{"id":23101,"date":"2026-04-09T17:15:29","date_gmt":"2026-04-09T17:15:29","guid":{"rendered":"https:\/\/farient.com\/?p=23101"},"modified":"2026-04-13T15:23:16","modified_gmt":"2026-04-13T15:23:16","slug":"ai-boom-implications-remuneration-committees","status":"publish","type":"post","link":"https:\/\/farient.com\/uk\/2026\/04\/09\/ai-boom-implications-remuneration-committees\/","title":{"rendered":"The AI Boom and Implications for Remuneration Committees"},"content":{"rendered":"

Developments in AI are driving a step change in company strategy, with companies across industries racing to harness AI technologies. Whilst a number of Boards have already added AI oversight to their agenda, there is a broader governance role for the Remuneration Committee, who will also need to consider the implications of AI from a human capital perspective. This includes the increased demand for AI expertise in the workforce and ensuring responsible AI adoption is appropriately rewarded through remuneration schemes.<\/p>\n

Oversight Responsibilities<\/strong><\/h2>\n

AI has become a core item on Board agendas. Over 60% of FTSE 100 companies now include a reference to AI in their corporate governance disclosures, with around 20% delegating AI oversight to the Audit or Risk Committees, and a further 15% establishing dedicated AI Committees. For example, NatWest Group introduced a Group Technology, Innovation and Simplification Committee in 2025 to oversee the bank\u2019s use of technology, AI, data and innovation. HSBC Group has also expanded the remit of its Technology and Operations Committee to include oversight of strategic plans relating to AI and digital currencies.<\/p>\n

While responsibility for the Company\u2019s overall AI strategy will typically sit with the Board as a whole or within these dedicated Committees, there are certain aspects which may fall under the remit of the Remuneration Committee \u2013 particularly in relation to talent management and remuneration design. This year we have seen a number of companies explicitly reference the need for AI expertise in their Directors\u2019 Remuneration Reports (DRRs), with Remuneration Committees signalling the importance of being able to appropriately attract and retain talent that can deliver AI transformation.<\/p>\n

Against this backdrop, management structures are also evolving. Nearly half of FTSE 100 companies have designated a Chief Artificial Intelligence Officer (CAIO) or equivalent role, responsible for AI strategy and implementation. Interestingly, over two-thirds of these roles were only appointed within the last two years. As these individuals typically report directly to the CEO and form part of the senior management team, it is the responsibility of the Remuneration Committee to set their remuneration. Given the emerging nature of the CAIO role and its particularly broad scope \u2013 from driving AI innovation to the ethical use of AI and data governance \u2013 designing appropriate remuneration frameworks can be challenging for Remuneration Committees.<\/p>\n

Incorporation of AI Measures into Incentive Design<\/strong><\/h2>\n

Where AI is included as a performance measure among FTSE 100 companies, it is currently seen exclusively in annual bonus plans. While standalone AI measures are rare, we have seen an increasing number of companies embedding AI-related measures within strategic or personal scorecards for Executive Directors. These scorecards typically have an overall weighting of 10-20% of the total bonus award and are split across multiple objectives. As a result, any single AI-related measure is often worth only around 2-5% of the total bonus award. In the future, as AI continues to play a critical role in company performance, we expect the weightings of these measures to begin to increase.<\/p>\n

Market practice indicates that most AI-related measures remain qualitative in nature, reflecting their inclusion within strategic or personal scorecards. Measures most commonly focus on the adoption and successful implementation of AI platforms, as well as employee engagement and training across geographies. Remuneration Committees will want to ensure that they are provided with sufficient evidence, so they are able to robustly assess performance achieved against the AI-related measures, and measures aren\u2019t seen as soft or too easy to achieve.<\/p>\n

Looking forward, we expect a gradual shift towards more clearly defined, quantitative AI-related targets. Once companies have established a baseline to measure performance against, this may include more robust measures such as AI-driven revenue growth or the percentage of products with embedded AI.<\/p>\n

Examples of AI-related Measures in FTSE 100 Annual Bonus Plans<\/strong><\/h2>\n

Use the scroll at the bottom to see the full table:<\/p>\n

\n
\n\n\n\n\n\n\n\n\n\n\n\n
Company<\/th>\nMeasure<\/th>\nWeighting<\/th>\nDescription<\/th>\n<\/tr>\n<\/thead>\n
AstraZeneca<\/td>\nPersonal objectives<\/td>\nNo specific weighting assigned to personal objectives<\/td>\n2025 Personal objectives \u2013 CEO performance assessment<\/strong><\/p>\n
\n
\u2022 The CEO announced the creation of a dedicated Enterprise AI unit, with the aim to deliver a single data foundation and accelerate high value AI initiatives, enabling the delivery of Ambition 2030<\/div>\n<\/div>\n<\/td>\n<\/tr>\n
Rolls-Royce<\/td>\nStrategic scorecard<\/td>\n20% (5% weight on AI measure)<\/td>\n\n
\n
\u2022 Strategic objectives for 2026 linked to the digital transformation (no further detail disclosed)<\/div>\n<\/div>\n<\/td>\n<\/tr>\n
GSK<\/td>\nPersonal objectives<\/td>\n30%<\/td>\n2025 Personal objectives \u2013 CEO performance assessment<\/strong><\/p>\n
\n
\u2022 The Committee determined that the CEO performed well against this objective for the following reasons:<\/div>\n
\u25e6 Leveraged unique insight to tech companies to drive continued AI capability embedded at scale in global functions<\/div>\n
\u25e6 Made excellent progress across the R&D data\/AI technology goals, driving improvements in cycle time, cost and attrition<\/div>\n
\u25e6 Trained 7,900 employees in Enterprise Digital Fluency<\/div>\n<\/div>\n<\/td>\n<\/tr>\n
Standard Chartered<\/td>\nPersonal objectives<\/td>\n10%<\/td>\n\n
\n
\u2022 Lead the creation of a clear and bank-specific approach to the application of data strategies, including GenAI<\/div>\n<\/div>\n<\/td>\n<\/tr>\n
Centrica<\/td>\nPersonal objectives<\/td>\n25%<\/td>\n2025 Personal objectives \u2013 CEO performance assessment<\/strong><\/p>\n
\n
\u2022 The Committee decided that the CEO strongly performed on this objective as he materially advanced the digital agenda for customer channels and internal business operations to reduce costs, improve resilience and scale 2026 AI deployment<\/div>\n<\/div>\n<\/td>\n<\/tr>\n
Sage Group<\/td>\nPersonal objectives<\/td>\n20% (5% weight on AI measure)<\/td>\n2025 Personal objectives \u2013 CEO performance assessment<\/strong><\/p>\n
\n
\u2022 The CEO is positioned as a leading voice on Sage\u2019s AI strategy and had frequent engagement with UK and European government officials, driving the AI agenda for small and mid-sized businesses and accountants, including through digital policy and e-invoicing initiatives<\/div>\n<\/div>\n<\/td>\n<\/tr>\n
Rightmove<\/td>\nStrategic scorecard<\/td>\n10%<\/td>\n\n
\n
\u2022 2026 Strategic targets include the launch of AI-powered features, embedding an AI-enabled culture and employee engagement<\/div>\n<\/div>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n
Source: Information sourced from companies\u2019 latest Annual Report.<\/div>\n<\/div>\n

Broader Workforce Organisation<\/strong><\/h2>\n

When Remunerations Committees review incentive outcomes for Executive Directors, it is established best practice that they take a step back and consider whether the formulaic outcome aligns with the wider stakeholder experience, including the experience of the company\u2019s employees. For some companies, the employee experience may not have been positive, with many making significant headcount reductions and implementing redundancy programmes as a result of AI adoption. In this context, Remuneration Committees may need to reflect on whether Executive Director incentive outcomes are appropriate in the round. While decisions around headcount are usually made in the best interests of the business, the default position is that Executive Directors should not be penalised, particularly when the shareholder outcome has been positive. In this scenario, the Remuneration Committee should be aware of potential reputational risks and ensure that they are able to justify their decisions appropriately in the relevant DRR.<\/p>\n

Looking ahead, it is expected that AI productivity gains will translate into job displacement, with a 5% \u2013 15% reduction in employee headcount across industries. As AI drives headcount reductions, companies are likely to reassess long-term workforce needs, particularly through the displacement of more junior roles. While this may deliver efficiency benefits over the short-term, it may also risk narrowing entry level job opportunities across the organisation. Remuneration Committees will therefore need to be aware that, over time, this could create challenges for talent development and succession planning, potentially weakening the pipeline for future senior leadership.<\/p>\n

Regulatory Guidance<\/strong><\/h2>\n

As of 2025, there are no specific regulatory requirements linking AI oversight to executive remuneration, and investor scrutiny is more closely focussed on how Boards are overseeing AI integration and deployment. For example, in its latest UK proxy voting guidelines, Glass Lewis notes that Boards must be aware of and take steps to mitigate any material risks stemming from the use or development of AI. In addition, the Financial Reporting Council\u2019s latest guidance highlights controls over new technologies \u2013 including AI \u2013 as potentially material for the purposes of a Board\u2019s declaration on the effectiveness of a company\u2019s material controls.<\/p>\n

That being said, shareholder focus may start to shift towards executive remuneration in the future. For example, over the next few years, shareholders are likely to place greater focus on the link between successful AI adoption and incentive outcomes for Executive Directors. They may even push for standalone AI-related performance measures for companies operating in industries where AI is a key driver of long-term value.<\/p>\n

Key Questions for the Remuneration Committee <\/strong><\/h2>\n

With AI reshaping the way Boards think about executive pay, we have set out some key questions that Remuneration Committees may wish to consider:<\/p>\n