Refocusing on Fundamentals Amidst Disruption and Divergence

Introduction

Companies are always managing through some level of uncertainty, but the first half of 2025 has introduced multiple, overlapping challenges for compensation committees. Unpredictable effects on supply chains and inflation due to tariffs, cuts and reductions in government spending, and the rapid adoption of artificial intelligence technologies have upended many budgets and, thus, incentive plans. The volatility does not appear likely to abate anytime soon. At the end of the day, neither investors, boards, nor executives seem fully satisfied with the state of executive compensation. As a result, diverging opinions have quietly developed among influential investor groups regarding long-held compensation practices. All of this has created a challenging environment for compensation committees to navigate. But with that challenge also comes opportunity.

Today’s disruptions, divergences, and uncertainties require that companies step back and realign their pay programs with their identity, or “True North.” Leading with identity and culture first will give compensation committees the chance to clarify what they stand for, double down on the metrics that matter, and lead the market with a long-term, principle-based approach to pay.

Finding Your “True North” Creates Clarity Amidst Uncertainty

The companies that best manage open-ended crises are those that stay focused on strategic elements they control, design compensation programs around these elements, and effectively communicate their long-term priorities to stakeholders.

1. Strategy – Re-Focusing on Core Principles

Present uncertainty doesn’t mean that the strengths and skills that helped a company succeed in the past should be abandoned. Organizations should strive to: (more…)