The Jasper Street Partners September insight (subscribe for the full version!) shares some details about say-on-pay support this year, highlighting nuances within the overall positive trend.
Among the largest investors, BlackRock recorded notably higher support levels than previous years, and Vanguard and SSIM again supported 95+%.
At the same time, support among many large active managers – including Fidelity, Capital, Invesco, Franklin, Wellington and Nuveen – has declined.
Jasper Street is seeing many active managers vote differently than the “default” recommendation by their firm’s proxy voting team — which can either help or hurt companies.
Investor concerns that go unaddressed can fester and have more meaningful consequences. This is particularly the case if the “against” vote was driven by the firm’s portfolio managers.
Even with 80%+ support levels, it says companies cannot afford to ignore ‘against’ votes from large shareholders.
This Troutman Pepper Locke alert describes some more compensation considerations from the One Big Beautiful Bill Act (OBBBA) — with a focus on changes to Sections 162(m) and 4960. The memo first level sets on the pre-OBBBA status of 162(m):
Section 162(m) limits the federal income tax deduction that a publicly held corporation may claim for compensation paid to any “covered employee” to $1 million per year. Covered employees include the principal executive officer, principal financial officer, and the three other highest compensated executive officers of the publicly held corporation. For years after 2026, covered employees also include the next five highest compensated employees, whether or not executive officers (the “five highest paid employees”). Anyone who was a covered employee for a year beginning after December 31, 2016, remains a covered employee for all future years, even after termination of employment (the “once covered, always covered” rule). However, the once covered, always covered rule does not apply to the five highest paid employees.
The section 162(m) limit applies to all compensation, including salary, bonuses, equity awards, and other taxable remuneration, regardless of whether the compensation is performance-based. IRS regulations require the deduction limit to apply to all compensation paid by the corporation and any members of its “affiliated group” as determined under section 1504 (excluding the provisions of section 1504(b)), and the disallowed deduction is prorated among payors.
It then continues with this discussion of OBBBA changes:
For tax years beginning after December 31, 2025, OBBBA requires the section 162(m) deduction limit to apply to a publicly held corporation and all members of that corporation’s “controlled group” under sections 414(b), (c), (m), and (o), instead of the “affiliated group” under section 1504 as currently required by the section 162(m) regulations. This change means that publicly held corporations must consider compensation paid to employees by all members of the controlled group, both for identifying the covered employees and for determining the amount of compensation received by those covered employees subject to the section 162(m) deduction limit.
While “controlled group” and “affiliated group” are both “used to aggregate related entities for various federal tax purposes,” they “have distinct definitions, requirements, and applications” with “controlled group” being the broader concept.
Practically, the memo says this change may especially hit “UPREIT” and “Up-C” business structures. That’s because the primary impact will be for public companies with partnerships or other noncorporate entities in their controlled group that were not in their affiliate group, and only to the extent those entities pay compensation to employees. Since Section 162(m) doesn’t “present any significant tax planning or mitigation opportunities,” the main task here is to look out for additional guidance and then make sure you identify the correct controlled group for the 2026 tax year.
This Meridian memo really grabs your attention right from the get-go.
In a merger and acquisition environment where scrutiny is high and single change-in-control (CIC) provisions can lead to an “Against” recommendation from proxy advisors, outdated “golden parachute” arrangements can quickly become a distraction, or worse, a liability.
It continues with tips so your CIC protections align with shareholder expectations and make executives economically neutral about a potential transaction.
1. Keep Severance Multiples in Check
2. Double-Trigger Equity is the Standard
3. Clarify “Cause” and “Good Reason” Definitions
4. Eliminate 280G Tax Gross-Ups
5. Be Transparent About Legacy Agreements
Here’s additional detail from the alert on the third point above:
Modernizing CIC arrangements is not just about quantum or structure—it’s also about language. There are examples of legacy agreements that include vague or broad employment termination definitions of “cause” and “good reason,” which can lead to disputes, unintended payouts or unfavorable governance optics.
Today, approximately 70–80% of companies rely on standardized CIC agreements or severance plans rather than individualized employment agreements—a shift that creates a valuable opportunity to align and standardize key terms across participants.
To reduce risk and strengthen governance alignment, companies should consider reviewing and updating these definitions to reflect objective, clear and market-aligned definitions.
I blogged yesterday about modest increases to compensation for public company directors over the past decade. That hasn’t been the case for their private company counterparts – who saw an average 25% increase last year, according to this survey from Private Company Director and Compensation Advisory Partners. Here’s more detail:
As private company board governance continues to evolve, the complexity and time commitment associated with board service has increased. The additional workload, coupled with greater competition to recruit qualified candidates, has caused private companies to increase pay levels and provide pay structures, such as annual retainers and long-term incentives, that are similar to public companies.
The 2025 Private Company Board Compensation and Governance Survey includes a robust dataset of 633 respondents who certified their data in April 2025 and provides an up-to-date analysis of director pay practices in the current competitive environment. About half of the survey respondents represent family-owned or -controlled companies. Another 17% of respondents represent closely held companies, 18% represent private equity-owned companies and 10% represent companies owned by employee stock ownership plans (ESOPs). The survey respondents span diverse industries and a broad range of revenue sizes.
The survey found that annual cash retainers are very common and that 37% of companies provide long-term incentives (mostly in the form of equity). Board compensation for private company directors is still lower than public company pay. But compared to the public company director compensation trends that I shared yesterday, it correlates more closely with company size.
If you think directors at large-cap public companies are bringing home a lot more in board compensation than their counterparts at smaller companies, you’d be wrong, according to FW Cook’s annual review of director compensation. The report summarizes trends at 300 companies of various sizes and industries. Here were a few key findings:
– Annual director compensation growth remains modest, particularly for mid- and large-cap companies.
– This trend goes back further than the three-year look on the prior page – looking across our last 10 studies, annualized growth in median total pay has been 2.9% for mid-cap companies and 2.2% for large-cap (4.9% for small-cap).
– Over the last 10 years, director pay has not kept pace with the increase in market value of companies. This is especially true for large-cap companies where, over this period, the median market cap rose 305% (11.8% annually) while median director pay rose 25% (2.2% annually).
– Large-cap companies, which in this study have a median market cap of >50x the small-cap median, pay directors roughly 1.5x what small-cap companies pay, compared to a multiple of 2.7x for CEOs.
FW Cook says that compression at the top of the pay scale is a problem for large companies looking to attract qualified directors and points out how this compression differs from what we see with CEO pay as companies grow.
While I can see that point, I’m taking it with a grain of salt. In my experience, high quality directors are more motivated by intrinsic rewards like reputation, connection, and staying relevant than money. I’ve heard recruiters and board chairs say it’s a red flag if the compensation is what’s attracting the candidate. Plus, with 60-70% of director pay coming in the form of equity that will continue to appreciate, board members at well performing large-cap companies aren’t exactly working for free.
The memo also has this to say about pay caps for directors:
– Prevalence of annual limits on director compensation continues to increase (82% of the total sample versus 79% last year and 67% five years ago).
– Limits on total pay typically range from $500,000 to $1,000,000 and equate to a multiple of roughly 2x to 3x total director pay.
Part of the reason that annual pay limits have become more common is because the Delaware Supreme Court decided several years ago that the entire fairness standard applies to the board’s director compensation decisions. I’ve shared commentary in the past about considering conflicts of interest in setting director pay – and those could be more of an issue if board compensation starts to track CEO pay patterns.
Finally, some good news in the world. This ClearBridge voting update says that equity plan proposals are doing very well – which should be a silver lining for companies facing share depletion. Here’s more detail:
▪ Consistent with last year, ~99% of equity plan proposals passed the shareholder vote – Reflects continued shareholder recognition of the importance of equity as a compensation and retention tool for companies
▪ While ISS recommended “Against” ~31.4% of companies in the Russell 3000, ~98% of companies that received an “Against” from ISS ultimately passed the shareholder vote
ClearBridge also recaps stats on say-on-pay and director elections so far this year – all in all, it’s been a pretty good year.
We’ll be discussing what this year’s proxy season results can tell us about next year – as well as key issues in short & long-term incentive plans and many other timely topics – at our “Proxy Disclosure & 22nd Annual Executive Compensation Conferences” – which are only 3 weeks away!! Register now online – or you can email info@ccrcorp.com or call 800.737.1271. Be sure to check out our agenda and our outstanding lineup of speakers.
The “Proxy Disclosure & 22nd Annual Executive Compensation Conferences” are happening October 21-22 at The Virgin Hotels in Las Vegas. There will be lots of great networking – so register and book your hotel! For convenience, we have a virtual attendance option – but we hope to see as many folks as possible in person! Remember that all Conference attendees – whether in-person or virtual – will have access to on-demand replays for a year after the event, as well as our valuable course materials.
As Meredith (and John) recently blogged, SEC Chair Paul Atkins has an ambitious list of priorities in the latest Reg Flex Agenda. This Gibson Dunn memo also points out what’s *not* on the agenda – specifically:
Certain Dodd-Frank-mandated rulemakings were dropped from short-term rulemaking and moved to long-term rulemaking in the 2025 Agenda, such as an interagency rulemaking intended to implement Section 956 of Dodd-Frank, which relates to incentive-based compensation practices at certain financial institutions that have $1 billion or more in total assets.
The Gibson Dunn team notes that four of six federal financial regulators re-proposed the Section 956 rule last year. Two of six, the SEC and the Federal Reserve, did not join in the issuance of the re-proposed rule – Meredith shared at the time that then-Commissioner Jaime Lizárraga was disappointed that the SEC didn’t jump on board.
Although the rule has made appearances on past Reg Flex Agendas, it’s not too surprising that it will remain “unfinished business” for now, given how issuer-friendly the Chair’s priorities appear to be.
ISS recently released its 2025 Proxy Season Review: United States – Executive Compensation (available to institutional subscribers). The related press release highlights these key say-on-pay takeaways from the 2025 season:
– Shareholder support for say-on-pay proposals decreased slightly, while failure rates remained near all-time low. Median say-on-pay support levels decreased from 94.9% in 2024 to 94.5% in 2025. Failure rates remained low at 1.2% in 2025.
– CEO pay reached a record high in the S&P 500 for the second consecutive year. Median S&P 500 CEO pay was $16.9 million, the highest pay level ever observed. Median CEO pay in the Russell 3000 was $5.7 million, tying the historic high in 2021.
This Pay Governance alert discusses factors influencing say-on-pay trends, which it summarizes in these bullets:
– Proxy Advisor SOP Opposition Has Declined. So far in 2025, Glass Lewis (GL) issued its lowest rate of SOP opposition (10%) in recent years and is converging with the 10% to 12% opposition rates historically observed from ISS. The ISS SOP opposition rate in 2025 of 9% remains low relative to historical rates but is slightly above the 8% dip observed in 2024.
– Proxy Advisor Impact on SOP Outcomes Has Diminished but Remains Influential. The percentage of proxy advisor-opposed SOP proposals that ultimately fail has declined markedly from 2021 to 2025. However, when both proxy advisors oppose SOP, shareholder support levels, on average, are reduced by -34 percentage points (i.e., from 93% support to 59% support).
– Sustained 1- and 3-Year TSR Performance Correlates with Stability in SOP Outcomes. The consistent SOP outcomes in 2024 and 2025 mirror the sustained relatively strong 1- and 3-year S&P 500 TSR performance observed for the years ending in both 2023 and 2024.
As Liz shared yesterday, in threeparts, on TheCorporateCounsel.net, ISS Governance published results from its annual global benchmark policy survey — part of the process for developing its annual voting policy updates — on Monday. As we shared when the survey was released, questions solicited input from investors and non-investors on non-executive director pay, time- vs. performance-based equity, say-on-pay responsiveness and the modification or removal of ESG metrics, among other things. Here’s a brief summary of some of the compensation-related survey results:
Non-executive director pay. The survey asked respondents to identify specific problematic practices in director pay that should warrant immediate concerns and potentially adverse ISS vote recommendations (even if only in one year). Investors chose:
– 34% – Inadequate disclosure or lack of clearly disclosed rationale in the proxy for unusual NED payments
– 32% – Excessive perquisites (such as travel), performance awards, stock option grants, or retirement benefits
– 33% – Particularly large NED pay magnitude or NED pay that exceeds that of executive officers
Among non-investors, 25% of their choices were for “No”, indicating that a quarter of this group does not believe that any of these problematic practices should immediately trigger an adverse vote recommendation.
Time- vs. performance-based equity. When asked if time-based equity structures are acceptable for part or all of executive long-term incentive awards, the results among investors were:
– 38% – Yes, but only for part of the awards; plans should provide a mix of time- and performance-based awards
– 31% – It depends. The adoption of time-based equity compensation with an extended time horizon may be acceptable for certain industries or due to specific factors disclosed by the company
When asked to provide views on a reasonable mix, investors’ responses did not highlight any significant preference. Non-investors supported “not exceed 50% of the awards” (30%) and “Time-based awards with a sufficiently long-term time horizon are not problematic and they can comprise either all or a majority part of long-term executive incentives” (30%).
In terms of what represents long-term vesting or retention periods to dispense with performance awards, all or in part:
– 46% of investors responded, “At least 5 years vesting and/or post-vesting retention requirement in aggregate (for example, 3 years vesting plus 2 years post-vesting retention)”
– 57% of non-investors responded, “At least 3 years vesting, without a further post-vesting retention period”
Say-on-pay responsiveness policy.
– 64% of investors and 88% of non-investors responded that, “The absence of disclosed shareholder feedback should not be viewed negatively if the company discloses that it attempted but was unable to obtain sufficient investor feedback”
– 80% of investors and 91% of non-investors responded, “Yes, pay program changes, when showing improvement in remuneration practices, can be considered responsive, even in the absence of disclosed shareholder feedback”
Modification or removal of ESG metrics. When asked how ISS should assess the removal of E&S or DEI-related metrics from in-flight awards:
– 73% of investors responded, “Continue with the current approach, whereby changes to in-flight awards are generally viewed negatively absent a compelling rationale”
– 76% of non-investor respondents preferred “The removal of E&S or DEI metrics from in-flight awards generally should not in and of itself be considered problematic absent other concerns”
ISS will over the coming weeks release key draft policy updates and open a public comment period for all interested market participants on certain proposed changes to its voting policies for next year. The open comment period is designed to elicit objective and specific feedback from investors, companies, and other market participants on implementing the proposed policy updates. Final policy updates are expected to be announced around late November and will take effect for shareholder meetings occurring on or after Feb. 1, 2026.
In the LinkedIn post I shared yesterday on share pool depletion issues, Aon’s Laura Wanlass referenced the inducement grant exception and suggested that companies should understand the benefits and drawbacks of this option. If you haven’t used this before — or advised companies that have used this before — Laura is referring to the exemption for new hire inducement awards made outside of a shareholder-approved plan in both NYSE and Nasdaq rules. This alternative involves additional complexities, but it is a welcome exception and not infrequently used approach.
Here are a few things to keep in mind if you are considering granting inducement awards:
− Inducement grants are not covered by the company’s existing registration statement on Form S-8. You may want to file a Form S-8 for the shares covered by inducement awards.
− You will need to make some modifications to your standard resolutions and award agreements (e.g. you will need to spell out provisions that are typically incorporated from the plan) – you may want to keep alternative forms available for this situation, if it happens with any frequency.
− You must notify the exchange that you are relying on the inducement grant exemption, and promptly disclose in a press release the material terms of the award, including the identify of the recipient and the number of shares involved.
− You’ll need to file a supplemental listing application with the exchange for the shares covered by the grant.
These tips are from our “Checklist: New Officers – Managing Arrivals,” so they’re focused on large, one-time grants to new exec hires. But for more widespread use, as Broc noted in 2018, companies often adopt an inducement plan. As far as other drawbacks, keep in mind that proxy advisors and investors closely scrutinize these types of awards, and exchanges encourage companies that anticipate using inducement grants for all new-hires to adopt a shareholder-approved plan for that purpose.
I’m really looking forward to the “Key Issues in LTI: Structure & Disclosure” panel at our October Proxy Disclosure & 22nd Annual Executive Compensation Conferences featuring Semler Brossy’s Blair Jones, Davis Polk’s Kyoko Takahashi Lin, Aon’s Stephen Popowski and Latham’s Maj Vaseghi. ISS’s latest investor survey gathered more investor (and non-investor) input on potential changes to its policy on performance-based equity. (More on that tomorrow.) For now, companies continue to navigate complex LTI programs and are struggling to set rigorous, achievable long-term performance goals in an uncertain environment. Our panel will discuss managing equity plan cost & burn rate, the latest on performance equity, plan design considerations and managing in-flight adjustments.
Our conferences are less than a month away! You can’t afford to miss out on the critical guidance our PDEC speakers — featured on every panel of the SEC’s June Executive Compensation Disclosure Roundtable — will share. What are you waiting for!? Register now! You can sign up online or reach out to our team to register by emailing info@ccrcorp.com or calling 1.800.737.1271.