Steady at the Helm: Executive Pay in 2026

In a year marked by economic uncertainty and shifting regulatory winds, a new Pearl Meyer survey finds companies are steering into 2026 with cautious confidence—and a steady hand on executive pay. Nearly 75% of companies expect 2025 financial performance to be better or about the same as the prior year, suggesting that despite macroeconomic headwinds, optimism remains intact.

Financial Outlook: Confidence with a Caveat. Public companies are showing the strongest optimism, with 41% expecting year-over-year performance improvements.

Macroeconomic Pressures on Pay. When asked what’s shaping compensation decisions for 2026, respondents cited three key forces:

• Economic uncertainty (68%)
• Inflation (50%)
• Legal and regulatory developments (41%)

Despite the uncertainty, 45% said they do not expect to use discretion for short-term incentive (STI) awards, and 42% said the same for long-term incentive (LTI) outcomes. A minority anticipate using positive discretion—12% for STI and 5% for LTI.

Compensation Plan Effectiveness: Most companies feel their frameworks are working.

• The majority of companies (60%) report that their compensation programs are highly effective, citing clear pay-performance alignment, strong retention, and competitive positioning.
  
  
• However, 35% described their plans as only moderately effective, and 6% flagged low effectiveness—often due to overly subjective measures or weak incentive differentiation.

What’s Changing for 2026?

Short-Term Incentives: About 40% of organizations are considering STI changes, including:

• Adding new financial metrics (12%)
• Incorporating new operational metrics (10%)
• Increasing objective weightings (10%)
• Increasing individual goal weightings (5%)
• Widening performance ranges to allow more flexibility in payouts (5%)

Long-Term Incentives: Roughly 25% expect LTI plan changes, with the business and professional services sector leading the way—39% report plans to add new performance metrics.

• Despite evolving proxy advisor views, 93% of public companies do not plan to alter their LTI mix or vesting schedules yet, favoring consistency over reactionary redesign.

The Bottom Line: Steady, Not Static. While uncertainty lingers, most organizations are choosing to stay the course—refining metrics, reinforcing pay-for-performance and staying grounded in strategy, not sentiment.