November 9, 2023

Executives May Earn (or Lose) Bonuses Based on Cybersecurity

The recent surge in high-profile data breaches and cyber incidents has heightened the urgency for businesses to fortify their digital defenses. In response to this evolving landscape, a revolutionary strategy is emerging: tying executive compensation to cybersecurity metrics, a shift that could redefine the approach to safeguarding an organization's digital assets and sensitive data.

Why Are More Executives Being Held Accountable?

As cyber threats have become more sophisticated, the need for organizations to prioritize cybersecurity has risen to the forefront of corporate strategy. Traditionally, CEOs and top leaders have primarily been held accountable for financial performance, revenue growth, and shareholder value, but in the digital age, cybersecurity measures protect an organization’s reputation, client base, financials, intellectual property, and more. Cyberattacks can have far-reaching consequences, including financial losses, damage to brand reputation, and legal liabilities.

In response to this, more organizations are looking to reward—or withhold—top level executives’ pay based on how well the organization has protected itself from cyber threats. EY recently reported nine of the Fortune 100 companies link bonuses to executive officers—a practice that was previously unheard of as early as 2018.

Securing data is no longer just an IT department's concern—it's a C-suite imperative. As a result, more and more organizations are linking executive compensation packages to cybersecurity performance. The approach is simple: when cybersecurity metrics improve, executive compensation is positively impacted. The incorporation of cybersecurity metrics into executive compensation packages serves a dual purpose. It not only underscores the importance of cybersecurity but also incentivizes CEOs and top leaders to actively engage in and support their organizations' cybersecurity efforts.

How Cybersecurity Metrics Work

Cybersecurity metrics are a set of key performance indicators (KPIs) that measure an organization's resilience against cyber threats. These metrics are designed to assess various aspects of a company's cybersecurity posture, such as incident response time, employee awareness and training, vulnerability patching, and breach detection capabilities.

The specifics of how these metrics are tied to executive compensation can vary from one organization to another, but the general concept remains consistent. For example, if an organization sets a goal to reduce the average incident response time by a certain percentage and the executive team successfully achieves that goal, they may receive a financial bonus. Conversely, if the organization experiences a breach that results from a lack of cybersecurity preparedness, executive compensation may be negatively affected.

This approach not only demonstrates a commitment to cybersecurity but also ensures that those who lead our organizations are personally invested in protecting them from the ever-present threat of cyberattacks. With cybersecurity metrics being tied to compensation, the likely benefits are:

  • Increased Accountability: When executives' compensation is directly linked to cybersecurity performance, they are more likely to take a proactive role in ensuring the organization's digital security. This accountability leads to better overall cybersecurity posture.

  • Improved Cyber Resilience: Organizations that prioritize cybersecurity as a key performance area tend to invest more resources in security measures, thereby bolstering their ability to withstand cyberattacks and minimize potential damage.

  • Alignment with Stakeholder Interests: Shareholders, customers, and partners are increasingly concerned about the cybersecurity of the organizations they engage with. Tying executive compensation to cybersecurity metrics aligns leadership's interests with those of key stakeholders.