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2024 Incentive compensation in banking survey

Discover insights on incentive plan design and management in banking

For banks and investment management firms, incentive-based compensation plays a valuable role in motivating employees, attracting talent, and managing risk. Explore five themes in incentive compensation management practices that can help banks evaluate and improve their own programs.

Incentive compensation management in banking

As the banking industry faces increasing shareholder and regulatory oversight and workforce competition, incentive compensation and governance programs are increasingly in the spotlight. Incentive-based compensation programs are crucial for motivating employees, attracting and retaining talent, aligning performance with strategic goals, and fostering a culture of accountability.  Proper governance ensures that compensation practices are fair, transparent, and compliant with regulatory requirements. 

In summer 2024, Empsight International, LLC and Deloitte Tax LLP launched the Incentive Compensation and Governance Survey to learn more about trends in incentive compensation design and incentive policy across the banking and investment management sectors. Twenty-five organizations operating in the United States were surveyed, with total assets ranging from $2.6 billion to $1.9 trillion.

We designed this survey to gain a deeper understanding of how the industry designs, operates, and governs its incentive compensation programs and to provide industry insights on differing approaches to strategically critical risk oversight policies and processes.

Our findings identified key practices concerning incentive plan design and participation, the role of risk within the compensation framework, and the approach to governance in the context of compensation decisions.

5 themes in incentive compensation and governance banking

While the approach to incentive compensation and governance varies across the banks and investment management organizations we surveyed, five common themes emerged:

Earnings, returns, and strategic goals are commonplace in annual bonus plans. Most banks surveyed are keeping annual plans simple by using two or three metrics to determine bonus, with a preference given to financial metrics goals over non-financial metrics. Fewer than half of companies include function-specific KPIs in control function employee bonuses to promote independence and mitigate conflicts of interest.

Performance-based equity is used to align the interests of leaders with overall corporate performance and as a risk-mitigating compensation deferral tool. Long-term incentive eligibility is typically reserved at the VP level and above.

Strong, consistent collaboration is necessary across management control functions when it comes to the design and administration of incentive plans. However, one-third of compensation committees are not involved in the review of the covered employee population.

Nearly 90% of respondents conduct enterprise-level risk assessments as part of annual bonus pool determination, covering financial and non-financial risks. However, assessments at the individual level are far less common—fewer than half of respondents conduct individual-level risk assessments for all bonus recipients.

More than 20% of respondents have 50 or more short-term incentive plans, creating administrative complexity, high volumes of documentation, and increased risk of regulatory non-compliance. As companies typically spend 10% to 15% of pre-incentive operating income on bonuses, understanding how these dollars are spent is critical.

How Deloitte can help

Along with our deep knowledge of the banking and investment management sector, Deloitte brings experience in designing effective incentive compensation and governance plans. Learn how we can help you to design, operate, and govern a plan that meets your strategic goals.

Optimize your incentive compensation plan

Download the full survey results by filling out the form below. If you’re interested in learning more or participating in future surveys, please let us know and we’ll get in touch.

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Michele Crish

Michele Crish

Advisory Managing Director
Ian Dawson

Ian Dawson

Principal
+1 312 486 5714
Irena Gecas-McCarthy

Irena Gecas-McCarthy

FSI Director, Center for Regulatory Strategy, US Principal | Deloitte & Touche LLP
+1 212 436 5316
Linda Quaranto

Linda Quaranto

Managing Director | Human Capital Practice
+1 704 236 6220
Richard Rosenthal

Richard Rosenthal

Principal | Deloitte & Touche LLP
+1 212 436 7587