The dot-com bubble burst of 2000 took stock options from a primary form of executive compensation to one that only companies with the highest of growth expectations continued to use. The global financial crisis and Dodd-Frank Wall Street Reform and Consumer Protection Act kicked off an era of compliance in which companies began following the market to design executive pay. In recent years, more companies are willing to design pay programs based on best fit rather than typical practice.
As today’s corporate stewards prepare to pass the baton to the next generation, it is time to consider how executive compensation practices could further shift to fit future leaders’ generational differences and preferences.
Millennials and Generation Z have shared expectations related to the form and delivery of compensation, including a focus on corporate social responsibility and environmental, social and governance (ESG) metrics and issues.
ESG imperatives started appearing in executive incentive plans as Millennials also gained corporate influence. By 2025, ESG performance metrics appeared in 75% of short-term incentive plans in North America, Europe and Asia Pacific, according to WTW’s 2025 ESG Incentive Metrics Study, conducted by WTW’s Global Executive Compensation Analysis Team.
Despite recent pushback from critics, Millennials and Gen Z continue to strongly support ESG matters. According to WTW’s 2024 Global Benefits Attitudes Survey, 39% of Millennial and Gen Z employees indicate a preference for ethical ESG initiatives — a stark difference from 23% of Generation X and 15% of Baby Boomers who indicate the same.
We predict that Millennial and Gen Z executives will continue to lead not only financial performance but also other key dimensions of stewardship: purpose, people, planet and risk protection. Incentive metrics may need to follow suit.
While some Baby Boomers and Gen X employees might view emerging leaders as risk averse, it may be more accurate to say they are more risk conscious. They came of age during the financial crisis, navigated uncertainties of the COVID-19 pandemic and are now managing through market volatility and global trade tensions.
Consequently, emerging leaders may prefer pay-program designs with a greater degree of stability. This could lead to:
As digital adopters, Millennials are accustomed to real-time information and customization at their fingertips, such as on-demand and personalized digital content, and they experienced the acceleration of remote work during the COVID-19 pandemic. These influences have led Millennials to embrace greater flexibility and personalization.
Along with Gen Z, they rank flexible work arrangements as the second primary reason for joining an organization, right behind salary and bonus, according to the 2024 Global Benefits Attitudes Survey. In contrast, Gen X employees and Baby Boomers rank flexible work as their fourth and fifth reasons, respectively.
In turn, Millennial leaders may appreciate flexibility within their pay programs. Today, there are more choices available among different forms of incentive pay; some companies allow executives to choose their allocation between restricted stock units and PSUs or stock options. We foresee more companies offering customizable, à la carte benefits as they respond to a more generationally diverse workforce.
Millennials are now reaching the top of their organizations, and Gen Z leaders will fill stewardship roles within two decades. As the first, true digitally native generation — shaped by rapid technological advancement and a deeper sense of social responsibility — Gen Z leaders will challenge traditional executive pay and performance models to an even greater extent.
Gen Z leaders will expect not only competitive compensation but also transparent, technology-enabled and values-driven pay programs and practices. Their fluency and comfort with real-time data and artificial intelligence could push innovative compensation designs, dynamic goal setting and risk-adjusted incentives. More importantly, Gen Z’s desire for social impact may bring purpose-based performance to the center of executive pay discussions.
Boards and management teams should consider how their executive pay programs might evolve to remain competitive and to align with the expectations of newer and future leaders.
A version of this article first appeared in NACD’s Directorship magazine.
