As most folks who work with compensation committees already know, many companies have changed their approach to ESG metrics over the past year or two. What tends to be more interesting than the existence of updated metrics is how changes are being communicated internally and externally – and how they’re being perceived. This “Sustainable Views” article (an offshoot of the Financial Times) has an interactive chart that parses proxy statement disclosures by 20 large companies from 2021 to 2026. Here are a few key takeaways:
– Sustainable Views’ analysis of the top 20 US companies by revenue finds large corporations are becoming vaguer about linking executive pay to sustainability goals, or dropping the linkage altogether
– While some companies continue to disclose specific sustainability-linked metrics or weightings in executive pay, most rely on broad qualitative assessments with limited transparency around targets or payout calculations
– Diversity, equity and inclusion goals saw the sharpest retreat over the period amid growing political backlash against corporate DEI programmes in the US
While it’s tempting to reduce the ESG shift to punchy graphics and sound bites, the truth is that compensation committees and advisors are facing a number of complexities and situations that are evolving in real time. The need to balance litigation risks, motivating executives, enhancing shareholder value, maintaining credibility with stakeholders, and other factors makes it unlikely that there will be easy answers, let alone a one-size-fits-all approach. Shareholder engagement with significant investors and robust internal discussion and alignment may not be super flashy, but they are usually good starting points.
A recent memo from Compensation Advisory Partners adds more data to what you may have already sensed: More companies – especially large caps – are providing personal security arrangements for executives that meet the definition of perquisites. However, it’s still not quite a majority.
The memo is based on data from 90 companies with fiscal years ending between March and November 2025, and looked at their 3-year history of personal security arrangements and aircraft perks. Here are a few key findings:
– Among the companies in CAP’s sample, the prevalence of CEO personal security perquisites has increased steadily over the past three years to 44.4% for 2025. Notably, changes in prevalence reflect only the addition of CEO security perks, with no companies eliminating them during the period reviewed. This contrasts with other perquisites – such as personal use of corporate aircraft – where companies both add and eliminate benefits over time. The absence of eliminations suggests that once implemented, CEO security perks are generally viewed as necessary, ongoing risk-mitigation measures rather than discretionary benefits.
– Among companies that disclosed the value of CEO personal security perquisites, reported costs varied widely depending on the scope of security provided. While the median value declined year over year, a majority of companies (72.0%) reported an increase in their CEO security perk value, and the average value increased, indicating an upward trend across the broader sample. The average CEO security perk value is significantly above the 75th percentile, driven by high-cost outliers.
– Among the companies in CAP’s sample, the prevalence of CEO aircraft perks has increased modestly over the past three years to 44.4% for 2025. 100% of the companies that introduced a CEO aircraft perk in 2025 cited security-related considerations in their proxy disclosures, and 100% of the companies that eliminated their aircraft perk experienced a CEO transition, with the outgoing CEO receiving the benefit and the incoming CEO not receiving it.
The memo also found that – while security arrangements tend to vary – they generally include a mix of the following elements, often based on a security study or other risk assessment:
Last week, the SEC proposed an overhaul of filer status thresholds that – if adopted – could make approximately 80% of public companies eligible for scaled disclosure accommodations akin to those currently available to smaller reporting companies. As noted in this Willis Towers Watson memo, that would mean:
– No shareholder advisory votes: No say-on-pay proposals, no say-on-frequency, and no say-on-golden-parachute
– Substantially reduced disclosure requirements:
– No CD&A required
– Three NEOs instead of five (the Principal Executive Officer plus the next two highest-paid executive officers; this means that the CFO’s compensation would not necessarily be required disclosure)
– Two years of Summary Compensation Table information instead of three
– Fewer compensation tables with only the Summary Compensation Table, Outstanding Equity Table, and Potential Payments upon Termination Table required; no requirement to include:
– Grants of Plan-Based Awards Table
– Options Exercised and Stock Vested Table
– Nonqualified Deferred Compensation Table
– Pension Benefits Table
– No pay vs. performance disclosure and no CEO pay ratio
– Other reports and disclosures not required:
– Compensation committee report and compensation policies and practices related to risk management
– Compensation committee interlocks and insider participation disclosure
– Item 201 performance graph disclosure in 10-Ks
– Disclosure of risk factors required in 10-Ks or 10-Qs
– Auditor attestation report under Sarbanes-Oxley section 404(b)
It’s important to note that while that would ease the requirements for a large number of companies, these companies represent less than 7% of aggregate public float across the market. But as this Cooley memo notes, if the rules are adopted as proposed, companies that become eligible for scaled compensation disclosure would likely still need to consider the potential wrath of investors – and thus need to think carefully before ditching say-on-pay. Here’s why:
Currently, in general, if a company includes a shareholder advisory say-on-pay vote, Institutional Shareholder Services (ISS) addresses its compensation-related recommendations to that proposal. However, if there is no say-on-pay proposal on the ballot, any adverse recommendations related to executive compensation are typically applied to compensation committee members. Without a say-on-pay proposal on the ballot for NAFs, more public company compensation committee members may find themselves subject to adverse recommendations related to executive compensation.
Comments on the proposal are due on or before July 20th, and eligibility for scaled disclosure would begin with the first filing following the effective date of the final rules and completion of the initial filer status assessment (which would occur at the end of the fiscal year, based on public float as of the end of the two most recently completed second fiscal quarters). We’re posting memos in our “SEC Rules” Practice Area.
I’m not fluent in ERISA, but I still appreciated the takeaways from the Fourth Circuit’s decision last month in Milligan v. Merrill Lynch highlighted in this Gibson Dunn alert. The Fourth Circuit addressed whether Merrill Lynch’s WealthChoice Award program, which provided annual contingent cash awards to select high-performing financial advisors who remained continuously employed through an eight-year vesting period, was an ERISA-covered pension plan. A former advisor forfeited unvested awards when he voluntarily resigned, and filed a class action lawsuit alleging that the program violated ERISA’s vesting and anti-forfeiture requirements.
The court []surveyed decisions from other circuits and identified a non-exhaustive list of factors relevant to determining whether a program is a bonus payment plan rather than an ERISA pension plan:
– whether the program contemplates universal employee participation or imposes heightened eligibility requirements;
– whether the program is funded with money that would otherwise be immediately payable to the employee;
– whether the program is actually funded or instead involves phantom or notional investments;
– whether employees can unilaterally postpone payment until termination or beyond;
– whether the program is presented as a vehicle for obtaining retirement income; and
– whether firm performance affects program payments.
The court emphasized that these factors are not exhaustive and that not every factor must be present in every case.
Applying those factors, the Fourth Circuit held that the WealthChoice Award program “comfortably qualifie[d] as a bonus payment plan.” The court emphasized that the program was limited to high-performing advisors who met production thresholds; awards were contingent on continued employment and were not funded with money employees were otherwise immediately entitled to receive; notional accounts were unfunded and unsecured; vesting triggered automatic and mandatory payment; approximately 92% of advisors who were paid WealthChoice Awards between 2018 and 2024 were current employees; and the program was communicated as a retention and business-alignment incentive, not as a pension or retirementincome vehicle.
This may be the expected conclusion, but the alert says there are still some helpful structuring and communication takeaways from the facts the Fourth Circuit emphasized in its decision. For example:
– Long vesting periods do not necessarily create an ERISA pension plan. The Fourth Circuit rejected the notion that an eight-year vesting period, standing alone, transformed the WealthChoice Award program into an ERISA pension plan. The key question was not simply whether payment was delayed, but whether the program systematically deferred
income until termination or retirement or was designed to provide retirement income.
– Program design and communications matter. The court relied on how Merrill Lynch described and structured the program. Employers seeking non-ERISA treatment should consider whether plan documents, award agreements, and employee communications consistently describe the program as a bonus, incentive, performance, or retention arrangement—not as a retirement, pension, deferred compensation, or savings program.
– Employee control over payment timing can be important. The court distinguished arrangements in which employees may elect to defer compensation or choose payment at termination or retirement. In Milligan, advisors could not unilaterally defer payment; once the vesting conditions were satisfied, payment was automatic and mandatory. That
feature supported non-ERISA treatment.
– Unfunded notional accounts may support bonus-plan treatment. The program’s use of unfunded, unsecured notional accounts indexed to reference investments did not convert the arrangement into an ERISA plan. The court viewed those features as consistent with a contingent promise to pay a bonus, not as evidence that employees had deferred earned income.
On May 5, the SEC proposed amendments that would allow public companies to elect to file semiannual reports on new Form 10-S, rather than filing quarterly reports on Form 10-Q. For companies that may be interested in taking advantage of optional semiannual reporting, should the proposed rules be finalized, there are many considerations to work through — including some executive compensation-related considerations. This Pearl Meyer alert notes that semiannual reporting might implicate:
– Annual incentive plans that are informed by quarterly reporting (e.g., interim performance reviews or explicit quarterly modifiers)
– Existing contractual commitments like incentive-based compensation arrangements tied to quarterly performance (though rare)
– Communicating pay-for-performance alignment (to use only annual or multi-year narratives)
There are also implications related to transactions in the company’s equity, like:
– Potentially longer blackout periods
– The decision to release information more frequently than semiannually to accommodate trading by employees
This Pearl Meyer alert says that companies aren’t waiting for new executive compensation disclosure rules to start transitioning the Compensation Discussion & Analysis sections of their proxy statements to focus more on how compensation committees think about their compensation programs. This includes “expanding their discussion of goal-setting processes, the role of discretion, and how compensation programs respond to both planned and unplanned business conditions.”
Even in the absence of finalized SEC rules, current proxy disclosures offer an early indication of where executive compensation disclosure is heading—and what will be required to do it well. This proxy season, many companies are recalibrating CD&A content toward more deliberate, decision-focused narratives that better align with how compensation committees actually evaluate performance and make pay decisions.
This is not a move away from rigor or quantitative disclosure. Rather, it reflects growing pressure from investors and proxy advisors to understand the framework and discipline behind those outcomes—predominantly how performance targets are set, calibrated, and assessed over time.
Companies with these evolved CD&As are ensuring their disclosures are:
– Articulating how targets incorporate internal budgets and external market conditions
– Explaining how “rigor” is defined and tested
– Describing how compensation committees apply judgment in determining final payouts
The alert also suggests that a simplification of the requirements may not necessarily reduce the burden on internal teams since market expectations may require “more planning, stronger internal processes, and more thoughtful communication.”
Zayla Partners recently took an early look at 2026 proxy disclosures to glean insights into pay design trends. Here are the five key early-season trends that they identified:
rTSR Modifiers: Large-caps are adding relative TSR modifiers to LTI plans — calibrating absolute payouts against peers to counteract rising/lowering tide impacts.
AI in Pay Design: At this stage, trends are industry-linked. Techs like Microsoft and IBM explicitly linked compensation program changes to AI strategy execution. For these companies, AI is now a structural rationale, not just narrative context. Side note, the number of “AI” references in 2026 Q1 was greater than “earnings” references.
PSUs are Standard: While proxy advisory firm policy changes weren’t announced until late in 2025, we note one of the key updates involved the “acceptance” of more time-vested awards in the mix. However, early filers are indicating 60% performance-weighted equity is consolidating as the standard for seasoned NEOs. Newly promoted executives typically receive transitional time-based grants.
Succession Planning in Focus: Speaking of newly promoted executives, succession planning is creating complexity in both plan designs (as noted above) and in disclosure burdens. Oracle and Celanese are two early filer examples of these points.
Engagement as Infrastructure: Year-round, committee-led engagement with named institutions — and documented program changes in response — is now a disclosure expectation, not a best practice. Expect this to continue as institutions lessen focus on proxy advisor firms and if SEC disclosure requirements change.
They dive deeper into these five trends in the blog. Here’s what they say about the rTSR modifiers:
Pressure for relative performance measurements has been increasing of late, thanks to market unpredictability. Large-cap companies are adding rTSR modifiers to long-term incentive plans as a result. IBM’s 2026 proxy is the clearest early example: rather than replacing its core operational metrics, the company introduced a modifier that adjusts payouts based on whether TSR outperformed or underperformed its performance peer group.
This is a meaningful design change. Modifiers allow committees to keep metrics that best capture business performance — free cash flow, operating EPS, ROIC — while meeting both the investor concern that strong absolute results during a broad market rally can produce outsized pay and the management concern that an over-reliance on absolute performance metrics can create “no win” scenarios if macro conditions are overly unfavorable.
The key design details boards should understand:
– Modifier ranges are typically ±10–20% of target; ranges outside this band attract scrutiny;
– Peer group definition matters as much as the modifier itself — vague peer groups undermine the mechanism;
– ISS and Glass Lewis view rTSR modifiers favorably; their absence is increasingly a talking point in SOP analyses, including scenarios where companies don’t have negative absolute TSR cutbacks.
Speaking of 2026 proxy disclosures, I’m excited to hear more insights during our upcoming webcast, “Proxy Season Post-Mortem: The Latest Compensation Disclosures 2026.” Go to the webcast landing page and add it to your calendar (it’s Wednesday, June 10, at 2 pm ET) so you don’t miss out on hearing all about interesting compensation disclosures this proxy season from Mark Borges of Compensia, Dave Lynn of CompensationStandards.com & Goodwin and Ron Mueller of Gibson Dunn.
A recent review by FCLT Global of 2,100+ global public companies suggests that companies have stronger long-term performance when independent directors have “skin in the game.” Here are a few key takeaways:
Across our analysis, companies with increasing and durable board ownership significantly outperformed over a five-year period. A sustained rise in director equity ownership over that timeframe is associated with:
– 35–40 percentage points higher total shareholder return.
– Approximately 50 percentage points higher risk-adjusted returns.
The data also highlights what happens when ownership declines. Companies where independent directors reduced their holdings saw materially weaker outcomes, including:
– An average decline of 9.7 percent in TSR.
– 11 percent reduction in risk-adjusted returns.
Beyond returns, the research shows that board ownership is linked to how companies make decisions. Higher director ownership is associated with greater investment in innovation, with roughly 3 percent higher R&D intensity relative to revenue. At the same time, companies where directors hold more equity than executives exhibit significantly lower volatility — reduced by more than 50 percent over five years.
However, the report calls out that the positive results hinge on appropriate design of equity ownership plans and holding periods – and those structures aren’t all that common. Here’s another excerpt:
Despite these implications, structured and durable board ownership remains uncommon across public markets. As the next section explores, a combination of short-term pressure, governance norms, incentive design, and investor dynamics has limited the extent to which the evidence on board ownership has translated into practice.
To avoid these pitfalls, the report offers these tips:
The same evidence and practitioner insights that highlight the risks of symbolic or short-lived ownership also point to concrete design features that appear more consistent with long-term alignment.
– Meaningful and sustained equity ownership, typically reflected in holding periods of 5 years or more
– Ownership aligned with the full arc of board service, including expectations that extend through tenure and, in some cases, beyond departure
– Meaningful ownership held by independent directors, supporting effective oversight and long-term perspective relative to executive ownership
– Ownership that is broadly understood and accepted by long-term investors, reinforcing good judgment without undermining independence
Tune in tomorrow for our webcast – “The Top Compensation Consultants Speak” – to hear Blair Jones of Semler Brossy, Ira Kay of Pay Governance and Jan Koors of Pearl Meyer discuss what compensation committees should be learning about – and considering – today. Among other topics, this program will cover:
– The Compensation Committee Landscape in 2026
– 2026 Say-on-Pay Outcomes and Challenges
– Aligning and Disclosing Pay and Performance
– Special Awards Under the Microscope: Retention, Sign-On, Make-Whole and “Moon Shot”
– 2026 Equity Plan Approval Outcomes and Challenges
– Time-Based vs. Performance-Based Equity: Rethinking Vehicle Mix and Award Design
– Shifting Proxy Advisor Power: Be Careful What You Wish For?
– Competitive Strengths of the US Executive Pay Model
– Compensation Committees and AI
– Compensation Consultants’ View of Potential Disclosure Rulemaking
Members of this site can attend this critical webcast (and access the replay and transcript) at no charge. Non-members can separately purchase webcast access. If you’re not yet a member, you can sign up for the webcast or a CompensationStandards.com membership by contacting our team at info@ccrcorp.com or at 800-737-1271. Our “100-Day Promise” guarantees that during the first 100 days as an activated member, you may cancel for any reason and receive a full refund.
We will apply for CLE credit in all applicable states (with the exception of SC and NE which require advance notice) for this one-hour webcast. You must submit your state and license number prior to or during the live program. Attendees must participate in the live webcast and fully complete all the CLE credit survey links during the program. You will receive a CLE certificate from our CLE provider when your state issues approval, typically within 30 days of the webcast. All credits are pending state approval.
This program will also be eligible for on-demand CLE credit when the archive is posted, typically within 48 hours of the original air date. Instructions on how to qualify for on-demand CLE credit will be posted on the archive page.
As we enter the height of annual meeting season, you may be getting questions about say-on-pay trends across the market. Here are Semler Brossy’s observations from say-on-pay votes as of late April:
• The current Russell 3000 average vote result of 92.1% is 150 basis points higher than the index’s 2025 full-year average
• The current S&P 500 average vote result of 91.6% is 220 basis points higher than the index’s 2025 full-year average
• The current Russell 3000 average vote result is 50 basis points higher than the current S&P 500 average vote result
• These initial summary vote results continue a multiyear trend of positive early-season vote support; it is still a small sample and summary results are likely to change over the course of the year
• 6.9% of Russell 3000 companies and 5.0% of S&P 500 companies have received an ISS “Against” recommendation thus far in 2026
• It is still early in the proxy season; the Russell 3000 ISS “Against” recommendation rate started lower (5.0%) at this time last year and increased over the course of the proxy season
Here’s what the write-up says about equity plan support so far:
• Average vote support for equity proposals thus far in 2026 (87.3%) is 220 basis points below the average vote support observed at this time last year (89.5%)
• No companies have received vote support below 50% in 2026
• ISS has recommended “Against” 29.7% of equity proposals, which is 240 basis points below the 2025 full-year rate (32.1%)
• Average support for equity proposals that received an ISS “Against” recommendation thus far in 2026 (76%) is aligned with average vote support observed for companies that received an ISS “Against” in the past decade (75%)