Pay Meets the Real World | Farient Briefings FOR EMPLOYEES
April 29, 2026
How Uncertainty, Talent, and Data Are Redefining Executive Pay
As the 2026 proxy season winds down, executive compensation discussions are rapidly changing. Pay design, talent retention, disclosure, and technology are no longer separate conversations; they’re converging at the boardroom level. Against this backdrop, a conversation with R.J. Bannister, partner and Chief Operating Officer at Farient Advisors, a global executive compensation, talent, and corporate governance advisory firm, seemed opportune. Bannister was interviewed by Frazer Jones Principal Recruiter Alfredo Lira. What emerged was insight into how uncertainty, data, and predictive analytics are redefining the compensation committee agenda. We explored what this means for compensation committees, CHROs, and Total Rewards leaders.
Goal Setting Under Pressure
“With the level of economic uncertainty, particularly around tariffs, there was significant anxiety about how companies were setting performance targets and ranges, and how they were accounting for volatility,” Bannister explained. That dynamic made target setting one of the many challenges of the 2026 proxy season, as compensation committees addressed balancing rigor and flexibility in an unpredictable and volatile environment.
This pressure has been especially pronounced in commodity-driven industries. Companies in sectors like mining, chemicals, and petroleum are dealing with significant price volatility, compounded by geopolitical developments.
Compensation committees are challenged to strike the right balance between economic reality and aspirational performance, and then to clearly explain outcomes when external forces exert an outsized influence. In response, many committees are turning to more rigorous analysis earlier in the process. As Bannister noted, “There is a lot of work committees can do upfront by analyzing historical and forward-looking performance targets, and by reviewing them through both internal and external lenses. That kind of preparation can help mitigate many of these challenges before they surface.”
The Limits of ‘Paper’ Pay for Performance
As those goal-setting challenges play out, compensation committees are also navigating what Bannister described as “a real tension today between the capital markets and the talent market.”
On one side, proxy advisors continue to exert significant influence, particularly when companies take actions outside traditional total direct compensation frameworks. High sign-on awards, retention grants, and one-off incentives tend to draw scrutiny. “Those types of actions draw the microscope of proxy advisors,” he explained, “and they can lead to negative say-on-pay recommendations if they are not well supported.”
At the same time, boards and management teams are focused on retaining key leaders through periods of uncertainty and transformation. “Management is looking at their talent and asking, ‘How do I keep the right people engaged and motivated when the business model is under pressure?’”
This tension is compounded by the way performance is assessed. Pay for performance remains central to proxy advisor evaluations, particularly over multi-year periods, but traditional quantitative pay-for-performance frameworks are increasingly misaligned with how value is being created in today’s environment.
“A lot of the decisions behind say on pay still flow from quantitative pay for performance models,” Bannister said, “but those models do not always capture what is really happening when a company is being disrupted or deliberately retooling because of technology and AI.”
Context, he emphasized, matters. “Are you a disruptor, or are you getting disrupted? And how are you responding? Those distinctions are critical, but they do not always show up cleanly in the numbers.”
As a result, the balancing act often hinges less on the pay decision itself and more on how it is framed, justified, and communicated to shareholders.
The Rise of Compensation Storytelling
Despite expectations of deregulation, governance requirements have not materially eased at the proxy statement level. While there has been regulatory whiplash across administrations, executive compensation disclosure obligations remain largely intact.
“There was an expectation that certain requirements, like the CEO pay ratio, might go away,” Bannister observed. “A lot of people said they were not really getting value from it. But so far, it has been relatively quiet.”
He pointed, however, to a broader structural issue shaping board thinking: the steady flow of capital from public to private markets. “One of the reasons you have seen so much capital move from public to private is the administrative burden of being public,” he said, adding that “any effort to unwind that complexity would be seen as a positive.”
In this environment of regulatory stability, disclosure has become a strategic lever. What was once largely a legal compliance exercise has evolved into an essential communications tool.
“The proxy statement, especially the CD&A, is now the primary way companies get their message across,” Bannister explained. Historically, legal teams dominated the process, resulting in conservative, risk-averse language. “The materials were bland, because the goal was to guard against risk.”
That has changed significantly over the last decade. Investors now want insight into the decision-making process itself. “They want to feel like they were in the room. They are not just interested in outcomes, but in the deliberations,” he said, referring to why a peer group was chosen, why discretion was applied, and what trade-offs were considered.
As a result, the narrative has become just as important as the numbers themselves.
The Modern Talent Risk
Perhaps the most profound shift is the expansion of compensation committees into broader human capital oversight. Today, over 50% of S&P 1500 compensation committees have formally changed their name to include human capital, leadership development, or talent.
More importantly, the remit itself has expanded. Succession planning has become a focal point. “Boards have really taken back ownership of succession,” Bannister said.
However, many organizations are still early in their maturation. “They have completed talent assessments and nine box reviews, and then they stop. They have not linked succession planning to compensation design, role sequencing, or retention strategy,” he said, noting that this pattern is common across companies of various sizes and sectors.
This often leaves organizations exposed. “They might have two or three strong utility players as emergency backups, but that is not the same as having real depth or a sustainable leadership,” he added.
The AI Inflection Point
Years of investment in HR systems have left companies rich in data. Unfortunately, an abundance of data does not translate into clarity. “Now companies are asking, ‘What are the questions we are actually trying to answer?’” Bannister observed.
AI has intensified this shift by forcing organizations to evaluate people and technology side by side in a more explicit way. “Companies are more likely to ask: if work needs to get done, do I deploy a person, or do I deploy AI?”
This represents a fundamental rethink of how organizations view their workforce. “People have historically been treated as expenses rather than assets,” Bannister explained. “AI forces companies to think differently about that trade-off.”
While clear answers are still emerging, compensation committees are beginning to engage more deeply with these questions. They are asking management how AI investments compare to people investments, where returns are being generated, and where the most acute trade-offs exist.
What This Means for HR Talent
From a recruitment perspective, these shifts are materially changing what organizations require from Executive Compensation and Total Rewards leaders.
As Bannister’s observations highlight, the role has moved well beyond program design and annual pay decisions. Today’s compensation leaders are expected to operate credibly at the board and committee level, exercising judgment in environments shaped by uncertainty, external forces, and competing stakeholder pressures. Technical expertise remains essential, but it is no longer sufficient on its own.
Committees are spending more time debating context, narrative, and intent. That places a premium on leaders who can clearly articulate why decisions were made, explain performance amid disruption, and connect pay outcomes to longer term strategy.
Expectations are also rising around data fluency. As organizations become data rich, compensation leaders are expected to help boards ask better questions. As Bannister highlighted, this includes framing tradeoffs between investment in people and investment in technology as AI reshapes how work gets done.
Taken together, this marks a clear inflection point. Executive compensation has moved beyond a focus on compliance and annual processes to become a “strategic lever” that boards use to guide leadership, manage risk, and drive long-term value. That requires the supporting talent to evolve accordingly.
Farient Urges SEC to Keep, But Simplify, PvP Disclosure
Farient Advisors has asked the Securities and Exchange Commission to retain the agency’s Pay vs. Performance disclosure rule. But it wants the requirement trimmed back to its analytical core.
In an April 13 comment letter to the SEC on File No. 4-855, the firm said the rule’s most valuable output is a performance-sensitive pay figure known as “Compensation Actually Paid,” or CAP. It argued that CAP is expensive to calculate the first time. It is cheaper to maintain once systems are in place.
The SEC’s Pay vs. Performance table has drawn criticism since it took effect in 2022. Investors often call it hard to read. Companies often call it costly. Those complaints have fueled calls to repeal the disclosure outright.
Farient’s message: Don’t throw out the one number that can show whether executives and shareholders are in the same boat.
Why CAP Matters
Farient said the usual pay figure that investors see — total compensation in the Summary Compensation Table — is not sensitive to performance. It is built largely on grant-date values for long-term incentives. Those values do not move much year to year, even when the stock does.
CAP is different, the firm wrote. It revalues equity awards based on what has vested and what remains outstanding. That makes the figure rise and fall with share price. Farient described CAP as a measure of realized and realizable pay.
Still, CAP has not been widely used. Farient said many readers see the Pay vs. Performance table as a “bird’s nest” of numbers. It can produce odd results, including negative pay. Proxy advisors have not provided consistent guidance on how to interpret it.
Pay Level is Not Pay Alignment
The firm urged the SEC to draw a clear line between two questions. First: Is pay reasonable for the job and the company’s size? Second: Does pay move with shareholder outcomes over time?
Farient said Summary Compensation Table pay is still useful for judging cost and “pay quantum.” But it said CAP is the better tool for alignment. CAP can show when an executive’s company-linked wealth changes alongside total shareholder return.
What CAP Can Reveal
Farient pointed to patterns that can look fine at grant date but turn into misalignment later. Its top example was the “round-trip effect.” It happens when companies use fixed-value equity grants during volatile periods. If shares fall and later rebound, executives can end up with more shares and more realizable pay than they would have earned in a steadier market.
The firm also flagged “large trough grants.” Those are big awards issued after steep stock price declines and ahead of a recovery. Farient said the practice was common during the early COVID-era downturn, when boards sought to “restore” lost equity value. CAP can help investors spot when such grants look like retention tools — and when they look like opportunism.
Farient said fixing these problems can be a challenge. Efforts to reduce volatility-driven windfalls can collide with boards’ desire to keep target pay “competitive” each year. But it argued that investors cannot evaluate those trade-offs without a performance-sensitive pay metric.
What Farient Wants Changed
The firm proposed a Pay vs. Performance disclosure focused on the CEO only, not all named executive officers. It said the CEO’s alignment is the most relevant signal of board oversight and strategy stewardship.
Under Farient’s proposal, the table would keep three items:
- SCT total compensation, as the cost-based pay measure
- CAP, as the performance-sensitive measure of realized and realizable pay
- Total shareholder return, as the return context investors care about
Farient also recommended a technical swap in how pensions are treated. It wants the SCT to use the pension cost figure used in the CAP calculation. It wants CAP to include year-over-year changes in pension value. The firm said that it makes the SCT more purely a cost measure and CAP a more purely wealth-change measure.
It also urged the SEC to drop other parts of the current disclosure. That includes the tabular list of company-selected financial performance measures and the narrative “relationship” discussion. Farient said cutting those items would reduce the reporting burden without sacrificing the core comparison.
Finally, the firm asked the SEC to rename CAP. It suggested “Realized and Realizable Pay.” Farient said the current label implies cash in hand. In practice, the number includes unrealized and unvested gains that can still be forfeited.
What Happens Next
The SEC has been reviewing feedback on whether the Pay vs. Performance rule is delivering value. Farient said the answer is yes — if the Commission keeps CAP and strips out the rest. The firm urged regulators to preserve CAP, calling it the only consistently reported, performance-sensitive pay metric for public companies.