How Economic Uncertainty Is Reshaping Executive Compensation Packages

Bonisiwe Shabane

-Dec 27, 2025, 8:14 PM

how economic uncertainty is reshaping executive compensation packages

Amid heightened economic uncertainty in 2025—driven in part by newly-imposed tariffs, persistent inflation pressures, and increased capital costs—middle-market companies are being forced to reevaluate how they retain, reward, and align executive leadership. For many privately held businesses, particularly those navigating supply chain volatility or margin compression, executive compensation is no longer business as usual. Boards, compensation committees, and leadership teams are revisiting incentive plans and employment agreements through the lens of adaptability, liquidity preservation, and long-term value creation. At Nelson Mullins, we are working closely with clients to adjust their executive compensation strategies to reflect this new environment. Below are six key trends and legal considerations emerging in the middle market today. With capital tighter and financing more expensive, companies are increasingly moving away from all cash bonuses that jeopardize liquidity and are turning to tools like deferred compensation, phantom equity payments tied to a liquidity...

Legal Insight: Alternative incentive programs can help conserve liquidity while maintaining retention leverage—but they must be structured carefully to comply with Internal Revenue Code Section 409A and protect against valuation disputes, especially if a... In today’s volatile global economy, traditional executive compensation models are rapidly becoming outdated. Instead of offering large base salaries, many companies are pivoting toward performance-based compensation packages. These include equity-based incentives, long-term stock options, and milestone-driven bonuses. The rationale is simple: when market conditions are unpredictable, leaders must be more accountable for performance than ever before. As a result, organizations are leaning on executive compensation consultants in NY to develop creative pay models that tie compensation directly to results, rather than tenure or hierarchy.

This shift is particularly evident in industries affected by inflation, supply chain disruptions, and shifting consumer behavior. Forward-thinking C-level recruiting companies in NY are guiding clients to adopt compensation frameworks that reward resilience, innovation, and profitability over stability. Executives today are being asked to look beyond quarterly earnings and deliver sustainable growth. This has led to the rise of long-term incentive plans (LTIPs) as a major component of modern compensation packages. Instead of yearly bonuses, companies are offering incentives that vest over several years—ensuring executive alignment with the company’s long-term vision. This model is becoming especially prevalent among companies seeking financial executive search support to attract CFOs and senior VP of finance executive recruiters who can drive strategic planning, cost optimization, and capital efficiency.

These executives are now compensated not just for financial accuracy but for long-range financial stewardship and adaptability. One size no longer fits all. Compensation is becoming more individualized based on role-specific KPIs, industry volatility, and company maturity. C-suite executive search specialists are advising organizations to develop tailored packages for roles like Chief Marketing Officers, Chief Revenue Officers, and Chief Financial Officers. As we look forward to 2025, compensation committees are faced with a unique set of considerations that will significantly impact their decision-making processes in the year ahead. To help make sense of it all, we called on the expert insights of Jon Szabo, Partner at Meridian Compensation Partners (a recent guest on Inside Today’s Boardrooms), who helped us unpack some of...

One trend that has gained significant traction over the past year is the implementation of supplemental discretionary clawback policies. In response to the need for accountability and deterrence of potential misconduct, companies are increasingly adopting these policies to enable the recovery of compensation in specific instances. This trend is expected to continue, with smaller companies expected to follow the lead of larger corporations in adopting such measures. By embracing supplemental discretionary clawback policies, organizations can strengthen their ability to mitigate risks and protect shareholder interests. In the midst of today’s economic uncertainty, compensation committees are tasked with setting performance goals and incentive plans for 2025. To help navigate this challenge, carefully consider threshold and maximum performance ranges, particularly in times of uncertainty.

As a SHRM Member®, you’ll pave the path of your success with invaluable resources, world-class educational opportunities and premier events. Build capability, credibility, and confidence to influence strategy, shape culture, and drive measurable business impact. Demonstrate your ability to apply HR principles to real-life situations. Stand out from among your HR peers with the skills obtained from a SHRM Seminar. Demonstrate targeted competence and enhance your HR credibility. As organizations enter the second half of the decade, executive compensation appears to be settling into a new equilibrium — one shaped by years of pandemic-era disruption, evolving investor expectations, and a shifting macroeconomic...

The WTW Global Executive Compensation Analytics Team (GECAT) analyzed CEO pay trends across the S&P 1500. The findings suggest that, while target total direct compensation (TTDC) growth has slowed, the design and delivery of incentive pay are becoming more nuanced — and, in some cases, more complex — in response... In an era marked by unprecedented disruption, it is likely crucial for organizations to remain agile, ensuring their incentive structures are robust enough to withstand unforeseen challenges and align closely with their long-term business... As shown in Figure 1, 2024 marked the lowest annual increase in TTDC for CEOs since 2020. Figure 1: Five-Year S&P 1500 CEO Pay Trends The return to more normalized long-term incentive (LTI) growth levels in 2024 also reflects greater confidence in business fundamentals.

The spike in fair value equity grants observed during the pandemic has receded, suggesting boards are less reliant on retention-driven pay adjustments and are focusing instead on addressing issues through core program design refinements. When navigating the complexities of an ever-evolving market landscape, the necessity for adaptive and resilient compensation programs becomes increasingly clear.

How Economic Uncertainty Is Reshaping Executive Compensation Packages

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