans (RSPs), allowing PSPs to remain genuinely performance-based and focused on rewarding outperformance. In contrast RSPs provide a safety net during periods of cyclical, industry-specific, or broader economic challenges. Implementing a hybrid would be suitable where companies face sustained uncertainty, seek closer alignment across senior employee populations, or look to remain competitive in global talent markets. While shareholder caution remains, we expect familiarity with these structures to increase where proposals are clearly explained and aligned with company strategy.
As hybrid plans become more established and better understood within the UK market, investor sentiment appears to be evolving. The IA has stated they assess proposals on a case-by-case basis, focusing on what is right for the company. Accordingly, Remuneration Committees considering a hybrid plan should be clear about why the approach is appropriate for their specific circumstances, rather than relying on using generic ‘boilerplate’ rationale. As such, a strategy-led approach is vital when making remuneration decisions, as is ensuring that the disclosure reflects the strategic drivers behind the approach.
ISS has opposed proposals that introduce an increase in the overall quantum alongside the adoption of a hybrid structure. This suggests that opposition has been driven not by the hybrid structure itself, but by concerns around increased quantum combined with increased certainty. By contrast, hybrid proposals that maintain overall quantum and apply a 50% haircut when introducing an RSP have received more shareholder support. This highlights the importance of clearly articulating the rationale for each change independently — both the introduction of a hybrid structure and any adjustment to quantum — to ensure that shareholders and proxy advisers can assess the appropriateness of each element.
2. There Will Be a Step Change in Quantum
Only a third of FTSE 350 companies adopted a new Policy in 2025, resulting in little impact on median incentive opportunities across the market. Therefore, if you just look at the quartiles across the entire FTSE 350, it looks like quantum has remained relatively stable. However, when isolating the companies that adopted a new Policy, the median LTIP increase across the FTSE 100 and FTSE 250 were 150% and 100% of salary respectively.
As we expect approximately 50% of FTSE 350 companies will put forward a new Policy this year, we anticipate significant increases in market data. These uplifts are likely to be material and, in many cases, represent a step change from previous Policy limits.
3. Some Companies Will Get It Wrong
As Boards become increasingly focused on doing what is right for the business, we have seen them to take a more aggressive approach to remuneration. This trend has become evident over the past year, with a rise in Policy votes below 80% and an increase in proposals for bespoke incentive structures. We expect this will continue in 2026.
Recently, a number of listed companies have chosen to withdraw or amend shareholder resolutions in response to investor opposition, reflecting the continued influence of shareholder feedback in public markets. In contrast, those companies with support from major and/or anchor shareholders have proceeded with their proposals, despite opposition from institutional investors and proxy advisory firms.
We expect more boards to continue pushing initiatives they believe are in the best interests of the company, even in the face of mixed or negative shareholder sentiment. In contrast, in response to evolving investor expectations, some companies will move quickly to follow emerging trends without fully considering how proposed changes align with their underlying strategy. When this occurs, decisions are more likely to miss the mark with investors, increasing the risk of declining shareholder support and, in some cases, failed Policy votes. This reinforces the importance of a considered, strategy-led approach to remuneration design, rather than reactive adoption of market trends.
4. Non-Executive Director Fees Will See a Significant Increase
Recent IA guidance has highlighted the need for companies to regularly review Non-Executive Director (NED) fees to ensure they appropriately reflect the complexity, responsibility and time commitment of the role. This is particularly relevant as the demands on NEDs continue to increase, with greater regulatory scrutiny, heightened stakeholder expectations, and more complex operating environments.
Despite this guidance, NED remuneration has not increased materially in recent years, in part due to continued sensitivity around pay levels amid the cost-of-living crisis. As a result, the gap between NED fees paid in the UK versus those available internationally has continued to widen, increasing the risk that companies may struggle to attract and retain experienced NEDs, particularly when competing with international markets where NED remuneration is more competitive.
We believe many companies could justify meaningful increases in NED fees, potentially in the range of c.150% to 200% over time. In addition, companies should review the structure of NED remuneration. In the US, almost all companies deliver a portion of fees in shares, compared to less than 10% of companies in the UK. Consistent with recent IA and FRC guidance, providing a greater proportion of fees in shares, purchased at market value, would strengthen alignment with shareholders and bring UK practice closer to international norms.
5. Greater Focus on Pay-for-Performance Alignment
Another key theme that has emerged is an increase in incentive outcomes versus historic norms. This pattern has persisted since the pandemic, when increased uncertainty likely led to more achievable targets being set. Current outcomes are significantly above the historical averages typically seen for annual bonuses (60%–70%) and LTIP (40%–60%).
In the FTSE 100, the median annual bonus reached 79% of the maximum, and LTIP outturns were at 75% of the maximum, both exceeding prior year levels. The FTSE 250 also reported strong vesting, with a 70% median annual bonus outturn and the LTIP vesting at 59% at median. These figures represent notably high outturns, particularly in the FTSE 100.
As companies continue to increase the quantum of incentives in the coming years, Farient anticipates that shareholders and proxy advisory firms will increasingly scrutinise pay for performance, the stretch of incentive targets, and the target-setting process. With increased scrutiny on target setting, Remuneration Committees will face growing pressure to ensure incentive plans are both competitive and defensible.
Conclusion
This year’s developments and expectations for the upcoming year, show that both the environment and advisors must adapt to the changing market. Ensuring remuneration decisions are aligned to the long-term strategy of the company is vital to support the company in achieving its long-term strategic objectives and to receiving the necessary support from shareholders.
Farient’s approach is strategy led. We consider what works best for each company by carefully considering its strategy, challenges, and future ambitions. This allows us to provide a fresh perspective, informed first and foremost by the commercial requirements. If you would like to discuss these predictions or your specific situation, please contact Stephen Cahill (stephen.cahill@farient.com), David Cohen (david.cohen@farient.com), or Alex Styles-Morris (alex.styles-morris@farient.com)
Global CEO Pay: US Leads, Tech Titans Surge, Performance Equity Prevails
How much do CEOs really earn—and why? A GECN Group preliminary report reveals that U.S. chief executives continue to command the highest pay globally, while also delivering outsized shareholder returns. Dive into fresh insights on how CEO compensation is advancing, or not, around the world, by sector, and incentive structures. Discover what’s driving global pay trends, why performance-based equity rules, and what boards must consider amid greater global competition for executive talent.
Read the report on the Harvard Law School Corporate Governance blog or download the full PDF below.
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ICYMI
Looking Back to Look Forward: How This Year’s Top Governance Stories Will Impact Board Work in 2026
As the curtain falls on 2025, boards and executives find themselves at a crossroads—where the lessons of a turbulent year become the compass for tomorrow’s governance. From record-breaking CEO pay and the recalibration of DEI priorities to the disruptive ascent of AI in talent management, this year’s headlines have (again) rewritten the board’s playbook for leadership, risk, and accountability.
Looking ahead to 2026, the stakes remain high and the pace fast. Boards must continue to navigate a landscape shaped by regulatory reform, activist investors, and global standards convergence—all while embedding ethical AI and skills-based talent strategies into the heart of their organizations. The stories we lived in 2025 are the blueprint for governance agility, resilience, and value creation in the year to come.
1. High Investor Support Despite Record CEO Pay and Recurring Issues
CEO compensation hit historic highs, with median S&P 500 CEO pay reaching $16.4M, driven by long-term incentives. Despite this, say-on-pay (SOP) support remained strong, signaling investor confidence in pay-for-performance alignment for most companies.
Nevertheless, anything less than 90% SOP support indicates lower investor confidence, and nearly one-third of Russell 3000 companies received SOP votes between 50%-90%. Common themes among companies receiving “against” SOP votes from shareholders included:
- Pay for performance misalignment
- Lack of rigor in performance goals
- Special or one-time awards
- Non-performance-based pay design
- Insufficient disclosure
2026 Outlook: Expect moderation in base salary increases (around 3%) but continued emphasis on equity and performance-based incentives. Proxy advisors will tighten scrutiny on discretionary bonuses and one-off grants.
2. Governance Under Political Pressure
Regulatory volatility in the U.S. reshaped governance priorities, with executive orders curbing diversity, equity, and inclusion (DEI) programs and resetting the SEC’s priorities.
2026 Outlook: Boards may face heightened activism and litigation risks as shareholder rights’ debates intensify. Governance agility and scenario planning will be critical. Compensation committees should work to understand shareholder perspectives, making engagement evermore critical.
3. AI Disrupts Talent Management
AI adoption in human resources surged, transforming recruitment, performance management, and workforce planning. An understanding of AI, its opportunities and risks, is now required for boards, their committees, and management teams.
2026 Outlook: AI will move from experimental to embedded infrastructure, requiring ethical frameworks and bias controls. Investors are likely to ramp up their expectations for companies to demonstrate robust board oversight of AI, clear disclosure of risks, and disclosure of ethical use of the technology.
4. Decline in DEI and ESG Metrics in Incentive Plans
After years of rapid adoption, companies pulled back on standalone DEI measures and, to a lesser extent, climate-related goals in pay programs, citing legal and political risks. Nevertheless, non-financial strategic and operational measures remain a key component of many incentive programs and companies continue to align their pay programs with their long-term strategy.
2026 Outlook: Broader human capital and risk measures will continue to replace narrow environmental, social, and governance (ESG) targets. Boards will still disclose non-financial considerations, but with greater caution. Sustainability-focused companies will work to better demonstrate the link between sustainability factors and financial value.
5. SEC Signals Major Disclosure Reform
The Securities and Exchange Commission (SEC) announced plans to modernize executive pay disclosure rules (Item 402) and convened a public roundtable to solicit commentary. Quite simply, SEC Chair Paul Atkins says the aim is to prioritize clarity and materiality over volume. The SEC has yet to publish new compensation disclosure rules, but many expect streamlined CD&A and pay-versus-performance disclosures and simplified requirements around security perquisites.
2026 Outlook: Companies should prepare for potentially simpler and principles-based disclosures that emphasize intended vs. realized pay and lifecycle views of equity awards, among other potential changes. Expect proposed rules to come out in 2026 and consider submitting feedback during the comment period.
6. Surge in CEO Turnover
CEO exits hit record levels—over 1,300 departures by October 2025, according to Challenger, Gray & Christmas—driven by economic uncertainty and digital transformation pressures. While directors surveyed by Farient and Corporate Board Member report they do not expect turnover, they also acknowledge losing a C-suite member or members in the last two years.
2026 Outlook: Succession planning will dominate board agendas. Expect more retention bonuses and long-term incentive redesigns to secure leadership continuity.
7. Investor Activism on Pay and Governance
Activists focused on executive pay alignment, ESG commitments, and board accountability. Boards responded with enhanced disclosure and governance reforms.
2026 Outlook: ISS and Glass Lewis will apply updated pay-for-performance tests with a focus on long-term alignment. Activists may look to executive pay issues as their options for shareholder proposals are limited due to SEC rule changes. Boards must engage proactively with investors to avoid proxy season backlash.
8. Executive Security and Perks Under Scrutiny
High-profile incidents and rising security costs pushed boards to reevaluate executive perquisites and disclosure practices.
2026 Outlook: Expanded clawback policies and streamlined perquisite disclosures will feature prominently in SEC reforms and investor expectations.
Strategic Takeaways for 2026
- Compensation: Expect continued investor scrutiny on executive pay, with boards needing to ensure strong pay-for-performance alignment and transparent practices
- Governance: Boards will need to be agile and proactive as regulatory and political changes drive new risks and require deeper engagement with shareholders
- AI & Talent: Oversight of AI in talent management will become a core board responsibility, demanding ethical frameworks and clear risk disclosures
- Investor Relations: Transparent engagement and proactive adaptation to policy shifts from proxy advisors and regulators such as the SEC are essential
Sources: Farient’s Data Analytics Team; Challenger, Gray & Christmas; the Society for Human Resource Management’s “2025 Talent Trends: AI in HR;” and the IFRS Foundation
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About Farient Advisors
Farient Advisors LLC, a GECN Group Company, is an independent premier executive compensation, performance, and corporate governance consultancy. Farient provides a full array of services linking business and talent strategy to compensation through a tailored, analytically rigorous, and collaborative approach. Farient has locations in Los Angeles, Newport Beach, New York, Louisville, and London and works with clients globally through its partnership in the Global Governance and Executive Compensation (GECN) Group. Farient is a certified diverse company and is recognized by the Women’s Business Enterprise National Council.
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