Boards of directors see effective people governance as a key element of stewardship as well as part of their fiduciary duty to drive resilience and sustainable value creation for shareholders. Hence, boards have ramped up their focus on human capital oversight and Chief Human Resources Officers (CHROs) are showing increased influence in the boardroom.
The way businesses navigate sensitivities related to diversity, equity and inclusion (DEI) initiatives is a prime example of the important oversight role boards play in people issues. Amid political pressures, U.S. businesses (as well as multinational businesses with significant operations in the U.S.) have had to re-evaluate their approach relating to these initiatives. Some have stepped back from these initiatives while others have doubled down on their commitment, with mixed responses from stakeholders.
Specifically, these sensitivities have led many companies to reconsider whether they should maintain their DEI metrics in their executive compensation plans. As such, global businesses are in a dilemma: managing the sensitivities in the U.S. while complying with regulatory requirements in European markets and managing expectations from investors, customers and employees. Boards play an important role in advising management around balancing these risks and finding the best way to preserve business resilience — including culture, employee engagement and shareholder value.
Earlier in the year, we examined the broader business climate and explored whether DEI metrics would be gone for good from executive incentive plans. We laid out five principles for companies to consider when making decisions on their incentive plans:
As the season of annual shareholder meetings came to an end, we reviewed data from Standard & Poor’s 500 Index (S&P 500), Toronto Stock Exchange 60 Index (TSX 60), Financial Times Stock Exchange 100 Index (FTSE 100) and other major indices in Europe to better understand how major companies have approached executive incentives.
Before discussing market developments in 2025, we reviewed the evolution of market practices around DEI metrics in executive incentive plans. Based on 2024 filings, 55% of North American companies (S&P 500 and TSX 60) had at least one DEI metric in their executive incentive plans, making DEI one of the most common incentive metrics across all financial and nonfinancial categories. This represents a 1% decline from 2023, as sensitivities related to DEI metrics began in the summer of 2023 after the U.S. Supreme Court’s Students for Fair Admissions v. Harvard decision, which ruled that race-based affirmative action programs with certain attributes violated the Equal Protection Clause of the 14th Amendment.
While overall prevalence of ESG metrics is much higher in Europe, use of DEI metrics was similar compared to the U.S. When looking at the top 300 companies in major European indices (across eight markets including Belgium, France, Germany, Italy, Netherlands, Spain, Switzerland and the U.K.), 59% of companies used at least one DEI metric in their executive incentive plans.
A review of 2025 filings shows that prevalence of DEI metrics has declined across both markets — unsurprisingly, to a greater extent in North America (especially the U.S.). Among North American companies, there's a 21-percentage-point (pp) drop in the use of DEI metrics, from 55% to 34%. Europe saw more stability, with a three-pp decrease in DEI metrics prevalence, as a result of regulatory pressure and reporting frameworks such as the EU’s Corporate Sustainability Reporting Directive and Pay Transparency Directive (Table 1).
| DEI metric prevalence | |||
|---|---|---|---|
| Location | 2024 | 2025 | 2024–25 Change |
| North America (n = 560) | 55% | 34% | –21 pp |
| Europe (n = 311) | 59% | 56% | –3 pp |
In the U.S., both quantitative and qualitative DEI metrics decreased in prevalence by about 10 pp. By contrast, we observe a trend in Europe toward the use of more quantitative DEI metrics, as boards and investors are calling for greater measurability and rigor in incentive metrics. Specifically, prevalence of quantitative DEI metrics increased (+6 pp) while prevalence of qualitative DEI metrics decreased (–17 pp) across both annual and long-term incentive plans.
Looking ahead, we expect DEI metrics prevalence to further decline in the U.S., though people metrics will remain prevalent. In fact, in 2025, we observed notable increases in prevalence for metrics such as succession planning (+5 pp), leadership (+5 pp) and training and development (+4 pp). While noting that forward-looking reporting of incentive design is not a widespread practice, when looking at companies that used a DEI metric for fiscal year 2024, we see around 10% of both European and U.S. companies report they will remove these metrics (Table 2).
Forward-looking changes reported to the use of DEI metrics of companies that used at least one DEI metric for fiscal year 2024 incentive plans, as disclosed through 2025.
| Types of reported changes to DEI metrics | Europe | U.S. |
|---|---|---|
| Removing | 9% | 12% |
| Substituting | 1% | 5% |
| Other changes | 13% | 3% |
| No change disclosed | 77% | 80% |
* "Other changes" include: increase/decrease of metric weighting, changing from an underpin to a KPI, moving the DEI focus (e.g., from executives to specific positions or wider workforce), changes regarding the performance targets (e.g., increasing/decreasing the proportion of females in executive positions).
Source: WTW Global Executive Compensation Analysis Team (GECAT) review of WTW's proprietary global executive compensation database.
In reality, we expect this number to be higher when retrospective disclosure becomes available, especially in the United States, in response to President Trump's Executive Orders related to DEI. However, this implies that many companies are staying the course, with DEI remaining an important area of focus and prevalent incentive metric globally.
Risk management efforts related to DEI initiatives and metrics have shown how people-related issues can have a significant impact on the preservation and creation of business value, and why boards must play an active role in people governance, a key component of stewardship. As shown in our analysis of major U.S. and European companies, most boards have taken a measured approach to recalibrate their narrative and create an inclusive work environment for their employees.
Looking ahead, boards have learned that the future of DEI metrics in executive pay will not be binary — it isn't about whether they are “in” or “out.” Instead, boards must navigate the gray area, adapting how they operationalize inclusive values in ways that balance risk, transparency and impact. To that end, here are some questions boards should deliberate as they think about their approach:
The uncertainty around DEI initiatives and metrics may have faded in recent months. However, boards must continue to stay vigilant in their capacity to oversee human capital issues as they increasingly interconnect with mainstream boardroom risks (e.g., geopolitics, cyber and AI) and ensure that corporate actions align with their stated values. The evolving use of DEI metrics in executive incentive plans is just one example of the increasing importance of robust people governance.
