Your CEO’s bonus is probably tied to a human capital metric already.
The research says it has barely moved performance at all.
If you have always suspected these metrics were more compliance theatre than capability building, new data agrees with you.
WHERE THE METRICS ARE POINTING
A multi-decade study of more than 45,000 executive pay plans found human capital metrics went from a handful of companies in 1998 to the majority of large firms by 2023. A separate global study of over 1,000 public companies found up to 81 percent of organisations worldwide now tie executive bonuses to people metrics like retention and turnover, up from around half in 2018.
Here is the uncomfortable part. That same academic research found these human capital pay plans are not linked to better firm performance, on average. The one category linked to anything was diversity and inclusion metrics, and what it was linked to was higher CEO pay, not stronger performance.
Boards are not measuring the wrong idea. They are measuring the wrong half of it.
Retention and turnover are lag indicators, the same distinction I have written about with Social Safety (Ray, 2021). They tell you what already happened, after someone’s brain had already decided to disengage or leave. Brain capital, resilience, judgement, the capacity to adapt under pressure, is the lead indicator sitting upstream of all of it, and almost no board is measuring it.
Picture the exit interview where someone says they are leaving for ‘a new opportunity.’ Their brain made that decision months earlier, the day their judgement stopped being trusted or their resilience stopped being replenished. The turnover number just recorded the funeral.
Last week I wrote about brain capital as the asset that appreciates instead of depreciating, and the five levers that build it. This is the piece boards are missing. Tie a CEO’s incentive to what already happened, and they will keep managing the past. Tie it to what predicts the future, brain health, brain skills, judgement under pressure, and they start managing the asset instead of the aftermath.
What would change in your organisation if leadership pay depended on a lead indicator instead of a lag one?
Research: Ai, Z., Burton, M.D., Wang, L., and Wruck, K.H. (2026). Human Capital Metrics and CEO Pay. Fisher College of Business Working Paper. WTW ESG Incentive Metrics Study (2026).
#Leadership #Neuroscience #BrainCapital #ExecutiveCompensation #CorporateGovernance
