As we note in our checklist on share counting (and in our Form S-8 handbook on TheCorporateCounsel.net), the methodology for counting share usage against a plan’s share pool may not necessarily be the same as counting shares for Form S-8 purposes – and this is something that can cause confusion from time to time.
One wrinkle where I have experienced some clients wanting to “shoot the messenger” is in counting restricted stock units against the registered share pool at the time of grant. A lot of folks have interpreted the rules to say that all RSU grants count against S-8 capacity – even if the award is later forfeited and the underlying shares again become available for grant under the plan’s recycling provisions. But there has been room for ambiguity and therefore some variances in practice. Ali Nardali of K&L Gates informed us of a recent conversation with the SEC’s Office of Chief Counsel, where OCC informally shared this view:
An RSU must be counted against the Form S-8 registered share capacity at the time of grant. If the RSU is later forfeited and the underlying share becomes available for reissuance under the plan, any subsequent RSU granted over that share must again be counted against S-8 capacity. In effect, each grant event – not each underlying share – triggers a deduction from the S-8 share registration.
Some companies don’t worry too much about this because their plans have evergreen features that result in regularly registering new shares for issuance and having plenty of headroom. For others who need to track usage more carefully, this is why some companies register “extra” shares on the Form S-8 – i.e., a number that is greater than what the plan document indicates. The OCC clarification also serves as a reminder that the S-8 should be on file before RSUs are granted.
At least one comment letter that was submitted in connection with the Commission’s “executive compensation” review called for the Commission to align the treatment of RSUs under Rule 701 and Form S-8 with the treatment of options under those rules – so the “date of sale” would be the vesting date (or later settlement), similar to the “exercise date” for options. If the Commission did that, it would correct difficulties that this issue causes for newly public companies and would resolve this share-counting issue for Form S-8. Fingers crossed!
As Dave shared on Friday on TheCorporateCounsel.net, State Street Investment Management (formerly known as State Street Global Advisors), which has over $5.6 trillion in assets under management, has published its 2026 Global Proxy Voting and Engagement Policy.
This year, State Street is spelling out a say-on-pay factor that looks at relative total shareholder return as compared to a company’s GICS sector. Relative TSR was something State Street considered in practice – for example, see this Q1 2025 stewardship report – but now the policy is clearer.
Other than that, the say-on-pay aspect of the policy is unchanged from last year. Here’s the full explanation of how State Street will evaluate say-on-pay resolutions:
We consider it the board’s responsibility to determine the appropriate level of executive compensation. Despite the differences among the possible types of plans and awards, there is a simple underlying philosophy that guides our analysis of executive compensation: we believe that there should be a direct relationship between executive compensation and company performance over the long term.
Shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance. When assessing remuneration reports, we consider factors such as adequate disclosure of various remuneration elements, absolute and relative pay levels, peer selection and benchmarking, the mix of long-term and short-term incentives, alignment of pay structures with shareholder interests, as well as with corporate strategy and performance.
For example, criteria we may consider include the following:
• The company’s financial performance relative to its GICS sector, based on a total shareholder
return metric
• Overall quantum relative to company performance
• Vesting periods and length of performance targets
• Mix of performance, time and options based stock units
We’ve posted the transcript for our last webcast “Pre-IPO Through IPO: Compensation Strategies for a Smooth Transition.” During this program, Morgan Lewis’s Timothy Durbin, Alpine Rewards’ Lauren Mullen, Cooley’s Ali Murata, Pearl Meyer’s Aalap Shah, and Latham’s Maj Vaseghi shared practical guidance on key compensation considerations from the pre-IPO phase through the offering and into the first chapter of public company life. They are superhuman and managed to cover all of these topics — with a lot of detail! – in 90 minutes, in addition to addressing some commonly asked questions.
Assessing Existing Arrangements and IPO Impact
Designing and Adopting New Equity Plans and ESPPs; Share Pool Strategy
Managing “Cheap Stock” Issues; 409A Valuations
Designing and Communicating Special IPO Awards
Negotiating New Employment Agreements; Change-in-Control and Severance Terms
Navigating Lockups, Blackout Periods and Post-IPO Selling Mechanics
Establishing the Post-IPO Executive Compensation Program
Building Compensation-Related Policies, Governance and Controls
Communicating with Executives and Employees Through the Transition
Transitioning Director Compensation
If you are working on an IPO, contemplating one or are recently public, do yourself a favor and read this transcript or listen to the replay. This program covered so many traps for the unwary! Members of this site can access the transcript of this program for free – and for the lawyers out there, you can also get on-demand CLE credit for watching the replay. If you are not a member of CompensationStandards.com, email info@ccrcorp.com to sign up today and get access to the replay and full transcript.
Compensation Advisory Partners recently provided an early look at 2025 CEO pay levels, based on disclosures from 50 companies with fiscal years ending between August and October 2025. Here are some of their key findings:
– 2025 financial performance was generally flat to up.
– Median CEO total direct compensation increased +8% year over year, driven by a +9% increase in the grant-date value of long-term incentives (LTI).
– Annual incentive payout was up +4% generally due to increases in the target opportunity.
– [M]edian bonus payout for CEOs was around target (i.e., 98% of target).
– While median and 75th percentile payouts were consistent with the prior two years, we saw a modest rise in the 25th percentile payout due, in part, to fewer companies having a payout below 50% of target than in prior years.
– About 25% of companies increased the CEO’s bonus payout above the corporate funded amount through either individual performance or positive committee discretion.
Not surprisingly, that 25% of companies that increased the CEO’s payout mostly did so through an individual performance component.
In 2025, about a quarter of companies increased the CEO’s payout above the corporate funding factor. The average increase ranged from 8 – 50 percentage points above the funding factor. Most of these increases were provided through an individual performance component although some companies did so through a discretionary adjustment. When a company provides a positive discretionary adjustment, it typically does not raise a below target payout to above target. Only one company reduced the CEO’s payout in 2025.
Since this disclosure requirement became effective, I’ve now seen a smattering of companies where the completion of a recovery analysis ran up against the filing deadline for the proxy statement. In these instances, the company either filed an amendment to its proxy statement once the result of the analysis was known or, if the investigation went beyond the scheduled annual meeting date, disclosed the result in a current report on Form 8-K. The scenario is still sufficiently rare that a “best practice” has yet to emerge.
One such example is found in the definitive proxy statement of Core Scientific, Inc., which discloses that the company’s recovery analysis is ongoing and it has yet to determine whether a clawback will be required. Mark shared language from the company’s Compensation Discussion and Analysis.
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.
Given the risks associated with using AI in hiring, I’ve been curious for some time now about other ways HR professionals are leveraging AI (or experimenting with it) for information gathering, decision-making, and streamlining day-to-day tasks. So I was happy to see that topic addressed in the latest Compensation Best Practices Report, which shares the results of Payscale’s most recent broad and comprehensive survey of HR professionals. In this 23-minute episode of “The Pay & Proxy Podcast,” Amy Stewart, Manager of the Content & Research Team at Payscale, joined me to dive deeper and share her perspectives on the survey results. We discussed:
The broad perspectives covered in the Compensation Best Practices Report
How survey respondents are currently using AI or have in the last 6 months
What motivated survey respondents to use or try AI for these tasks
What AI tools HR teams are using
The benefits they’ve seen / risks they’re worried about
Respondents’ thoughts on AI for compensation benchmarking
What’s holding nonusers back
Strategic considerations for HR teams as workforces expand AI adoption
If you have insights on compensation and proxy disclosures you’d like to share in a podcast, I’d love to hear from you. Email me at mervine@ccrcorp.com.
It’s hard to believe that we are already into the second quarter of 2026. If you’re involved with executive compensation, public company disclosures, and corporate governance, you still have a lot to look forward to. In particular, we expect the SEC to propose significant rule changes – including on executive compensation disclosure – as soon as this summer.
Our fall conferences – happening October 12th & 13th in Orlando – will be the perfect opportunity to understand how new rules could affect your company and board. We will be covering all the hot topics! Now is the time to register – our “super early bird” rate ends tomorrow, Friday, April 3rd! This rate applies to both in-person and virtual attendance. Register online at our conference page or contact us at info@CCRcorp.com or 1-800-737-1271 by tomorrow, April 3rd, to lock in the best price.
Last year, nearly 25% of Russell 3000 companies submitted an equity plan proposal to a shareholder vote. Under current voting frameworks, most companies need to go back for approvals every 2 to 3 years – and while 99% of companies get the support they need, there are always a few outliers.
For obvious reasons, you want to do whatever you can to stay out of that category. This Pay Governance memo shares what you can do to increase the likelihood of a successful outcome:
1. Analyze the share reserve pool under various stock price scenarios to estimate how many shares are needed over the next 1 to 3 years.
2. Calculate current and potential dilution levels and share usage levels on an absolute basis and relative to the company’s peer group and overall industry sector.
3. Understand the voting guidelines on new share requests of the company’s largest institutional shareholders, including any brightline policies such as excessive dilution or burn rate thresholds.
4. Understand proxy advisor “dealbreakers” and estimate the likelihood of proxy advisors’ vote recommendations on the proposal. If opposition is anticipated, consideration should be given to engaging with the largest shareholders well before the annual shareholder meeting. (Remember, ISS introduced a new negative overriding factor for 2026, which makes plan features extra important.)
5. Ensure the proxy disclosure of the equity plan proposal is clear and complete. Within the equity plan proposal disclosure, highlight shareholder friendly design features and practices (e.g., reasonable dilution and share usage levels, requiring shareholder approval of option repricings or cash buyouts) and the role equity plays in attracting, motivating, and retaining employees as well as why it is important to the success of the company.
The memo notes that some industries tend to fare better than others with their equity plan proposals – by far, communications services drew the most opposition from proxy advisors in 2025. ISS opposition was also relatively higher in pharma/biotech, information technology, consumer discretionary, and real estate – compared to industries like utilities and energy.
According to the Investment Committee presentation, the updated framework is intended to further align the interests of executives with long-term shareholders. My take in looking at the framework’s “foundational priorities” is that CalPERS wants more than just alignment between pay and long-term performance – it also wants pay programs to be transparent and understandable. This isn’t a huge substantive change, but it’s spelled out more clearly now. Here’s the full list of these priorities:
• The design and structure of compensation plans should promote long-term shareholder value creation.
• Compensation should not be overly volatile, as significant fluctuations in compensation can undermine the stability and focus required for long-term strategic execution.
• Long-term incentive compensation should be designed to reward senior executives for above market performance, not overall market appreciation.
• Compensation plans should be straightforward and easily understood by both shareholders and executives, avoiding unnecessary complexity that can obscure true performance objectives.
• Compensation plans should not be excessively dilutive to existing shareholders, ensuring that equity awards are granted judiciously and in a manner that preserves long-term value.
• Equity awards should have long multi-year vesting periods to promote a long-term perspective.
• CEOs and senior executives should have significant personal stock ownership in the company.
CalPERS’ quantitative analysis will continue to be in a scorecard format, based on five-year performance and Equilar’s P4P formula. The P4P score looks at realizable pay vs. five-year cumulative TSR. Although that element of the scorecard doesn’t refer to grant date target pay, the overall scorecard continues to look at grant date target pay to assess whether CEO pay incentivizes excessive risk-taking.
The updated framework (and the proxy voting guidelines) also list examples of plan design and governance issues that may result in an “against” vote for say-on-pay. Here are a few factors that might warrant special consideration if CalPERS is a significant shareholder for your company:
• Overly complex plan design
• Excessively high CEO compensation relative to other named executive officers (NEOs)
• Majority of annual equity grants are to NEOs
• CEO-to-median employee pay ratio is disproportionately high
The FAQs are attached as an appendix and give more detail about CalPERS’ preferences for equity award holding periods, peer group benchmarking practices, etc.
Compensation committees with oversight responsibility for human capital management should also know that HCM is one of CalPERS’ three key priorities for 2026. Specifically, as flagged in this presentation, the pension fund is prioritizing:
As discussed in this 32-page Meridian memo, most companies have migrated to using severance agreements for CEOs in lieu of entering into employment agreements when an executive comes aboard. However, employment agreements are still a useful approach for some companies. About 36% of Russell 3000 companies continue to go this route – with it being more prevalent in industries like consumer discretionary, health care, communication services and financial services. Employment agreements are also more common at small-caps than large-caps.
In addition to stats on prevalence, the memo shares trends in key terms from the 100 or so S&P 500 companies that have entered into agreements – including:
• Exclusivity requirements
• Duration and renewal terms
• Compensation provisions
• Post-termination arrangements
• Restrictive covenants and releases
• Clawback provisions
• Change-in-control protections
• Indemnification and D&O insurance requirements
• Administrative provisions
Appendix C gives a convenient summary of typical provisions. In evaluating existing or potential CEO employment agreements, the memo suggests that boards consider whether the agreement:
• Serves as a useful tool for talent acquisition, retention and risk management (which, as noted above, may depend on the company’s size and industry, among other factors)
• Provides competitive levels of compensation, benefits and severance,
• Safeguards corporate interests
• Allows for terms to be reset through sunset provisions
• Reflects the current corporate governance environment
• Addresses dispute resolution
• Complies with applicable regulatory requirements, and
• Includes terms which clearly and unambiguously reflect the intent of the parties.