The Advisors' Blog

Pearl Meyer reported in this HLS blog post that the growing importance of AI has yet to be reflected explicitly in many incentive compensation programs.

Based on a review of approximately 2,500 public company proxy statements filed in 2026, we identified 58 companies that incorporate AI into executive incentive programs through formal metrics, strategic objectives, or executive performance assessments—just 2%. Of those, only 12% use an explicit AI metric.

They identified three approaches to incorporating AI into incentive plans — using explicit AI metrics, embedding into broader goals or incorporating into individual performance considerations.

Explicit AI Metrics. A small group of companies has introduced discrete AI measures, typically with modest weighting.

For example, one industrial company has replaced a prior ESG component in its annual incentive plan with a roughly 5% AI adoption and utilization metric focused on enterprise deployment. In another example, a large retailer has taken a different approach, incorporating AI into long-term incentive awards tied to digital tools and technology experience, linking AI to customer engagement and operational execution over a multi-year period.

AI Embedded in Broader Goals. Sixty percent of the public companies we identified are incorporating AI within broader technology or transformation objectives focused on execution and efficiency.

Companies are embedding AI within broader transformation objectives in several different ways. For example, a specialty insurance company incorporates AI-related objectives into its short-term incentive plan through operational efficiency and technology deployment goals, with achievement directly influencing payout levels. A life sciences company includes AI within broader workforce and enterprise transformation initiatives tied to training, governance, and adoption. Similarly, a financial services organization links AI governance, adoption, and deployment milestones to a broader multi-year transformation strategy.

Qualitative and Individual Performance Considerations. A third group of companies (28% of the identified public companies) addresses AI through individual performance assessment rather than formal metrics.

In these cases, compensation committees consider leadership in advancing AI initiatives, enterprise adoption, and contribution to innovation. For example, one organization includes AI usage and governance as part of an executive’s individual performance goals, such as establishing guidelines for AI use and managing associated risks. Another incorporates AI-driven productivity and insights into broader executive performance evaluations.

The blog says that measurement is one of the major hurdles. “Metrics tied to adoption can encourage activity without ensuring results.” If this is something you’re thinking about, check out the blog’s list of governance considerations for compensation committees.

– Meredith Ervine