Here’s something Dave shared yesterday on TheCorporateCounsel.net about an announcement by the Division of Investment Management:
The SEC’s Division of Investment Management and Division of Corporation Finance recently provided guidance regarding the federal securities implications of pooled employer plans (also known as “PEPs”), which are defined contribution retirement plans that permit multiple, unrelated employers to join together in a single plan. These types of plans can be particularly attractive for small businesses seeking to provide retirement plan benefits to employees.
In its Staff Statement Regarding Pooled Employer Plans, the Division of Investment Management provided its views regarding the applicability of the “single trust exclusion” in Section 3(c)(11) of the Investment Company Act to pooled employer plans, as well as the applicability of Securities Act Rule 180 to interests in collective investment trusts maintained by a bank and issued to those pooled employer plans that cover self-employed individuals.
In parallel, the Division of Corporation Finance updated its Corporation Finance Interpretations (CFIs) to address two interpretive issues relating to pooled employer plans. In new Securities Act Sections CFI Question 118.01, the Staff states:
Question: Are pooled employer plans (“PEPs”) eligible to claim the Section 3(a)(2) exemption for any interest or participation in a “single trust fund”?
Answer: The staff will not object if a PEP that meets the qualification requirements of ERISA and Section 401 of the Internal Revenue Code and otherwise meets the conditions of Section 3(a)(2) claims the Section 3(a)(2) exemption for any interest or participation in a “single trust fund” even though multiple, unrelated employers participate in the PEP. As with any plan that meets the exemption in Section 3(a)(2), the offers and sales of any securities in connection with the PEP are subject to the anti-fraud provisions of the Securities Act. See Section 17(c). In addition, the exclusion in Section 3(a)(2) for investments in employer securities would apply. Therefore, if a participating employer offers its own securities to its employees as an investment option in a PEP, the Section 3(a)(2) exemption would not be available for the plan interests offered to the employees of that employer. Please refer to Securities Act Forms CFI [126.45] regarding the availability of Form S-8 to register the offer and sale of an employer’s own securities and the plan interests in connection with a PEP at https://www.sec.gov/rules-regulations/staff-guidance/compliance-disclosure-interpretations/securities-act-forms. For the views of the staff of the Division of Investment Management regarding the application of section 3(c)(11) of the Investment Company Act of 1940 and rule 180 under the Securities Act to PEPs, see here.
Question: An employer participant in a pooled employer plan (“PEP”) offers its own securities to its employees as an investment option in the PEP, such as by offering an employer securities fund in which employee contributions may be invested. May the employer use Form S-8 to register the offers and sales of those securities? If so, must the PEP also register the offer and sale of plan interests on that form?
Answer: An employer participant in a PEP may register on Form S-8 offers and sales of its own securities to eligible employees. In addition, the PEP must register the offer and sale of plan interests to the employees of that employer on the same Form S-8. Along with the employer registrant’s signatories, the PEP’s trustees or other persons who administer the PEP must sign the Form S-8 for the plan. See Instruction 1 as to Signatures on Form S-8.
Alternatively, the staff will not object if the employer files a Form S-8 to register the offering of its securities to its employees and the PEP separately files its own Form S-8 to register plan interests offered and sold by the PEP to the employer’s employees, as long as the employer, in addition to incorporating its own periodic reports, incorporates the PEP’s periodic reports by reference into its Form S-8. If filing a separate Form S-8:
• The PEP should register an indeterminate amount of plan interests in accordance with Rule 416(c).
• The staff will not object if the PEP applies Rule 457(h)(2) by analogy and does not pay a fee for the registration of the offer and sale of the plan interests as long as the PEP includes a reference to the employer’s related Form S-8 by name and file number and provides a hyperlink to the filing.
• The PEP’s Form S-8 need only incorporate the documents related to the plan in order to comply with Item 3.
• The employer and the PEP must ensure that investors receive all of the information constituting a Section 10(a) prospectus pursuant to Rule 428 and that such information is updated in accordance with General Instruction G of Form S-8.
• The staff will not object if a PEP registers plan interests offered and sold to employees of multiple employers on a single Form S-8 as long as each employer’s separate Form S-8 is referenced and hyperlinked. [May 4, 2026]
We now have more data on CEO pay trends from 2026 proxy disclosures — this time from ISS-Corporate. They reviewed 2026 proxy disclosures by 318 companies in the S&P 500 with no CEO turnover in the last two years. Here’s what they found:
– Median CEO pay […] stood at $17.7 million. More than 74 percent of S&P 500 CEOs in the study received a pay increase while compensation fell for the remaining 26 percent.
– For the segment of companies that increased pay for their chief executives, the median change was 15.6 percent, while compensation decreased by a median of 9.5 percent among those companies where pay dropped.
– Notably, pay increased by more than $10 million for 27 CEOs, and 21 CEOs saw their pay more than double in 2025.
– Median CEO pay increased for these large cap companies by 10.6 percent from the 2025 to 2026 filing periods, the analysis found, representing an acceleration from the 7.5 percent rise observed between the 2024 and 2025 filing periods.
While increases in base salary were modest, as is often the case, growth was primarily driven by an increase in the value of new equity awards.
Compensation Advisory Partners recently analyzed how 2026 proxy disclosures on goal-setting and earned compensation addressed the impact of tariffs. They specifically surveyed 22 companies that had filed proxies by April 17 and depend on imported goods, manufacture overseas or source key materials from countries impacted by tariffs. Here are their key findings:
– Of the 22 companies reviewed, 11 (50 percent) did not reference tariffs impact on incentive plan metrics in their proxy statements.
– Of the remaining 11 companies (50 percent), 8 disclosed an impact on their annual incentive (AI) plan, while 3 disclosed impacts on both annual and long-term incentive (LTI) plan payouts.
– Therefore, 8 out of 22 companies (36 percent) made adjustments to annual and/or long-term incentive payouts.
They found that the disclosures had a consistent theme:
[P]erformance goals for both AI and LTI plans had been established prior to the implementation of tariffs. Once tariffs were introduced, companies experienced a period of volatility during ongoing negotiations between the Trump Administration and the impacted countries. As a result, many companies characterized the negative financial impact as an unforeseen, extraordinary event and applied upward adjustments to incentive plan payouts.
Not surprisingly, that was the cited rationale when adjustments were made:
[T]ariffs are external, unpredictable shocks that were not included in the original target setting process, so adjusting helps isolate true operational performance and ensures executives are evaluated and compensated based on factors within their control. Adjustments also prevent key financial metrics such as EBIT, EBITDA, Free Cash Flow, and EPS from being distorted and help maintain a consistent pay-for-performance framework.
When companies made adjustments, here’s what they observed about their disclosures:
The impacts on payouts were disclosed as adjustments to their plan payouts in percentage points. In comparing annual versus long-term incentive plan adjustments, ICU Medical was the only company to disclose a quantitative adjustment to its long-term incentive plan, applying an upward adjustment of +50% to the payout percentage. Adjustments were more common for annual incentive plans, with reported increases ranging from +6% to +43% of the actual payout. Among the seven companies that disclosed a specific adjustment, the median increase was +13%, and the average was +12% to the actual payout.
Finally, companies adjusted annual and long-term incentive plans in different ways. Of the eleven companies that made adjustments, 5 companies modified adjusted EBITDA to exclude all or a portion of the tariff expense to increase incentive plan payouts. In addition, three companies adjusted multiple performance metrics rather than a single measure.
Companies that discussed tariffs but declined to make adjustments explained that they did so for purposes of:
– Ensuring performance metrics do not fully exclude real economic impacts of tariffs on profitability
– Maintaining accountability for management’s response to tariff pressures
– Avoiding overstatement of performance by fully removing a real cost
– Preserving credibility with shareholders and consistency in reporting
CAP goes on to make some future predictions:
Companies are likely to continue adopting hybrid approaches to tariff treatment, with a growing emphasis on partial and rule-based adjustments rather than fully excluding or fully including tariff impacts. The evidence suggests companies will increasingly distinguish between anticipated tariffs, which are treated as normal economic costs, and unforeseen or newly imposed tariffs, which may be adjusted out using predefined mechanisms such as cutoff dates or specific cost factors.
This reflects an effort to balance fairness in performance evaluation with accountability for real business outcomes, while also enhancing transparency and consistency in incentive design. As tariff volatility persists, companies are expected to formalize these practices further, embedding clearer guidelines into incentive plans to ensure that performance metrics remain both economically meaningful and aligned with shareholder value creation.
Speaking of balancing fairness and accountability, they also note that companies “will need to evaluate whether and how to adjust performance metrics to exclude or normalize the impact of refunds, ensuring that executive compensation reflects underlying operating performance rather than a one-time boost.”
Here’s something Mark Borges shared on his Proxy Disclosure Blog here on CompensationStandards.com on Friday:
[I]f you’re like me, you may not have noticed a pair of bills introduced in Congress in March that would empower the Federal Deposit Insurance Corporation to claw back certain compensation paid to executives and directors of financial corporations subject to the FDIC’s jurisdiction. Generally, the House bill, the “Failed Bank Executives Accountability and Consequences Act” (H.R. 7886) and the Senate bill, the “Failed Bank Executives Clawback Act of 2026” (S. 4050), would require the executives and directors of large banks (as well as certain other persons) to disgorge the compensation they received over a multi-year period (two years for the House and three years for the Senate) preceding their bank’s failure. Citing the failure of Silicon Valley Bank as an example, the measures would hold these individuals financially responsible for some of the costs those failures impose on the rest of the banking system and the U.S. economy.
The applicability of this clawback is limited, and Mark notes that, like many bills introduced, the measures’ prospects are unclear. But clawback requirements remain top of mind for some in Congress (on both sides of the aisle), and even when proposals don’t get any short-term traction, some keep coming back up again and again.
As this FW Cook memo explains, sometimes there are good reasons for boards to approve special awards. But the fact remains: Investors don’t like them. The memo points out that some companies are able to recover quickly from investor concerns associated with these awards, while others suffer fallout for years. Here’s an excerpt:
The difference tends to come down to a combination of factors: underlying company performance, the quality of engagement with key shareholders, demonstrated responsiveness to the concerns raised, as well as the overall design and disclosure of the award itself. There is no single formula that guarantees a smooth recovery, and boards that approach the aftermath as a routine engagement exercise sometimes find it is anything but.
The memo walks through factors that tend to contribute to a quick recovery. Not surprisingly, a lot of it comes down to thinking ahead. Here’s an excerpt:
Boards that navigate this well also tend to think ahead — specifically, about what the story looks like if circumstances don’t resolve cleanly. When the board does not yet have a viable successor in place, a retention grant has a straightforward logic at the time of grant. The board needed time, and the award bought it. That story is easier to tell if a transition happens eighteen months later. It gets harder if two or three proxy seasons pass, the CEO is still in place, succession is still unresolved, and shareholders are left wondering what the award actually accomplished beyond extending the status quo. The question worth asking in advance is not whether the rationale works today — it usually does — but how it ages if the underlying situation moves slowly or not at all.
Related to that is a consideration that often gets underestimated: what the grant closes off. No board grants a special award knowing exactly what the next two or three years will bring. Business circumstances shift, and some of those shifts — an acquisition, an unexpected performance shortfall, a leadership change — may call for compensation responses that are themselves outside the ordinary. When that happens, a board that has recently granted a special award faces a harder conversation. Shareholders have limited appetite for repeated departures from normal practice, even when each one is justified on its own. The cost of a special award is not only the grant itself — it is the flexibility it may take away from the board later, when a more consequential decision requires shareholder patience.
We tend to cover CEO succession planning less on this site and more on TheCorporateCounsel.net, as a full board governance issue – in fact, we have a full “CEO Succession Planning” Practice Area over there. But this Pay Governance memo is interesting in that it highlights the greater role that some compensation committees are playing in this key responsibility. Here are the key takeaways:
• Succession planning has become a core responsibility of compensation committees, as boards increasingly oversee broader human capital matters amid persistent market volatility, deeper regulatory scrutiny, and rapid industry change.
• CEO succession among Russell 3000 banks reflects a predominantly planful talent pipeline, with approximately two thirds of CEOs hired from COO or President roles – positions often intentionally structured as stepping-stones to the top job.
• External hiring serves as a targeted complement to internal succession planning, often through former CEOs or M&A related appointments, reflecting a flexible approach to selectively augment internal pipelines with high potential external talent where strategically appropriate.
• Boards and compensation committees across industries should consider the approaches – such as succession planning cadence, incentive design for “CEO-in-Waiting” roles, and targeted development investments in COOs/Presidents and other executive pipelines – that encourage greater proactivity, streamline succession processes, and strengthen long-term leadership outcomes.
• Compensation committees can deploy a suite of succession linked pay tools – including pre CEO retention RSUs, pre approved compensation step ups, and promotion awards – to support continuity, reduce flight risk, introduce pay certainty ahead of transition, and reset long term incentives in a manner that aligns incoming CEOs with enterprise wide accountability.
We’ve posted the agendas and speakers for our pair of popular fall conferences – The 2026 Proxy Disclosure & 23rd Annual Executive Compensation Conferences – which are coming up on October 12th and 13th virtually and in person in Orlando!
With a “blockbuster” year in the works for Corp Fin – alongside many other developments affecting executive compensation, corporate governance, and disclosures – you do not want to miss these two informative days. Here’s a sampling of what’s on tap – check out the full agenda for all the details!
– Christina Thomas: The Latest From Corp Fin
– The SEC All-Stars: Proxy Season Insights
– The Fate of Shareholder Proposals
– Fireside Chat with Top Activism Defense Lawyers
– Scary Stories!
– Trends in Tokenization & Blockchain
– SRCs, EGCs & FPIs: What’s Next?
– Keeping Governance in Focus When the Future is Hazy
– The SEC All-Stars: Executive Pay Nuggets
– Your Compensation Disclosures: New & Improved (We Hope)!
– The Top Compensation Consultants Speak
– Navigating ISS & Glass Lewis
Our conferences will be a great opportunity to understand how new rules and other evolving developments could affect your company and board – and to talk with fellow practitioners about how they’re adapting and preparing. Register online at our conference page or contact us at info@CCRcorp.com or 1-800-737-1271. Sign up soon to take advantage of the early bird rate!
We’re continuing to monitor how the proxy voting landscape is changing in light of new technologies and more customized voting policies. This Farient Advisors blog takes a closer look at the question, “How will investors’ use of AI affect say-on-pay outcomes?”
The short answer is: Don’t expect a seismic shift in the near-term. But the blog explains that investor practices are already changing in several ways. Investors are:
– Revisiting historical “checklists” related to year-over-year pay changes, absolute pay levels, and one-time awards
– Translating these checklists into customized policies and actions, influencing voting behavior, engagement preparation, and investor priorities
– Analyzing proxy statements, including extracting key information from the CD&A, reinforcing the importance of how companies frame their disclosures
– Conducting custom peer group benchmarking, enabling comparisons beyond traditional company- or proxy advisor-defined peer groups, with implications for both voting and engagement
The Farient team says that proxy advisors are continuing to play a meaningful role in certain aspects of say-on-pay analysis, even as the state of play evolves. Specifically:
– Investors continue to rely on established pay-for-performance (PFP) alignment models while developing their own frameworks
– Proxy advisors retain advantages in covering non-U.S. markets and smaller companies, where operational complexity remains high
In addition to continuing to focus on shareholder engagement and fundamentally well-aligned and well-disclosed pay programs, the blog says that companies can use AI to their advantage too – but don’t take it too far. Here are a couple of parting thoughts:
– Reevaluate peer group strategy: AI tools will enable greater customization in peer group selection, which may diverge from traditional company or proxy advisor frameworks. Companies and their advisors should proactively test a range of peer scenarios and be prepared to address their rationales for the comparisons.
– Elevate the Compensation Committee narrative: When relevant and appropriate, the Compensation Committee Chair letter can carry more weight for investors than in the past by providing the full context around the Committee’s decision-making process, in addition to any anecdotes they hear during an engagement. An annual or periodic letter can be a powerful tool. Don’t treat this as boilerplate or a check-the-box exercise; insight from the Compensation Committee Chair and its members can help contextualize non-routine pay decisions, particularly around special or one-time awards. While AI can be helpful for typo and grammar checks, investors have tools at their disposal that allow them to check for AI-generated content. The pen should remain firmly in the hand of the Committee Chair.
[W]hile the evergreen needs to end after 10 years due to stock exchange shareholder approval rules, there’s no reason to have a 10-year term on your whole equity plan. We’ve had situations where we’re coming up on the 10-year anniversary of when the plan was adopted, and while the evergreen is ending, it has built up the share reserve over the years. You don’t want your plan to expire at that point. You want to still be able to use those shares for as long as you want.
In connection with their IPO, greater than 90% of technology and life sciences companies adopt equity compensation plans that contain an “evergreen” provision. These provisions provide for an automatic increase in the number of shares available for issuance under the plan (with a typical initial share pool of 8% to 12% of outstanding shares and a 4% to 5% annual increase in the technology sector) without requiring additional shareholder approval of the increase.
Consistent with the listing standards of the New York Stock Exchange and the Nasdaq Stock Market, an evergreen provision may have a term of up to ten years. Although not required, many companies that adopted evergreen provisions in connection with their IPO also provided that their equity plan contain a fixed 10-year term that mirrors the term of the evergreen provision. As a result, these companies must ask their shareholders to approve a new equity plan as they near the 10-year anniversary of their IPO.
Typically, by evergreen and plan expiration, most companies are relatively “mature” and widely held by institutional shareholders whose support, absent a multi-class stock structure and/or insider voting control, will be required for the new equity plan.
A 10-year period is also relevant to incentive stock options (ISOs) and the requirements under Internal Revenue Code Section 422. (And possibly certain restricted stock recycling provisions — see Q&A Forum Topics 1159 & 1577.) Even so, your equity incentive plan‘s evergreen and termination provisions might read:
Share Reserve. […] In addition, subject to any adjustments as necessary to implement any Capitalization Adjustments, such aggregate number of shares of Common Stock will automatically increase on January 1 of each year for a period of ten years commencing on January 1, 2026 and ending on (and including) January 1, 2035, in an amount equal to five percent (5%) of the Share Reserve Increase Stock outstanding on December 31 of the preceding year; provided, however, that the Board may act prior to January 1st of a given year to provide that the increase for such year will be a lesser number of shares of Common Stock (each, an “Annual Increase”).
Termination of the Plan. The Board may suspend or terminate the Plan at any time. No Incentive Stock Options may be granted after the tenth anniversary of the earlier of: (i) the Adoption Date, or (ii) the date the Plan is approved by the Company’s stockholders. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
Either way, if you find yourself with an expiring evergreen or plan, the Compensia alert has a flow chart for that scenario.
This recent Pay Governance memo shares an observation about how ISS’s say-on-pay recommendations in the 2025 proxy season differed from past trends:
ISS quantitative P4P test results have historically been a reliable predictor of an ISS “against” SOP recommendation. However, in 2025, we observed strong quantitative P4P results for companies receiving opposition from ISS on SOP […] [I]n 2025, 73% of S&P 500 companies that received an “against” SOP recommendation from ISS scored “low” concern on the primary RDA test. In other words, the majority of S&P 500 companies opposed by ISS on SOP demonstrated alignment between CEO pay and TSR relative to ISS-defined peers. Further, nearly half of S&P 500 companies (48%) received an overall “low” concern when incorporating the other quantitative P4P tests.
This suggests that qualitative factors played an outsized role in ISS’s 2025 say-on-pay analyses, so the tip here is not to ignore those even if you expect the quantitative analysis to come out OK.
Among S&P 500 companies receiving ISS SOP opposition in 2025, the top three areas of ISS criticism within its qualitative review were related to the use of non-standard pay elements, such as special awards, high-value security benefits, and severance payments for voluntary separation.
Looking at this proxy season, the memo points to the lengthened timeframes for the primary quantitative analysis effective for the 2026 proxy season. It says that this change may complicate things for some companies, especially those with significant one-time awards.
For companies that demonstrated recent strong P4P alignment, concern levels could be elevated by the longer lookback periods for pay and performance, and vice versa. The extended time period also means that one-time awards will be included in these calculations longer, potentially raising ISS’s concern levels for RDA and MOM.
It’s worth noting that ISS doesn’t expect this shift to drastically change the number of companies that receive an “adverse” recommendation, although it may change which companies receive one. ISS’s Marc Goldstein addressed this briefly during our “ISS Policy Updates and Key Issues for 2026” Webcast on TheCorporateCounsel.net. He shared:
We do not anticipate that the number of adverse recommendations will be materially impacted. This isn’t a way to increase the number of adverse recommendations or decrease it. It will potentially result in different companies receiving adverse recommendations, but the intention isn’t to have a radically different number of adverse recommendations in either direction.
I’ll say it just because it may not be obvious, but the quantitative screen is always just the first step in the analysis. If the concern level is elevated, then we do a deep dive in a qualitative review examining the features of the pay program in detail.