Elevate Your Executive Compensation Strategy Through Benchmarking and Design

NOVEMBER 3, 2026

Attracting and retaining executive talent remains a challenge for many organizations as compensation expectations reflect several years of higher costs. While inflation has cooled from its recent peak, the cumulative effects of rising prices and higher borrowing costs continue to influence compensation decisions. As a result, salary budgets remain elevated at 3.6%, above the roughly 3% norm of the previous decade, and employers project little change in 2027.¹

Against this backdrop, many employers are reevaluating how they compensate key executives. A well-designed executive compensation strategy can reinforce organizational goals, reward performance, support succession planning and improve retention. Benchmarking the total compensation package can help employers identify gaps and determine the right mix of salary, incentives and long-term rewards.

Benchmark Your Executive Compensation Strategy

An effective executive compensation strategy begins with understanding how current pay practices support business and talent objectives. This requires evaluating internal factors, such as business strategy, financial performance and internal equity, alongside external market data and peer practices.

Benchmarking can help determine whether base salary, total cash compensation and total direct compensation are competitive for key executive roles. Looking at each component individually can also reveal gaps that may be obscured by total compensation. For example, salary and annual incentives may align with market levels while long-term incentives lag peers.

Emerging Executive Compensation Trends              

As employers reevaluate executive compensation, several strategies are receiving increased attention:

• Emphasizing pay-for-performance models
• Expanding long-term incentive programs
• Taking a more targeted approach to salary increases
• Leveraging deferred compensation programs as retention tools
• Aligning executive rewards with long-term business outcomes

Balance Three Elements

Executive compensation starts with balancing short- and long-term rewards:

Base salary provides fixed compensation for leadership responsibilities and expectations and is often targeted near the market median, with adjustments for factors such as experience, geography and organizational complexity.

Annual incentives reward achievement of short-term business goals and performance objectives. When structured effectively, they align executive rewards with organizational results and accountability.

Long-term incentives reward sustained performance, encourage long-term thinking and help retain key talent through approaches such as equity-based compensation, stock options, phantom stock arrangements and executive benefit programs.

Regardless of the compensation vehicle, decisions regarding eligibility, vesting schedules, performance measures, distributions and administration play a significant role in program effectiveness.

Consider NQDC as Part of the Executive Compensation Package

For highly compensated employees, traditional retirement plans often provide limited opportunities to replace income in retirement. IRS contribution limits and nondiscrimination testing requirements can restrict how much executives and other key employees are able to save through qualified retirement plans. Nonqualified Deferred Compensation (NQDC) plans can help address this challenge while serving as a valuable recruiting and retention tool.

NQDC plans allow highly compensated employees to postpone receipt of salary and bonus compensation, generally without a cap on the amount. This amount typically grows at a tax-deferred rate until distribution, providing additional retirement accumulation opportunities. Employers can further tailor NQDC plans through discretionary contributions, performance-based rewards, customized benefits and vesting schedules that support retention.

According to the Plan Sponsor Council of America’s benchmark study, employers most often offer NQDC plans to enhance benefits competitiveness, retain key employees and help participants accumulate additional retirement assets.²

Like any executive benefit strategy, NQDC plans require careful consideration of funding, administration, governance and Internal Revenue Code (IRC) Section 409A compliance before implementation.

Case Study: Aligning Executive Rewards Without Giving Up Ownership

A family-owned business wanted to attract and retain experienced non-family executives while maintaining full ownership of the company. To support those goals, USI designed a phantom stock plan that complemented competitive base salaries and annual incentive opportunities, allowing executives to participate in the company's growth without receiving actual equity ownership. USI also provided financial modeling to evaluate payout scenarios and address key accounting, tax and valuation considerations.

As a result, the family preserved full ownership while strengthening alignment between ownership and executive leadership, improving retention and establishing a more competitive long-term compensation strategy. The plan's vesting schedule further encouraged long-term commitment from key executives.³

Where Should Employers Begin? 

A strong executive compensation strategy starts with understanding how current programs compare with market peers and whether the mix of salary, incentives and long-term rewards supports recruiting, retention and performance goals. For some organizations, that evaluation may also identify opportunities to use a NQDC plan to strengthen the overall program. Together, these considerations can help organizations build a competitive executive compensation strategy that is more closely aligned with long-term business objectives.