The Advisors' Blog

FW Cook recently published its annual incentive plan report – which reviews plans at the top 250 largest S&P 500 companies by market cap, based on 2024 practices disclosed in 2025 proxy statements. Here are a few key highlights:

• Plan Types: Formulaic annual incentive plan design with predetermined metrics and weightings remains the chosen approach by 93% of companies, aligning with shareholder and proxy advisor preferences.

• Financial Measures: Profit and revenue measures are the most prevalent and tend to account for the greatest weighting. Use of 2 or 3 financial metrics remains most prevalent, as this practice allows participants to address key business priorities without diluting management’s focus.

• Non-Financial Measures: A non-financial component is highly prevalent in annual incentive plans as a complement to core financial measures, with 80% of companies using a non-financial measure. While most ESG performance metric categories measured remain unchanged over the past 2 years, use of diversity & inclusion measures declined precipitously in the most recent year as companies have eliminated or rebranded these types of goals.

• Goal-Setting: Most companies continue to set more challenging target goals relative to prior year’s actual results.

The report gives supplemental details by sector – which are worth reviewing since practices can vary across industries. It also identifies the companies included in the study.

– Liz Dunshee