The Advisors' Blog

Here are some helpful pointers that John shared yesterday on TheCorporateCounsel.net:

Disclosure of executive security arrangements is a topic that’s received a lot of attention over the past year, including from SEC Chairman Paul Atkins, who suggested that the SEC’s continued treatment of executive security arrangements as a perk doesn’t reflect modern business realities.  While Chairman Atkins’ comments may give companies reason to hope that perk disclosure of these arrangements may soon end, for this year at least, the old rules continue to apply.

So, with all the attention being paid to executive security, what should companies disclose about these arrangements in their proxy statements?  Over on Real Transparent Disclosure, Broc recently provided some answers to that question. Here’s an excerpt:

– Rapid Growth in Executive Security Spending: Personal security services (home security, cybersecurity, security personnel, travel security) are increasing in prevalence and cost. Disclosure rates show 64% of the S&P 100, 35% of the S&P 500 – and 10% of the Russell 3000 provide executive security services, with expectations of continued growth.

– ISS’s Evolving Position on Security Perks: While ISS historically cited security expenses critically in negative Say-on-Pay recommendations, it recently relaxed its stance. ISS now indicates it is unlikely to raise significant concerns if companies provide robust proxy disclosure explaining the rationale and assessment process behind security programs.

– Disclosure Expectations from Proxy Advisors: Adequate disclosure should describe:

-The nature of the security program
– The benefit to stockholders
– The internal or third-party security assessment
– The arm’s-length decision-making process

Broc also says that companies expecting a significant increase in executive security expenditures need to involve the compensation committee and the relevant executives early on in order to ensure a robust assessment and approval process. These companies should also provide clear disclosure of that process in the CD&A in order to mitigate any criticism they might receive from proxy advisors.

– Liz Dunshee

As we’ve shared on this blog, investors have become slightly more open to companies motivating performance through equity awards that vest over an extended period of time (e.g., 5+ years) – rather than based on performance objectives.

For example, in response to the Policy Survey conducted last fall by ISS Governance, 38% of investors said time-based awards were acceptable as one component of compensation plans – and 31% said that time-based awards were acceptable as all or part in certain industries.

However, a new report announced by ISS Corporate (available for download) flags that relying on time-based awards is still a minority practice, and perhaps performance awards have not been misguided after all. Here are the key takeaways:

– “Standard” companies, which incorporate performance-based awards, generally show stronger long-term shareholder returns and more measured CEO compensation growth than companies that rely solely on time-based equity. Vote support for Say on Pay was higher at these companies as well.

– Standard companies perform better across all Governance QualityScore categories, including non-compensation categories suggesting a broader pattern of stronger governance practices where performance-based awards are used. However, this is partially due to the inclusion of factors related to performance-based awards in the Compensation category.

– No-Performance Based Awards (NPBA) and Extended-Timed Based Awards (ETBA) programs remain minority practices and are becoming even less common, reinforcing performance-based equity as the dominant market expectation.

– Companies with extended time-vesting awards and companies with no-performance-based awards are smaller in size than companies with a “Standard” compensation program. They also have a similar distribution to Standard companies.

My personal view is that every company should do what their board thinks is best – taking into account how to motivate performance and retention, administrative burdens, and investor preferences. But it can be helpful to revisit the conversation from time to time, with consideration of the trends and data points covered in reports like this one. In this blog from last summer, I also shared some pros & cons of shifting to time-based awards.

– Liz Dunshee

This Pay Governance alert discusses the disconnect between company disclosures addressing pay-for-performance and the shifting approaches of proxy advisors and institutional investors. Companies continue to use varied approaches to describe pay-for-performance alignment, and the confusion created by PvP meant that these required disclosures didn’t fill the gap created by this lack of comparability.

Most companies describe the rationale for their performance measures, and in some cases the rigor of their performance targets, but provide limited disclosure demonstrating how pay outcomes align with performance. Some companies use realized or realizable pay analyses and supporting charts to illustrate alignment with shareholder outcomes, while others focus on “take-home” pay as evidence of alignment. These varying disclosure methods make it difficult to readily assess pay-for-performance alignment across companies.

Institutional investors and proxy advisors similarly have varied approaches to pay analysis. But the memo suggests there is a push towards a greater use of outcome-based measures:

The proxy advisors’ pay-for-performance models up until now have generally relied on SCT compensation, which reflects the grant date value of long-term incentives, rather than outcome-based compensation, which reflects the actual number of shares earned and the updated stock price.

One of the proxy advisory firms has added two outcome-based tests to its pay-for-performance model this year to supplement its SCT compensation tests . . . Vanguard has incorporated outcome-based measures in evaluating pay-for-performance in its proxy voting guidelines, and it is likely that other institutional investors are also relying on similar approaches to inform their voting decisions.

The memo suggests that companies that don’t already might want to start proactively supplementing the required PvP disclosures with realizable pay.

As proxy advisors begin to supplement traditional models with outcome‑based tests and large institutional investors increasingly rely on proprietary pay‑for‑performance methodologies, boards would be well served to proactively adopt and disclose more robust, outcome‑oriented analyses. Supplementing required PVP disclosure with clear, contextual explanations of CAP and realizable pay and visual demonstrations of alignment with shareholder outcomes can enhance credibility, improve investor understanding, and strengthen the overall pay‑for‑performance narrative.

– Meredith Ervine 

Managing the process of granting equity awards to employees in the U.S. alone is already a huge compliance effort, but multiply that by 10+ for multinational companies that grant awards to employees around the world — navigating many securities, tax, data privacy, etc., regulatory regimes. If you administer a global equity plan, this McDermott alert is your annual reminder to consider new regulations adopted in applicable countries in 2025. The memo addresses developments in China, the EU, Japan, the Philippines and the UK. It also shares these overall trends:

Income tax and social insurance rates

A number of countries have proposed income tax and social insurance rate and threshold changes for 2026. Similar to the last few years, during which most changes have increased the taxes due, many of these adjustments will increase the applicable tax rates, although there are a few exceptions this year.

Restrictive covenants

In 2025, various countries introduced legislation that curtailed restrictive covenants and limited their use solely to executive-level employees for short durations. We expect to see similar legislation in additional countries in 2026. The trend is based on a concern that these restrictions had become too common and were restricting the mobility of rank-and-file employees.

– Meredith Ervine 

We have two webcasts coming up this month focused on the IPO process and newly public companies. The first – “Pre-IPO Through IPO: Compensation Strategies for a Smooth Transition” – is coming up next week on CompensationStandards.com. We’re also hosting a webcast the following week on TheCorporateCounsel.net called “From S-1 to 10-K: Avoiding Disclosure Pitfalls,” addressing the new disclosure expectations and increased compliance demands for companies entering into the Exchange Act reporting cycle.

Join the first webcast on Wednesday, March 18th, from 2 to 3:30 ET on CompensationStandards.com to hear our stellar panelists discuss key compensation considerations from the pre-IPO phase through the offering and into the first chapter of public company life, with a focus on practical strategies for designing, implementing and communicating compensation programs and governance frameworks that support a smooth transition. Timothy Durbin of Morgan Lewis, Lauren Mullen of Alpine Rewards, Ali Murata of Cooley, Aalap Shah of Pearl Meyer and Maj Vaseghi of Latham will discuss:

On Friday, Corp Fin announced new and updated Compliance & Disclosure Interpretations, most of which relate to Rule 701, which exempts offers and sales of securities issued pursuant to a compensatory benefit plan by a private company to employees, directors, officers, consultants, advisers, and other individuals providing bona fide services to the company. Here are the updates to the Securities Act Rules CDIs:

New Question 271.26 clarifies when companies must provide disclosure under Rule 701(e)(1)–(6) if the aggregate sales price of securities sold under this exemption during a consecutive 12-month period exceeds $10 million.

New Question 271.27 states that the Rule 701 exemption is lost for the entire offering during the 12-month period in which the $10 million threshold is exceeded if the issuer fails to provide the required Rule 701(e) disclosure within a reasonable period before the date of sale.

Revised Questions 271.10, 271.12, 271.14, 271.16, 271.23 and 271.24 are updated solely to replace outdated references to $5 million with $10 million (which was updated in Rule 701(e) in 2018).

The other updated CDI addresses the definition of “ineligible issuer” (Securities Act Rules CDI 203.03 (redline)). A new CDI confirms a new CIK is not required following a reorganization (Securities Act Forms CDI 101.06), and another states that the failure to check the SRC status box does not result in loss of SRC status or the ability to use SRC accommodations (Regulation S-K CDI 102.06). 

– Meredith Ervine 

This is an exciting time of year for anyone who geeks out over proxy disclosures and executive compensation – and if you’re reading this blog, you likely fall into that bucket, whether or not you want to admit it! This year it’s even better, because Mark Borges is sharing noteworthy proxy examples on his “Borges’ Proxy Disclosure Blog.” Here are a few of Mark’s recent updates:

– Parsons’ Executive Compensation Disclosure

– Fastenal’s “Plain Talking” Disclosure

– Jefferies Financial’s Perquisites Disclosure

– Synopsys’ Executive Transition Disclosure

– TD SYNNEX’s Management Incentive Plan Disclosure

Mark doesn’t simply flag the disclosure – although even that is helpful! He also adds context and commentary from his years of experience. Members of this site can visit the blog – and can sign up to get that blog pushed out to them via email whenever there is a new entry. All you need to do is click the link on the left side of the blog and enter your email address.

If you aren’t yet a member with access to the Borges’ Proxy Disclosure Blog and all of the other resources on this site – such as our checklists, resource libraries, and the essential Lynn & Borges’s “Executive Compensation Disclosure Treatise” – email info@ccrcorp.com, call 1.800.737.1271, or sign up online.

– Liz Dunshee

AI-related goals are making their way into executive compensation plans – which isn’t too surprising since many companies are aiming to use new technology to transform their business in one way or another. This Equilar blog looks at how companies are incorporating these metrics, based on 2025 disclosure examples. Here are a few takeaways:

1. Most companies that have incorporated AI metrics have done so within their annual incentive plans. Example metrics include capturing opportunities for revenue growth, driving AI literacy, and AI development and advancement.

2. In one example of putting an AI-focused performance objective into a long-term plan, the company still uses an annual measurement to assess the objective of deploying AI tools to enhance productivity. Equilar notes this approach reflects how the fast-moving nature of AI makes it difficult for companies to set multi-year targets.

3. At least one company is planning to take a scorecard approach in 2026, where AI serves as the strategic goal modifier.

The blog notes that at one company, the AI performance metric is replacing “citizenship and sustainability measures.” It’s not too hard to tell what’s hot and what’s not right now – “ESG” is out, “AI” is in – but hopefully we can use lessons learned from ESG to deploy novel AI-focused metrics in an even more effective way.

– Liz Dunshee

If you are disclosing transition pay arrangements in your proxy this year, there’s good news and bad news. ISS Governance recently published these predictions for the 2026 annual meeting season:

Transition pay arrangements are expected to be a focus in the 2026 proxy season. Following an unprecedented number of U.S. CEO changes in 2025, severance packages, sign-on bonuses, make-whole awards, and other transition pay issues are expected to play a prominent role in many executive compensation disclosures.

The good news is that you won’t be alone in making these disclosures, the bad news is that they’re probably going to be scrutinized as part of larger trends.

These predictions were part of a larger report that ISS Governance published on forecasts for the 2026 annual meeting season (available for download), which also says we shouldn’t be surprised if spending on executive security increased last year:

Investors may continue to see increases in security-related perquisites in 2026. Over the last three years, the prevalence of security-related perks increased at a much larger rate than other common perks for S&P 500 CEOs, as many companies reevaluated the need for new or enhanced security protections for their top executives.

The report predicts that economic and geopolitical headwinds will also play a role in the 2026 proxy season.

– Liz Dunshee

Recently, the NYSE published annual compliance reminders for companies whose shares trade on the exchange. The letter reminds listed companies of the need to submit supplemental listing applications at least two weeks in advance of any issuances of a listed security, listing a new security, and certain other corporate events.

This requirement tends to catch some folks by surprise in the context of equity plans – and maybe that’s why the exchange has highlighted it for at least two years running on the letter’s front page. Here’s more detail:

A listed company is required to file a SLAP to seek authorization from the Exchange for a variety of corporate events, including:

• Issuance (or reserve for issuance) of additional shares of a listed security;

• Issuance (or reserve for issuance) of additional shares of a listed security that are issuable upon conversion or exercise of another security, whether or not the convertible security is listed on the Exchange;

• Change in corporate name, state of incorporation, or par value; and/or

• Listing a new security (e.g., new preferred stock, second class of stock, or bond).

No additional shares of a listed security, or any security convertible into the listed security, may be issued until the Exchange has authorized a SLAP. Such authorization is required prior to issuance, regardless of whether the security is to be registered with the SEC, including if conversion is not possible until a future date. The Exchange requests at least two weeks to review and authorize all SLAPs. It is recommended that a SLAP be submitted electronically through Listing Manager as soon as a listed company’s board approves a transaction.

Section 703 of the Listed Company Manual provides additional information on the timing and content of
SLAPs. Domestic companies should also give particular attention to Sections 303A.08, 312.03 and 313 of the Listed Company Manual (see Shareholder Approval and Voting Rights Requirements below). Generally, FPIs may follow home country practice in lieu of these requirements. Please consult the Exchange if you have any questions.

Check out the letter for additional proxy season reminders – including for shareholder approval requirements and voting standards.

– Liz Dunshee