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 2025 practices disclosed in 2026 proxy statements. Here are a few key highlights:

Core annual incentive design features have remained broadly stable over the last four years, including the prevalence of formulaic plans, the number and types of financial metrics, and the weighting of financial and non-financial measures.

The more notable changes are within the non-financial component. Team-wide strategic goals are more common than four years ago, individual performance goals are less common, diversity and inclusion measures have declined sharply, and artificial intelligence is beginning to appear explicitly in plan design.

Goal-setting showed more movement in 2025. More companies held revenue and profit targets close to prior-year actual performance, while threshold-to-maximum performance ranges widened. Those observations do not necessarily indicate easier goals: among companies with revenue goals and available beginning-of-year guidance, 61% set incentive-plan revenue targets above the guidance midpoint, and the median target across the full available sample was 0.4% above the midpoint.

Median CEO annual incentive payout for 2025 was 127% of target, in line with the 2023 median and below the 2021 median.

The report found that approximately 10% of the sampled companies that used team wide strategic measures disclosed an AI-related team-wide objectives. Here’s more detail on that topic:

• Most AI-related objectives were embedded within a broader strategic goal; two companies used AI as a stand-alone weighted metric. An additional ten Top 250 companies included AI-related performance within individual goals for select NEOs and are not included in the team-wide prevalence below.

• Almost all identified AI-related measures were assessed qualitatively rather than against defined quantitative goals; the two stand-alone AI metrics were assessed quantitatively.

• Current proxy disclosure may understate adoption because 2026 proxy filings generally report goals set for 2025; 2027 filings will provide greater visibility into AI-related goals adopted for 2026.

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