CAP analyzed executive compensation practices at companies with recent IPOs from 2023 to 2025. The data shows a clear public company transition: cash generally increases, formal bonus programs become more prevalent, and equity grants become a larger part of the compensation mix. This report also examines equity share pool design, including pool size and value, other equity practices and the typical allocation to senior executives. Majority of IPOs tend to cluster in a couple of industries. CAP’s study is cross-industry, though approximately 80% of the sample represents the technology or biotechnology/pharmaceutical industries (45% and 36% respectively).

At a Glance

An IPO changes more than just a company’s ownership and capital structure. It also introduces public company governance and shareholder expectations that affect both pay levels and program design. CAP’s review shows that the transition from pre-IPO to post-IPO is visible in the changes to cash compensation, equity mix, formalization of incentive programs, and the equity pool design that supports ongoing compensation programs.

• Pay levels rise. Median base salary for CEOs increases 5% and median CFO salary rises 7%, while long-term incentives triple in value
• Formal annual incentive (or bonus) programs become more prevalent
• Pay mix shifts increasingly toward equity and long-term incentives, increasing to about 50% of mix, from about 35% pre-IPO, on average
• Share pools are a major component of compensation-related IPO planning. The median pool is about 15 million shares; 89% of new plans include an evergreen provision
• 77% of companies implemented an Employee Stock Purchase Plan (ESPP) at time of IPO

How Pay Levels Change after an IPO

The move to public company compensation is accompanied by higher pay, but the magnitude for each element differs across industries.

Base Salary

CEO and CFO base salary increases for the total sample were similar in the mid- to high-single digits. For CEOs, median increase is 5% post-IPO; for CFOs, the median is 7%. Among constant incumbents in the technology sector, at median, base salaries were flat.

Annual Incentive Opportunity

Median bonus opportunity for CEOs nearly doubles post-IPO, while CFOs see a more modest increase in target bonus as a percent of salary. Technology executives tend to have higher opportunities than their counterparts in biotechnology/pharmaceuticals.

Long-Term Incentive Opportunity

For CEOs, the median actual long-term incentive values increase by 262% from pre-IPO levels; for CFOs, median increases by slightly less but is still significant (+230%). As public company compensation plans are formalized, long-term incentive values become the largest portion of executive pay as the cost to companies of providing long-term incentives goes down given access to equity.

Total Direct Compensation

Overall, when looking at total direct compensation, CEO and CFO compensation significantly increases from pre-IPO levels.

Annual Incentive Programs Become More Defined

Pre-IPO annual incentive (or bonus) programs are often highly discretionary. They may consider financial performance but often do not have formal metrics or weightings and may be largely determined based on individual performance. As companies evolve towards and through an IPO, we see companies begin to formalize the bonus program. Investor expectations are that bonus programs are tied to financial performance with clear target goals. The first step to formalizing a bonus program is ensuring that participants have individual targets. From there, depending on the ability to forecast and set goals, companies typically start with selecting key financial performance metrics and ultimately evolve to a clearly defined program with threshold, target, and maximum financial goals. About a third of companies in our sample did not have a formal annual incentive program pre-IPO and formalized it in the year after going public.

Corporate performance remains the foundation of formal short-term incentive programs. Post-IPO, all companies in our sample had a corporate component, with about half of them also incorporating individual performance.

Pay Mix Shifts Toward Long-Term Incentives (Equity)

The public company transition changes not only how much executives are paid but also how compensation is delivered. Across the total sample, long-term incentives become a larger portion of actual pay after IPO.

The long-term incentive vehicles used varies across companies. Most recent IPO companies use time-based vehicles, either stock options or time-based restricted stock/stock units (RS/RSUs). This also aligns with the most common vehicles used pre-IPO. As companies continue to evolve into more mature public companies, the expectation from institutional investors and proxy advisors is that a performance-based vehicle is introduced into the mix, balanced with time-based vehicles. Our sample saw limited instances of a performance-based vehicle right after IPO, but that prevalence increases as companies move further away from IPO.

Founder-Led Status Impacts Compensation

About 70% of companies in CAP’s sample were led by founders at the time of IPO. Founder ownership levels remained relatively steady pre- and post-IPO, with technology CEOs holding about 30% of outstanding equity. For other industries, ownership is around 10%. Boards and Compensation Committees need to determine philosophically if higher ownership levels should be considered when setting pay. One approach is to minimize equity grants given high existing ownership and alignment with shareholders, while another approach is to set market-competitive pay irrespective of ownership level. We often see mix of pay differ between founders and non-founders, even when total compensation levels on a dollar-basis are similar.

Founder-led companies can have unconventional pay mixes, including exceptionally low annual equity compensation or unusually high concentrations in one pay element. Overall, founder CEOs tend to have a slightly heavier weighting on cash compensation than non-founders, though for both groups, we see about 50% in the long-term incentives on a go-forward basis in our sample.

Share Pool Size and Equity Plan Design is One of the Biggest Decision Points

Long-term incentive plan design is one of the biggest compensation decisions made during the IPO process. The size of the equity pool (and related plan features) determines the ability to make initial transition-related grants, support ongoing annual equity programs, and recruit future talent.

The initial share pool, at median, for our sample was around 15 million shares, with median total potential dilution of around 15%. Size of the pool can vary across industries – we see higher initial pools in technology where equity can be an important compensation tool organization-wide, with slightly smaller pools in the biotechnology/pharmaceutical industry. Regardless of the absolute number of shares, we typically see dilution in the range of 10% – 15%+, with more mature companies having lower dilution and earlier-stage companies that rely more heavily on equity as a compensation tool to have dilution ranging up to 20%.

As the first long-term incentive plan is drafted at the time of IPO and therefore is not shareholder approved, we often see less shareholder friendly practices including evergreen provisions and liberal share recycling. It is also common to implement an employee stock purchase plan (ESPP) at the time of IPO.

Once a company goes public, any material changes to the equity plan document, including increasing the total pool, are required to be shareholder approved. Evergreen provisions automatically increase the size of the equity pool each year. The typical evergreen provision is around 5% per year, though boards typically retain the discretion to reduce this amount. Sometimes companies use a “lesser of” approach that considers a fixed absolute number of shares versus a fixed percentage to increase the pool by.

Liberal share recycling is another common pre-public practice that helps conserve the number of shares. While all plans permit returning shares to the pool upon forfeit, liberal share recycling can be when shares withheld for taxes or tendered at an option exercise are returned to the pool. This can lead to further dilution of shareholders without them being aware. We typically see these two provisions removed when a company puts their equity plan up for shareholder approval the first time.

An employee stock purchase plan, or ESPP, allows employees to purchase shares through payroll, often at a discount to the current stock price. This practice supports retention and engagement and broadens equity participation for employees that may not be in the annual equity program.

We often see companies grant initial equity awards to executives right before or in conjunction with the IPO. These awards are often larger than typical annual equity awards and designed to retain executives through the newly public company period. Median CEO grant is around 4% of the total pool, though higher for technology companies and slightly lower for biotechnology/pharmaceutical companies. For CFOs, this is around 1% – 1.5% of the total pool. These awards often can use a large portion of the initial share pool. In our sample, we had few examples of special awards, and those tended to be for other executives given the high prevalence of founders in our sample.

Top Considerations for Companies Preparing to Go Public

Executive compensation when going public is shaped by two primary forces: 1) the additional responsibility and oversight inherent in leading a public company and 2) external expectations from proxy advisors and institutional investors regarding compensation program design. There is an understanding that the transition and evolution of the executive compensation program happens over time, though the time period for this varies based on your investor base. There are several considerations during the transition:

• Establish a core compensation program: Develop a peer group, set executive pay aligned to public company peer group, formalize annual incentive program and determine long-term incentive program
• Make decisions that set the company up for success over a multi-year period: Establish framework for continued evolution and progression toward public company pay and governance, determine size of equity pool needed to support multiple years of grants, and determine how compensation tools such as equity are used throughout the organization
• Assess post-IPO ownership and understand your investor base: If founders still retain significant ownership or there is a controlling shareholder, companies may feel less pressure than other newly public companies to ramp up governance expectations such as stock ownership guidelines or adding a performance-based long-term incentive plan
• Understand your filing status and how that impacts compensation disclosures: The SEC has a proposal outstanding that will greatly simplify disclosure requirements for newly public companies; however, it is not just about a CD&A, there are currently other requirements such as say-on-pay, CEO pay ratio and pay versus performance disclosure. It is important to understand when you will become subject to these, and the phase-in period so that you are prepared come proxy season and are not scrambling
• Understand how decision-making impacts disclosure: It is not just special awards, any and all parts of the decision-making process (setting targets, determining bonus outcomes, etc.) will need to be disclosed. Make sure your board understands disclosure implications of decisions going forward.

Going public is an exciting time for companies, but there are a lot of implications for executive compensation. Beginning to think about the necessary changes 12-18 months ahead of going public will make the transition significantly easier, rather than trying to take care of compensation as an afterthought.

For questions or more information, please contact:

Joanna Czyzewski
Partner
[email protected]
646-486-9746

Chris Callegari
Senior Associate
[email protected]
646-486-9747

Bhavika Podduturi provided research assistance for this report.

Research Sample

CAP’s analysis covers 44 companies across industries. See below for financial statistics.

For banks and financial services firms, the 2026 proxy season has been defined by sharp increases in executive pay at the largest U.S. institutions. Below, CAP highlights several key takeaways from proxy seeason and outlines questions compensation committees should consider as they evaluate pay and talent strategy in 2026.

For CEOs of the Largest Banks, $40 Million is the New Benchmark

CEO pay at the largest U.S. banks and financial services firms crossed the $40 million mark for the first time with compensation awarded for 2025 performance. Pay increases were significant and generally tied to strong growth and total shareholder return. BNY Mellon reported the largest increase, with CEO compensation rising 66% year-over-year.

Large increases in CEO pay did not alone seem to warrant pushback from proxy advisory firms and shareholders. ISS and Glass Lewis recommended “Against” Say-on-Pay only at banks that also granted one-time special equity awards to their CEOs in 2025. These banks, including BNY Mellon, Goldman Sachs, and Wells Fargo, received relatively low support from shareholders. Capital One also granted a special award in 2025 related to the integration of Discover Financial and saw a dip in Say-on-Pay support.

CEO Pay is Also Rising Among the Super Regionals

Other large U.S. banks with assets of greater than $100 billion also made significant increases to CEO pay for 2025, with median compensation rising +16%. PNC topped the group with total CEO pay of $35 million for 2025, up from $25 million for 2024. Higher pay levels were driven primarily by significant increases in the grant date value of long-term incentive awards granted in 2026 and, in some cases, reflected the completion of significant acquisitions in Q1 (i.e., Fifth Third’s acquisition of Comerica and Huntington’s acquisition of Cadence Bank).

While CEO Pay Levels Rise, Incentive Design Remains Stable

Most banks did not disclose meaningful changes to their incentive structures for 2026. This stability follows several years in which banks modified incentive designs or adjusted incentive outcomes to recognize the impact of disruption in the industry, beginning with the COVID-19 pandemic in 2020 and continuing with the liquidity crisis and bank failures in 2023. Although banks have not made changes to their core incentive programs, we expect continued consolidation to impact executive pay programs in other ways. For example, many banks use transaction-specific incentives to align executives with the successful integration of the target bank. In Q1 2026, Fifth Third granted special merger-related equity awards to their named executive officers that vest based on the achievement of goals related to the integration of Comerica.

Questions Committees Should Be Asking

• What should our bank’s response be to the rise in CEO pay among the largest companies in the industry?
• How will the potential for continued consolidation impact our bank’s peer group and the market for executive talent?
• In an environment with significant CEO pay increases year over year, does the structure of our compensation program provide us with enough flexibility to pay competitively for 2026 while aligning pay with performance?

CAP reviewed chief executive officer (CEO) pay levels among 50 companies with fiscal years ending between August and October 2025 (defined as the Early Filers). 2025 financial performance was generally flat to up, which resulted in median bonus payouts of around target. Total compensation for the CEO was up +8% due to an increase in the grant date value of long-term incentives (LTI). This report covers 2025 financial performance, CEO actual pay levels and annual incentive payouts for the Early Filers.

Key Findings

Performance: 2025 median financial performance – as measured by revenue, earnings before interest and taxes (EBIT), and earnings per share (EPS) – was generally flat to up. In 2025, median revenue grew slightly (+2.9%), EBIT grew modestly (+7.3%) and EPS was down slightly (-1.6%). One-year total shareholder return (TSR) was up modestly (+5.3%) and generally aligned with overall financial performance.

CEO Pay: Median CEO total direct compensation increased +8% year over year, driven by a +9% increase in the grant-date value of long-term incentives (LTI). Annual incentive payout was up +4% generally due to increases in the target opportunity.

Annual Incentive Payout: For the third year in a row, the median bonus payout for CEOs was around target (i.e., 98% of target). While median and 75th percentile payouts were consistent with the prior two years, we saw a modest rise in the 25th percentile payout due, in part, to fewer companies having a payout below 50% of target than in prior years. About 25% of companies increased the CEO’s bonus payout above the corporate funded amount through either individual performance or positive committee discretion.

2025 Performance

Financial performance was flat to up for the Early Filers. Median revenue was up +2.9%, EBIT was up +7.3% and EPS was slightly down -1.6%. Median S&P 500 performance for the metrics reviewed was up modestly over the same period.

Median TSR performance was up moderately for Early Filers and generally aligned with 1-year financial performance. At median, TSR was up +5.3% year over year; the S&P 500 had similar median TSR performance over the same period (+5.4%). We measure TSR through a company’s fiscal year end for the Early Filers and through September 30th for the S&P 500. The index returns for calendar year 2025 were around 17%, influenced by the larger technology companies that saw Q4 stock price performance increase with the AI boom.

2025 CEO Actual Total Direct Compensation

CEO pay increased in 2025. Median CEO total direct compensation – base salary plus actual bonus payout plus grant-date value of LTI – was up +8%. This increase was largely delivered in the form of LTI which was up +9% year over year. LTI awards are generally approved in the first quarter (i.e., September 2024 – January 2025 for Early Filers), and increases in award value are typically to recognize strong company and/or individual performance from the prior year. Long-term incentive pay eventually realized by CEOs may be higher or lower than the target amounts.

Median salary was up 2.3% in 2025 (slightly behind merit budget increases for 2025). Annual incentive payout was up +4% year over year. This increase in the annual incentive payout was generally due to increases in the target bonus opportunity.

Annual Incentive Plan Payout

For a third year in a row, the median annual incentive payout was around target (98% in 2025). Median and 75th percentile payouts as a percentage of target were generally flat when compared to 2023 and 2024. However, in 2025, we saw a modest increase in the 25th percentile bonus payout (87% of target in 2025 vs. 77% of target in 2024 and 76% in 2023).

Approximately 50% of the companies in our sample achieved annual incentive payouts at or above target (median payout for these companies was 139% of target). These organizations demonstrated robust performance, including a notable increase in revenue and double-digit growth in EBIT, EPS, and TSR.

In contrast, companies with below target payouts experienced flat or declining financial results. The median payout for this group was 87% of target.(1) 1-year financial performance and TSR is as of each company’s fiscal year end.

Nearly 80% of the companies studied provided a bonus payout that was between 50 – 150% of target. We saw more companies providing a payout just below target as well as fewer companies having a payout below 50% of target which resulted in a higher 25th percentile payout (87% of target) among the Early Filers.

Most companies provided a payout to the CEO that was +/-5 percentage points from the corporate funding factor (i.e., the percentage at which the annual incentive funds based on company performance). If a company wanted to adjust an executive’s payout, as approximately 30% of the Early Filers did, there are a couple of ways in which it could be accomplished – through individual performance or discretionary adjustment. 30% of the Early Filers use individual performance as a component of the annual incentive payout for the CEO. Companies use individual performance to align the incentive payout with an executive’s contribution to the company and the results can raise or lower an executive’s payout relative to corporate performance. Alternatively, companies may make discretionary adjustments to recognize overall company performance (more broadly than incentive plan or financial metrics), particularly if an individual component is not part of the annual incentive plan design.

In 2025, about a quarter of companies increased the CEO’s payout above the corporate funding factor. The average increase ranged from 8 – 50 percentage points above the funding factor. Most of these increases were provided through an individual performance component although some companies did so through a discretionary adjustment. When a company provides a positive discretionary adjustment, it typically does not raise a below target payout to above target. Only one company reduced the CEO’s payout in 2025.

Looking Ahead

2025 was a year of uncertainty, largely defined by tariffs which impacted both financial performance and stock price performance. For the Early Filers, tariffs were enacted after their Q1 began which means that annual incentive goals were established and set before tariffs were implemented. Despite the challenges, median annual incentive payout for companies was around median. CEO total compensation was up year over year driven by increases in LTI awards given strong TSR performance in the prior year.

There is continued uncertainty for 2026 because of tariffs and its impact on the global supply chain. We anticipate that goal setting will continue to be a challenge for companies, particularly given the recent Supreme Court ruling on tariffs. When there is economic uncertainty, companies typically take two approaches for incentives: either through goal setting at the beginning or determining final payout at the end of the performance period. During the goal setting process, companies will try to address it by widening the performance leverage curve, flattening the payout range around target or setting more conservative growth goals. At the time of payout, other companies may deal with uncertainty by adjusting the final results to exclude the impact of tariffs or use Compensation Committee discretion to adjust the final payout. At the time of writing, the war in Iran recently began and is adding uncertainty to the economy. Most companies (including fiscal year companies) have set their budgets and incentive plan goals for 2026. The impact of the war is yet to be seen and may not affect all companies. Depending on the length of the war, we would expect that companies that are greatly impacted would be more likely to make adjustments while others may take a wait and see approach.

Given the moderate increase in TSR performance in 2025, we would expect to see modest increases in LTI award values for 2026 to align with stock price performance. In the broader market, we may see larger increases in LTI for 2026, particularly at AI or technology companies, given the significant stock price appreciation towards the end of 2025.

Early Filer's Company Sample

CAP’s study reflects 50 companies with fiscal years ending between August and October 2025. Industry sectors reviewed include: Communication Services, Consumer Discretionary, Consumer Staples, Financials, Health Care, Industrials, Information Technology and Materials. Revenues for these companies ranged from $1.1 billion – $416 billion (median revenues of $11.5 billion); median fiscal-year-end market capitalization was $16.2 billion.

Grace Tan and Bhavika Podduturi provided research assistance for this report.

Each year CAP analyzes non-employee director compensation programs among the 100 largest US public companies. These companies are trendsetters and can provide early insights into evolving pay practices across the broader public company marketplace. This report reflects a summary of pay levels and pay practice trends based on the most recent 2025 proxy disclosures for these 100 companies.

The following page describes CAP’s key takeaways from 2025 proxy disclosures on Director Compensation programs, as well as our expectations looking ahead. Pages 3 through 6 provide more detailed findings.

CAP Detailed Findings

Board Compensation

• Total Fees: Median board compensation rose +3% year-over-year to $335K from $325K. Board compensation at the 25th percentile increased by +5% to $320K, while the 75th percentile saw a +3% increase to $358K.
• Pay Structure: On average, total pay was comprised of 64% equity and 36% cash, a slightly higher weighting on equity-based pay versus the prior year. This is consistent with a longer-term, gradual trend seen among large public companies, where total pay was comprised of 61% equity and 39% cash in our 2020 study, and 58% equity and 42% cash in our 2015 study. Typically, large US public companies solely use annual retainers to compensate directors, rather than through meeting fees or a mix of retainers and meeting fees. The simple of director pay structure (e.g., no meeting fees) is another long-term trend seen among large public companies. Only five companies in the sample still provide meeting fees – a decline from six last year, and from 11 in our 2020 study. Of the five companies that provide meeting fees, only three actually paid out any meeting fees in the past year, since the majority of these companies only do so when the number of meetings exceeds a pre-defined threshold. All three companies that paid out board meeting fees in the past year have non-standard ownership.
• Equity: Providing full-value equity awards (shares/units) remains the standard approach, with only one company granting stock options (no company uses stock options as the sole equity vehicle). Nearly all companies denominated equity awards using a fixed value rather than a fixed number of shares. Using fixed value is generally considered best practice as it manages the “target” value awarded each year.
• Form of Increase: 32% of companies disclosed increases to their annual cash or equity retainers, with most of the increases driven by changes to equity retainers:
  • 1% disclosed increases to only the board cash retainer
  • 11% disclosed increases to only the annual equity grant, with most companies making increases between $10K and $25K, with the median increase being $15K
  • 20% disclosed increases to both cash and equity retainers, with most companies making total increases between $15K and $31K, with the median increase being $24K

Committee Member¹ Compensation

• Overall Prevalence: 36% of companies paid committee-specific member fees for Audit Committee service, while only about a quarter of companies paid fees for service as a member on other committees. Most companies rely on board-level compensation to recognize committee member (non-Chair) service, with the general expectation that all independent directors actively participate in committees.
• Total Fees: Of the companies that paid committee member compensation, the median for additional compensation remained flat for the Audit ($15K) and Compensation ($15K) Committees, while there was a modest decrease to $12K from $12.5K for Nominating/Governance Committee members.
• Meeting Fees: Similar to compensation for board service, meeting fees are uncommon for committee service. Only four companies in our sample provided committee meeting fees this past year (all four of these also provide board meeting fees). Per meeting fee values are consistent between each of a company’s committees, although the total fees paid differ due to different numbers of meetings between committees. This past year, Audit Committees had the highest median number of meetings at 9 per year, which is more than twice per quarter. Compensation Committees and Nominating & Governance Committees meet less frequently, at 6 and 5 times a year at median, respectively, or a little more than once per quarter.

Committee Chair² Compensation

• Overall Prevalence: 95% of companies in the study provided additional compensation to committee chairs, recognizing the additional time commitment, responsibilities and heightened shareholder scrutiny of governance.
• Total Fees: Median additional compensation for Chair service remained flat for each of the Audit ($30K) and Compensation ($25K) Chair roles. However, the additional retainer for Nominating/Governance Chairs increased to $25K from $20K for year-over-year. No committee chair from our sample receives additional committee meeting fees beyond what other committee members receive.

Independent Board Leader Compensation

• Non-Executive Chair: 86% of companies with this role provided additional compensation. Median additional compensation provided was $200K, consistent with the prior year. At median, when expressed as a multiple of total board compensation, total Non-Executive Chair pay was 1.61x that of a standard board member.
• Lead Director: 91% of companies with this role provided additional compensation. While median additional compensation remained flat year-over-year ($50K), CAP anticipates future increases based on the relatively narrow pay gap between the 25th percentile ($46.25K) to median, and the wide pay gap between median and the 75th percentile ($75K). At median, when expressed as a multiple of total board compensation, total Lead Director pay was 1.15x that of a standard board member. The pay differential relative to Non-Executive Chairs is in line with variation in roles and responsibilities.

Equity Retention

• Having a minimum stock ownership guideline in place is typical practice
• 91% of companies in our sample have a minimum stock ownership guideline in place for outside board members, consistent with the prior year. Among these companies, 89% use a “multiple of retainer” approach, the most common multiple being 5.0x the annual cash retainer, and the most common achievement period being within five years of election to the board.
• 38% of companies have a holding requirement in place where a pre-defined minimum percentage (net after-tax) of all vested equity awards must be held until a director achieves the minimum stock ownership guideline.
• It continues to be minority practice to require that equity awards be settled at or after termination of board service.

Pay Limits

• Director pay limits are in place largely due to the advancement of litigation over the past decade, over the conflict of interest stemming from directors approving their own compensation. As a general rule, directors who receive a substantial amount of their wealth through their pay as a director create a reputational risk for the company.
• 77% of companies have a shareholder approved limit in place for director compensation, slightly more than the prior year. Limits apply to total director pay (62% prevalence for those who have limits in place) or equity awards, only (38% prevalence). Similar to last year, limits typically range from $600K to $1M with a median of $800K, which is generally much higher than annual equity grants and/or total annual compensation. For example, roughly one-third of limits are equivalent to more than 5x the annual equity grants, which (as mentioned above) represent 64% of total annual board pay, on average.

• Companies do not typically change, or review, director compensation limits on an annual basis. They typically review pay limits about every three to five years when they look for shareholder approval for a new or amended equity incentive plan/reserve. During the last year, four companies in our sample added pay limits, and three companies made changes to their pre-existing limits over the past year:
  • Bank of America, HCA Healthcare, Performance Food Group Company, and Exxon Mobil added new limits this past year.
  • Chubb increased their equity and cash limit across all directors from $5.5M to $6.5M, using a consistent percentage increase to what was approved for the annual pay program.
  • Centene and Walmart changed their limit from covering equity only to now cover both equity and cash. Centene changed their limit from two million shares to a limit of $1M in cash or equity, while Walmart changed their limit from five hundred thousand shares to a limit of $2M in cash or equity.

Board Size & Number of Board Meetings

• Both Board size and number of board meetings have remained constant despite evolving responsibilities of corporate boards (e.g., artificial intelligence, cybersecurity, environmental/social issues, etc.).
• The median number of non-employee directors for our sample has consistently been at 10 over the past decade, while the median number of board meetings has remained at 7 since 2022 (consistently around 8 for years prior to that).

Historical 3-Year Look at Pay Levels

Average Total Board Compensation ($000s)³

Additional Leadership Compensation ($000s)

Research assistance for this CAPIntel was provided by: Thomas Brown, Grace Tan, Cedrick Jean-Louis, and Alex Barrionuevo.

Compensation Advisory Partners (CAP) conducted a study of executive compensation trends in the regional banking industry. The study examined 2024 CEO compensation levels and pay practices among 40 regional banks across three groups based on FY’24 asset size: $1B – $5B in assets (“small banks”; n=13), $5B – $10B in assets (“medium banks”; n=13) and $10B – $20B in assets (“large banks”; n=14). This report compares both compensation levels and incentive plan design across the groups and highlights current issues facing the banking industry in 2025.

Highlights

2024 Performance and Pay Outcomes

Performance Results

In 2024, regional banks faced a difficult operating environment, decreasing net interest margins and rising funding costs which all weighed on profitability. However, some banks, particularly toward the end of the year, managed to grow earnings, supported by loan and deposit growth and improved efficiency.

Regional banks also continued to face intense competition for deposits following the 2023 banking crisis, which drove up funding costs and put pressure on liquidity. Loan growth continued to lag, and fee income was constrained by slower activity in mortgage and capital markets. Operational efficiency was challenged early in the year, leading banks to adopt cost-control measures.

When comparing all three groups in this sample, the medium banks had the best performance year in 2024, as EPS, Net Income, Pre-Tax Operating Income and PPNR declined at lower rates than the small and large banks. As of 12/31/2024, medium banks also outperformed in TSR over the 1- year period.

CEO Annual Incentive Payouts

At median, CEO annual incentive payouts were above target across all groups, increasing 7 percent, 40 percent and 32 percent year-over-year for the small, medium and large banks, respectively. Over half the banks (55 percent of the total sample) paid bonuses above target, compared to less than one-third (30 percent) last year. Payouts among the three groups rose across all percentiles year-over-year, likely signaling that going into 2024, banks set lower performance targets for the year by incorporating expected challenges into their goal setting for the year (following the regional banking crisis).

CEO Total Pay Changes

CEO actual total compensation1 (base salary, annual incentive payouts, and long-term incentives) increased among all banks. Large banks had the greatest increase in total compensation (+22 percent) followed by the small banks (+14 percent) and medium banks (+10 percent). The increase across banks was driven by annual incentive payouts (double digit increases among all sizes). Large banks had the greatest increase in annual incentive amounts (+52 percent). Long-term incentive increases were also significant among large banks (+16 percent), while small and medium banks were more modest (+4 and +6 percent, respectively). Base salary increases were more modest, with increases ranging from +1 to +5 percent at median.

CEO Pay Mix

Similar to our findings from prior years, CEOs at the larger banks have more of their total pay delivered at-risk or variable compensation (i.e., annual or long-term incentives). Conversely, CEOs at smaller banks are often paid more fixed compensation (i.e., base salary).

Pay Practices

Annual Incentive Plans

The most common annual incentive plan funding approach continues to be “goal attainment,” in which actual financial achievement is compared to pre-established goals made at the beginning of the fiscal year. The banks in our sample typically utilize several corporate metrics when determining their annual incentive payouts. Approximately 85 percent of the small, medium and large banks use three or more weighted financial metrics. EPS, Efficiency Ratio, Asset Quality (i.e., non-performing assets, non-performing loan ratio) and ROA are among the most prevalent metrics used at these banks. Net Income is the most prevalent metric among small banks but less often used by medium and large banks (where EPS is more prevalent). Among the banks that use them, Earnings (EPS and Net Income) were typically weighted more heavily (on average approximately 40 percent of the total plan) than Returns (ROA or ROE), Efficiency Ratio and Asset Quality metrics (approximately 15 to 25 percent of the total plan). The small and medium banks differ from the large banks in that they more frequently use Loan or Deposit measures in their plans, with these metrics accounting for no more than 25 percent of the total plan.

Individual goals are prevalent among all asset groups. The small and medium banks predominantly incorporate individual performance as a standalone weighted metric (typically 20 percent weighting), while majority of the large banks that measure individual performance use a discretionary assessment. The medium and large banks are more likely to incorporate strategic goals such as audit quality, liquidity management, risk management, net promoter score, succession planning, and customer service.

Long-term Incentive (LTI) Plans

The most typical long-term incentives used across industries, including the banking industry, include stock options, time-vested stock (restricted stock [RS] or restricted stock units [RSUs]) and performance-vested stock. Like the broader market, the banks in our sample use a portfolio approach for their LTI plans, with approximately 70 percent of these banks granting two or three LTI vehicles. The small and medium banks more frequently use a single LTI vehicle (35 percent, on average), and only one bank in the entire sample did not grant equity. The LTI mix among the three groups is consistent, with stock options continuing to be the least utilized equity vehicle, on average about 0 to 7 percent of the overall LTI mix. Time-based RS are prevalent across banks of all sizes. Performance-based awards are similarly widespread; however, they represent a larger proportion of the total incentive mix at medium and large banks. Stock options remain uncommon, used only at 15 percent of medium banks and 20 percent of large banks.

Performance-based awards are typically granted annually and have overlapping 3-year performance periods. Payouts can fluctuate based on achievement of performance measures, and the upside is normally limited to 150 to 200 percent of the target level. Approximately 80 percent of companies in each asset grouping (that utilize performance plans) measure performance against two to four metrics. The most prevalent metrics used are Returns, relative TSR and EPS for all three groupings, and it is common that two of these measures are paired together to determine all, or the majority of, the payout.

TSR is almost exclusively measured on a relative basis, often measured against either the company-defined peer group or an industry index. In our sample, relative TSR is used mostly as a weighted metric, and only 5 percent of all banks use it as a modifier of the calculated payout. Further, only 5 percent of all banks in the sample use absolute TSR as a cap on the calculated payout (e.g., limited to 100% of target if TSR is negative during the performance period). Other common relative metrics include ROE, ROA and EPS growth. Among the total sample, approximately 70 percent of banks use a relative measure other than TSR.

Special One-Time Awards

Special one-time awards were granted by 13 percent of the companies in the full sample. These awards were usually provided either exclusively to the CEO, or to the CEO in combination with other top executives, with grants occuring most often among large banks. The forms of delivery varied, including time-based RS, cash payments, or a combination of both. Notably, none of these awards were subject to performance-based conditions.

The rationale for granting these awards generally fell into one of two categories: recognition of significant bank transactions (i.e., M&A activity), or as a mechanism for executive retention during critical periods. Among the CEOs who received them, award values ranged widely (from $100K to $5.6M; median of $550K). In most cases, vesting schedules mirrored those of annual LTI awards, with payouts spread over a three-year period.

Change in ESG/DE&I Metrics for Incentive Plans

In 2024, the inclusion of ESG/DE&I metrics in incentive plans declined among regional banks, reflecting a broader corporate trend. Across the U.S., legal challenges, shareholder pushback, and growing anti-ESG/DE&I sentiment have prompted many companies to scale back or rebrand related programs.

Among our sample of regional banks, only 8 percent incorporated ESG/DE&I metrics into their annual incentive plans in 2024, decreasing from 20 percent in 2023. Most banks either eliminated ESG/DE&I metrics entirely or revised the associated language. All three large banks in our sample that had included ESG/DE&I metrics in 2023 removed them for 2024. Examples of banks that removed or revised ESG/DE&I goals for 2024 performance are provided below:

Looking Ahead

As of the second quarter of 2025, the banks in our sample have posted positive year-over-year earnings, and year-to-date TSR (as of August 2025) is flat. U.S. regional banks are heading into a more favorable operating environment in 2025, supported by a steeper yield curve, lighter regulatory pressures, and stronger asset quality. Earnings in 2024 were supported by higher noninterest income, discipline costs, and fewer realized securities losses. While there is potential upside in 2025 for net interest margins and loan demand, challenges remain.

Banks remain cautious amid continued headwinds from inflation, elevated deposit costs and uncertainty around interest rate trajectories. The financial results of each bank are shaped by factors such as asset size, business mix, sector exposure, growth approach, and loan composition. As 2025 draws to a close, institutions will need to maintain a careful balance between linking executive pay to performance outcomes and ensuring returns that meet shareholder expectations.

For questions or more information, please contact:

Kelly Malafis
Partner [email protected]
212-921-9357

Shaun Bisman
Partner [email protected]
212-921-9365

Christopher Callegari
Senior Associate [email protected]
646-486-9747

Thomas Brown and Alexander Barrionuevo provided research assistance for this report.

Regional Banks in CAP’s Study (n=40)

Small Banks ($1B – $5B in assets)

• Bar Harbor Bankshares
• Capital City Bank Group, Inc.
• Community West Bancshares
• Enterprise Bancorp, Inc.
• Evans Bancorp, Inc.
• Farmers National Banc Corp.
• First Business Financial Services, Inc.
• First Financial Northwest, Inc.
• LCNB Corp.
• MVB Financial Corp.
• National Bankshares, Inc.
• Oak Valley Bancorp
• Sierra Bancorp

Medium Banks ($5B – $10B in assets)

• 1st Source Corporation
• Amerant Bancorp Inc.
• Camden National Corporation
• CNB Financial Corporation
• German American Bancorp, Inc.
• Heritage Commerce Corp
• Heritage Financial Corporation
• Independent Bank Corporation
• National Bank Holdings Corporation
• Park National Corporation
• Stock Yards Bancorp, Inc.
• Univest Financial Corporation
• Westamerica Bancorporation

Large Banks ($10B – $20B in assets)

• Banner Corporation
• Berkshire Hills Bancorp, Inc.
• Brookline Bancorp, Inc.
• Community Financial System, Inc.
• Enterprise Financial Services Corp
• First Busey Corporation
• First Commonwealth Financial Corporation
• First Foundation Inc.
• First Merchants Corporation
• Pacific Premier Bancorp, Inc.
• Renasant Corporation
• Seacoast Banking Corporation of Florida
• Trustmark Corporation
• WesBanco, Inc.

‘

CAP’s report examines compensation outcomes for Chief Financial Officers (CFOs) relative to Chief Executive Officers (CEOs). This analysis summarizes 2024 compensation actions among 155 companies with median revenue of $12.6 billion. Detailed criteria used to develop the sample is included in the Appendix.

Study Highlights

Base Salary

The median change in base salary in 2024 was 4.0% for CFOs and 0% for CEOs. These changes were the same as last year.

• Over 70% of CFOs and approximately half of CEOs received base salary increases in 2024. The higher prevalence of salary increases among CFOs relative to CEOs is consistent with historical results
• Among executives who received salary increases, the median increase was 5.7% for CFOs and 4.1% for CEOs
• 80% of CFOs and 61% of CEOs received at least one salary increase in the last two years. The annualized salary increases at median were 4.4% and 2.1%, respectively

Bonuses

Financial performance in 2024, based on revenue and operating income growth, was up 3% and 5%, respectively, at median. Actual bonus payouts were directionally aligned with performance and increased 5% for CFOs and 3% for CEOs at median.

• Among our sample, 55% of CEOs and 56% of CFOs had the same or higher bonus payouts in 2024
• The bonus payouts were mostly aligned with company performance during 2024. Among the companies whose operating income fell in 2024, bonuses were flat compared to 2023 at median. Among the companies with higher operating income, CFO bonuses were up 7% and up 5% for CEOs
• Median target bonus opportunities remained consistent for CEOs at 160% of salary and for CFOs at 100% of salary

Long-Term Incentive (LTI)

LTI awards increased 7% for CFOs and 5% for CEOs at median, which is more moderate compared to last year (11% and 9%, respectively). LTI continues to lead other elements of pay in magnitude of increases.

• LTI awards have increased 6% for both CFOs and CEOs annually, on average, over the last 10 years

Total Direct Compensation (TDC)

TDC increases in 2024 were 6% for CFOs and 4% for CEOs at median.

• CFO total compensation as a percentage of CEO total compensation remains at approximately 1/3 in 2024

LTI and Target Pay Mix

Performance-based equity plans continue to make up the majority of total LTI for CFOs and CEOs. This focus aligns with the emphasis on performance-based pay that is consistent with the compensation philosophies of most organizations.

• The emphasis on variable over fixed pay, and performance-based equity over time-based equity continues
• CFO pay consists of approximately 60% long-term incentives (70% for CEOs). Approximately 95% of companies that grant LTI include performance-based equity

Study Results

Salaries

In 2024, 72% of CFOs and 48% of CEOs received salary increases (72% of CFOs and 50% of CEOs received increases in 2023). Increases remained flat for CEOs at median and remained at 4.0% for CFOs. In recent years, salary budgets have trended down from historical highs post-COVID, but are still above 3.0%. When analyzing only executives who received a salary increase, CFOs received a median increase of 5.7% and CEOs received a median increase of 4.1%.

CFOs who received salary increases received higher increases than last year. Salaries at the 25th percentile, median and 75th percentile increased 4.0%, 5.7% and 8.0%, respectively, compared to 3.7%, 5.0% and 7.1% last year.

Changes in Actual Pay Levels

Actual bonus payouts in 2024 were up 2.6% and 5.0% for CEOs and CFOs, respectively, when compared to 2023. Total direct compensation (including long-term incentive awards) increased for both CEOs and CFOs (3.5% for CEOs and 6.1% for CFOs) driven by higher increases in long-term incentive award values. Over time, increases have generally been higher for CFOs compared to CEOs, partially driven by higher external scrutiny on CEO compensation, the expansion of the CFO role over the years, and the increased competition for talent.

Overall, revenue and operating income performance were up slightly compared to the prior year, with revenue up 3% and operating income up 5% at median. Total Shareholder Returns (TSR) were +14% at median for 2024. Median actual bonuses as a percentage of target were 121% for CFOs and 125% for CEOs in 2024, which is more significant outperformance for CEOs compared to last year, but similar payouts for CFOs. Most companies are still paying above-target bonuses.

Bonus payouts were generally correlated with performance outcomes for most companies. For companies with lower operating income in 2024, bonus payouts were flat at median, compared to a 7% increase for CFOs and 5% for CEOs at companies with higher operating income.

Median Bonus Increases by Industry*

Median change in bonus varied by industry. In 2024, the highest bonus changes for CEOs and CFOs were companies in the Information Technology, Financials and Utilities industries. Energy is the only industry where bonuses were down across the board for both CEOs and CFOs. Operating Income (or EBIT) was down 5% at median in this industry in 2024. All other industries had EBITDA growth at median.

Target Pay Mix

The pay program structure for CEOs and CFOs has remained largely unchanged over time. In the last five years, CEOs have progressively received less in the form of salary and more in long-term incentive opportunities. The pay mix for CFOs has remained consistent. Long-term incentives comprise approximately 60% of total compensation for CFOs and 70% for CEOs.

Target Bonuses

Median target bonus opportunities as a percentage of salary remained the same for CEOs at 160% of base salary and for CFOs at 100% of base salary.

Long-Term Incentive (LTI) Vehicle Prevalence and Mix

The majority of companies (66%) deliver LTI using two different vehicles. 22% of companies in the sample use stock options, time-based stock awards, and performance plan awards, and 12% use only one vehicle. The prevalence of companies granting three equity vehicles continued to decline in recent years. Five years ago, in 2020, 54% of companies used two vehicles and 33% used three vehicles.

The portion of LTI delivered through performance shares has remained relatively consistent over the last five years. The remaining portion has been delivered increasingly through time-based shares as opposed to stock options. In 2024, 33% of companies used stock options, compared to 53% in 2020.

Total Compensation for CFOs as a Percentage of CEOs

Over a 10-year period, CFO total compensation as a percentage of CEO total compensation has been approximately 1/3, generally ranging from 30% to 34%.

Conclusion

Our study continues to support that paying for performance remains a focus for Compensation Committees and senior management. 2024 revenue and operating profit performance improved 3% and 5%, respectively, and bonus awards were directionally aligned. The CFO role continues to serve as a key leadership role and strategic partner, which partially contributed to the higher movement in pay compared to CEOs. In terms of the target program, though pay mix stays relatively consistent over time, Compensation Committees are delivering the biggest increases in long-term incentives. Looking forward to 2025, economic uncertainty prevails, so we expect no major changes in target programs. Compensation Committees will continue to spend a significant amount of time balancing compensation outcomes with performance, calibrating goal setting in an increasingly volatile political environment, and ensuring talent retention and attraction.

Appendix

Sample Screening Methodology

Based on the screening criteria below, we arrived at a sample of 155 public companies with median 2024 revenue of $12.6B.

As artificial intelligence continues to reshape industries and redefine how companies operate, organizations are under increasing pressure to build leadership and governance structures that can keep pace. In response, a growing number of S&P 500 companies are elevating AI to the executive level through formal leadership roles, while others are embedding oversight responsibilities into existing C-suite functions and board committees. This evolving landscape reflects not only the strategic importance of AI but also the complexity of managing its opportunities and risks across the enterprise.

At the same time, these developments are raising important questions about compensation, from how to attract specialized AI talent to how companies recognize new responsibilities taken on by existing leaders and directors. In the sections that follow, we examine how companies are structuring AI leadership and oversight today, and what this means for executive and board compensation in the years ahead.

Leadership Roles and Oversight Models

While AI is rapidly becoming a strategic priority across industries, relatively few S&P 500 companies have taken the step of assigning formally titled AI leadership roles. Only 8% have publicly disclosed a senior-level position with a direct AI focus, and just 4% have gone further by establishing a C-suite title that explicitly references artificial intelligence.

These roles — such as Chief AI & Data Officer, SVP of Data, Analytics & AI, and AI Product Manager — are disproportionately concentrated in four industries: Information Technology, Financials, Health Care, and Industrials. This industry concentration reflects both the strategic importance of AI and the degree to which companies are formalizing their AI leadership through role nomenclature. The rise of dedicated AI roles in these fields reflects both a need to scale AI responsibly and a desire to embed AI deeply into core products and operations.

While only a small subset of S&P 500 companies have formal AI-specific executive titles, a larger group discloses that other senior leaders are responsible for overseeing AI initiatives. Specifically, 12% of companies identified at least one non-AI-titled executive with AI oversight duties. These roles span a range of functional areas, reflecting the cross-cutting nature of AI strategy within organizations.

The table below shows the distribution of roles across companies disclosing AI oversight. Unsurprisingly, the most frequently cited position is Chief Technology Officer (46%), highlighting the close alignment between AI initiatives and broader technology leadership. Other common roles vary widely, underscoring how AI responsibilities are being integrated across different strategic functions.

This data highlights that many companies are integrating AI oversight into existing leadership structures, even in the absence of AI-specific titles. It suggests that for some firms, AI is being treated as an extension of core digital, data, or technology functions rather than a standalone domain, at least at this stage of strategic development.

Beyond naming specific executives or titling roles to reflect AI leadership, some companies disclose broader governance structures to oversee their AI initiatives. While these disclosures are less common overall, they highlight the diverse ways organizations are embedding AI oversight across the company.

Roughly 4% of S&P 500 companies disclose board-level involvement in AI oversight, with responsibility most often assigned to the full board. Other companies note involvement by standing committees, including Audit, Nominating & Governance, Technology, Risk, Compensation, or Finance, suggesting that AI governance is beginning to be woven into existing board oversight frameworks rather than being housed in a single, consistent place.

In addition to board-related governance, some companies report cross-functional structures that support or oversee AI activities. About 4% of companies disclose the use of cross-functional teams or groups, signaling a collaborative approach that spans functions like technology, legal, operations, and strategy. A smaller subset (2%) disclose established AI-specific councils or groups, suggesting a more formalized, centralized body focused exclusively on guiding AI strategy, deployment, and risk management.

These structures, whether at the board level, within cross-functional groups, or through AI-focused bodies, demonstrate the varied and still-developing approaches companies are taking to organize and operationalize AI oversight. Together with the role-based governance described earlier, they point to a landscape in which companies are experimenting with different oversight models based on their size, sector, and strategic priorities.

Compensation Implications of AI-Related Leadership and Oversight

As companies expand their leadership and oversight structures to address AI-related opportunities and risks, new implications are emerging for both executive and director compensation. These trends are unfolding across multiple fronts:

First, the recruitment of specialized AI and technology talent, especially individuals with advanced technical credentials or experience leading AI-driven innovation, can carry a significant cost. Much of this talent pool is concentrated within large, well-resourced technology companies or venture-backed AI startups. As a result, attracting these individuals often requires customized compensation packages, including sizable sign-on awards with non-standard vesting schedules. In many cases, these awards are large enough to require Compensation Committee approval, leading to a notable increase in Committee- and Board-level engagement around talent strategy in the AI and broader technology domains.

The integration of AI talent at the non-executive level also presents pay equity considerations. In some instances, market-competitive compensation for AI specialists may push up against or even exceed that of existing executives within the same or adjacent functions. This dynamic has the potential to create internal tension if not carefully managed. Organizations should proactively set expectations, be ready to communicate the rationale for these compensation decisions, and revisit internal compensation structures to ensure fairness and alignment with strategy.

For existing executives and employees whose roles are expanding to include AI-related responsibilities, companies may need to make additional investments in training and upskilling. As these roles evolve in complexity, organizations should assess whether current compensation structures appropriately reflect the changing scope of responsibility. Benchmarking to emerging market data, while still limited, will become increasingly important in ensuring pay remains aligned with role content and performance expectations.

At the governance level, current oversight of AI is most often incorporated into the mandates of existing Board Committees, such as Audit, Risk, or Technology, rather than prompting the formation of new Committees. Looking ahead, we may see the creation of dedicated Technology, Risk, or Cybersecurity Committees, increased recruitment of directors with AI expertise, and adjustments to Committee-level compensation in recognition of expanding oversight duties. These changes will likely unfold gradually as companies continue to assess the strategic and risk-related implications of AI at the Board level.

Conclusion

As companies adapt their leadership and oversight structures to meet the demands of AI, compensation is becoming a key lever. Recruiting specialized AI talent often requires customized, high-value pay packages, sometimes exceeding standard frameworks and prompting greater Compensation Committee involvement. Internally, these dynamics raise questions around pay equity and performance alignment, especially as existing executives assume AI-related responsibilities that may shift role complexity and market benchmarks. At the board level, expanded committee mandates tied to AI oversight could eventually influence director pay, particularly where responsibilities grow meaningfully.

While many practices are still taking shape, the evolving AI landscape is already influencing compensation strategies in visible and important ways.