Human Capital Metrics Continue to Anchor Executive Pay as ESG Incentives Are Recalibrated, WTW Finds

A new global study from Willis Towers Watson shows that while companies are reworking how environmental, social and governance considerations appear in executive incentive plans, human capital measures remain firmly embedded in pay design. Boards and investors are increasingly framing ESG not as a standalone agenda but as a set of business-relevant levers tied to long-term value creation, with people-related metrics emerging as the most resilient non-financial category.

 

ESG Incentives Shift Toward Value and Stewardship

 

The study finds that ESG metrics continue to feature prominently in executive compensation, even as their framing evolves. In the United States, 76 percent of S&P 500 companies disclosed the use of at least one ESG metric in executive incentive plans, a marginal decline from the prior year. Most of these measures remain concentrated in short-term incentive structures, with only a small share included in long-term incentive plans.

Globally, adoption remains even higher. Eighty percent of companies analyzed reported at least one ESG metric in executive incentives, though this also represents a modest year-on-year decline. Short-term incentives dominate globally, while roughly one-third of companies incorporate ESG factors into long-term incentives, underscoring a cautious approach to locking non-financial metrics into multi-year pay outcomes.

 

Read more: The “S” in ESG: Why Protecting Workers Is Central to Corporate Resilience

 

Declining DEI Metrics Amid Legal and Policy Pressure

 

One of the most notable shifts highlighted by the study is the sharp reduction in diversity, equity and inclusion metrics in U.S. executive pay. Legal rulings and policy changes have led many companies to reconsider how explicitly DEI goals are linked to compensation. Among S&P 500 companies, the share tying executive incentives to DEI metrics fell to 34 percent in 2025, down from 55 percent the previous year.

A small but meaningful number of companies have gone further. Around 5 percent of S&P 500 firms disclosed plans to remove DEI metrics from their incentive programs altogether for the current plan year. WTW notes that this trend may deepen, as many companies do not disclose forward-looking changes to compensation frameworks until after they are implemented.

 

Human Capital Remains Central Despite ESG Reframing

 

Despite the pullback in DEI-specific measures, the study shows that broader human capital metrics continue to gain traction. In North America, 71 percent of companies included at least one people-related measure in executive incentive plans, rising to 81 percent in Europe. These metrics extend beyond representation targets to focus on areas such as employee engagement, succession planning, organizational culture and retention.

WTW attributes this persistence to heightened board-level attention on workforce-related risks and opportunities. Tight labor markets, skills shortages, rising labor costs and the impact of technology-driven transformation have elevated human capital from a social consideration to a strategic priority.

 

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Board Oversight and Competitive Advantage

 

According to WTW, boards are increasingly viewing people metrics as essential to governance and long-term competitiveness. Oversight of talent, skills and culture is seen as integral to navigating geopolitical uncertainty and structural shifts across industries. As a result, companies appear to be substituting narrower ESG labels with metrics that more directly reflect operational resilience and value creation.

Kenneth Kuk, Senior Director for Work and Rewards at WTW, notes that the continued emphasis on people metrics reflects how boards assess company strategy. Human capital is now widely treated as a core asset, shaping productivity, innovation and the ability to execute through change.

 

A More Targeted Phase for ESG Incentives

 

The findings suggest that executive incentive design is entering a more selective phase. Rather than abandoning ESG-linked pay, companies are refining it, prioritizing measures that are defensible, business-critical and aligned with shareholder value. While environmental and social goals remain part of the conversation, human capital has emerged as the most stable bridge between ESG principles and executive accountability.

WTW’s analysis is based on disclosures from 1,070 public companies across 18 markets, covering fiscal years ending between May 2024 and May 2025. The results indicate that even as ESG terminology evolves under political and regulatory pressure, the centrality of people to corporate performance continues to shape how executives are rewarded.