Our 2026 Proxy Disclosure and Executive Compensation Conferences are just around the corner. Our conferences will be held on October 12th & 13th in person in Orlando and will also be available online for virtual participants. Our discounted “early bird” rate expires on July 24th, so you need to act fast to ensure that you don’t miss out!
With an agenda featuring two days of fast-paced, topical panels, an all-star speaker lineup, and Dave Lynn’s interview with Corp Fin’s Deputy Director Christina Thomas, attendees will receive critical insights into the latest SEC rulemaking initiatives and developments in governance, disclosure practices, activism & shareholder engagement, and executive compensation.
If you’ve been following our blogs, webcasts, podcasts and newsletters, you know that the SEC has turned on the rulemaking firehose – and the agency has indicated that there’s plenty more to come! This year more than ever, you can’t afford to miss the insights that our expert panelists will provide on the latest developments.
Register online at our conference page or contact us at info@CCRcorp.com or 1-800-737-1271. Do it today so you don’t miss out on our discounted “early bird” rate!
Even though we (thankfully) put the pandemic behind us several years ago, we can’t say the same for business complexities and surprises. When it comes to compensation plans, that may be why a few pandemic-era practices have continued.
This memo from ISS Corporate says that compensation committees continue to prioritize flexibility for short-term incentives. They’re doing this by using a greater number of metrics than in pre-pandemic times, including non-financial metrics that may involve subjective measurements. Here’s an excerpt:
Although the growth of metric counts and the use of individual/non-financial metrics has slowed slightly from immediate post-Pandemic levels, neither trend shows signs of returning to pre-Pandemic levels. Short-term incentive program design has thus undergone a paradigm shift: more complex programs and more qualitative metrics are used to mitigate the risk of non-vesting and provide flexible opportunities to ensure vesting independent of performance. That protects executive paydays (and, ideally, executive retention) well after the macroeconomic shocks of the Pandemic have subsided.
Thus, short-term incentive design implies a riskier and more challenging business environment than before the Pandemic, even if not directly due to the lingering effects of the Pandemic. This situation is seen as justifying enhanced executive compensation in ways notably different than pre-Pandemic norms and expectations, both in terms of investor understanding of program design and achievement and the importance of a direct link between pay and performance. Declining rates of say-on-pay failures seem to affirm the investor viewpoint that business now is harder than before the Pandemic and executive compensation focused on outright compensation is more acceptable.
The memo says that companies with more metrics tend to have higher payouts – but those payouts may not translate neatly to higher returns for shareholders. Investors could take issue with that if the short-term incentive plan is supposed to incentivize year-over-year stock price increases. However, the memo acknowledges that this component of compensation programs may be geared more towards retention. Here’s concluding food for thought, which may be helpful in communicating about plan design:
At the same time, these trends are partially explainable by reflecting on the focus of incentivization: if the intent is to promote executive retention by constructing near-term awards that are realistically obtainable — and that remain so even in years of market turmoil such as during the Pandemic — the question of the relationship between payouts and performance takes on a different contour when market participants consider the role of short-term versus long-term incentive compensation.
Whether these trends extend beyond the 2026 annual meeting cycle remains uncertain. In the absence of a significant external disruption comparable to the Pandemic, prevailing market norms are likely to continue favoring more complex short-term incentive structures with reduced reliance on purely financial metrics. Although some trends, such as complexity, appear to have plateaued, emerging practices, once established, can proliferate as companies seek to remain competitive in attracting and retaining executive talent, given the central role of peer benchmarking and comparative assessments in executive compensation decisions. From this perspective, short-term incentive design can be understood less as a direct reflection of company performance and more as an expression of the board’s assessment of, and confidence in, management’s leadership.
The Division is considering recommending that the Commission propose rule amendments to Item 402 of Regulation S-K to rationalize executive compensation disclosure requirements.
In addition to proposing changes to Item 402, the Reg Flex Agenda says that – among other things – the SEC is considering proposing rules that would modernize the Rule 14a-8 requirements for shareholder proposals, amend other proxy rules, and rationalize disclosure requirements.
As we’ve shared in prior blogs, the SEC’s May 2026 proposals on filerstatus and semi-annual reporting could also have big implications for executive compensation disclosure.
As John noted in his blog, the dates tied to these items are aspirational and signify general timeframes versus precise dates. And while the Reg Flex Agenda provides insight into the SEC’s current rulemaking priorities, it isn’t a definitive guide for anyone trying to predict SEC rulemaking for purposes of specific board agendas, budget and workflow. Still, it will be exciting to see what may be in store!
As Meredith noted last week, we’ve been seeing relatively strong say-on-pay support this year. Average say-on-pay support clocked in at 91% as of June 1st for S&P 500 companies, according to this FW Cook memo. But the memo explains why it’s important for compensation committees and their advisors to look beyond the numbers – for signals that could improve your fall engagements and potentially influence compensation decisions in the coming year. Here’s an excerpt:
Context determines what a result means more than the number itself. Modest erosion from a historically stable baseline reads differently than a fourth consecutive decline. A drop that would look manageable in isolation is more significant when it comes from long-supportive holders, or when the proxy advisor’s critique, shareholder feedback, and vote pattern all point to the- same issue.
Start by taking the vote apart before explaining it. Compare it to prior years. Determine whether opposition was concentrated or broad-based. Review how large holders appear to have voted and connect the result to any concerns heard during pre-meeting shareholder engagement. Low-90s support, and in some cases high-80s support, may not require action, but it may still warrant a closer read if opposition is concentrated, recurring, or tied to known concerns.
When it comes to using voting results to inform off-season engagements, the memo says:
Off-season engagement should start with the questions the Committee needs answered rather than starting with a promise of change.
Ain’t that the truth! The memo shares the types of questions that companies might want to ask depending on their circumstances.
ISS recently wrote a piece on say-on-pay outcomes and one-time awards for the HLS Corporate Governance blog. The blog reiterates the continued strength of say-on-pay outcomes, but here’s an interesting tidbit:
Increases in the prevalence and size of one-time awards have not translated into lower support levels or more failures. Rather than reflecting a reduction in the use of one-time awards, companies may be deploying them more selectively or structuring them in ways that mitigate investor concerns.
As far as trends in the use of one-time awards, the blog shares:
Following a post-pandemic peak of nearly 30% of Russell 3000 companies in 2021, the prevalence of one-time equity awards declined steadily through 2024, bottoming out at 25% and reflecting a normalization of compensation practices. However, year-to-date data disclosed for fiscal year 2025 indicates a reversal of that trend, jumping to 27% [. . .]
Most one-time equity awards remained concentrated in modest value ranges, with a majority falling below $5 million. However, the upper end of the distribution has shifted. Among S&P 500 companies, larger one-time awards have become more common, particularly in the $5 million to $20 million range.
Notably, so-called mega grants exceeding $20 million increased in 2025 rising in prevalence by approximately 63% over the previous peak in 2021. These mega grants are most often associated with executive recruitment, retention, or leadership transitions requiring companies to secure or retain key talent. Although these awards remain rare, the increase suggests more willingness among some large-cap companies to utilize sizable grants. In contrast, companies across the broader Russell 3000 exhibit a more modest distribution, with most awards concentrated below $1 million and fewer in the largest tiers.
All types of one-time awards — sign-on, make-whole, retention, moonshot — get quite a bit of attention from investors and proxy advisors. To some extent, there has been a perception that special awards evidence that the regular annual compensation program isn’t working as intended. But I get the sense that this perception is shifting — maybe because companies have gotten better at communicating their rationale — and there’s greater recognition that there is an appropriate time and place for a special award. The blog says:
One-time awards typically remain a key tool for addressing discrete compensation situations, such as executive retention or transitions. Although prevalence remains below peak levels following the pandemic, the recent increase suggests companies have experienced a greater need to address retention and turnover concerns during the year.
As far as how companies can selectively deploy special awards and structure them in ways that mitigate investor concerns, I’m looking forward to hearing from our speakers on “The Top Compensation Consultants Speak” panel at our fall conferences, who will do a lookback at special awards in the last year and discuss do’s and don’ts.
Our agenda features two full days of fast-paced, topical panels, an all-star speaker lineup, and Dave’s interview with Corp Fin’s Deputy Director Christina Thomas. Our Fall Conferences will be a great opportunity to get up to speed on the SEC’s latest rulemaking initiatives, as well as other developments in executive compensation, governance, disclosure practices, activism and shareholder engagement.
You can register online at our conference page or contact us at info@CCRcorp.com or 1-800-737-1271. Do it today so you don’t miss out on our discounted “early bird” rate!
Programming Note: Speaking of the holiday weekend, our blogs will be off tomorrow and return on Monday. Have a safe and happy Semiquincentennial Fourth of July.
As you’re making and executing on your summer vacation plans and fun beach reading lists, this Cooley alert suggests, if you’re an executive compensation professional, you don’t forget about what you might wish you had been doing or reading from a professional perspective to feel well prepared for compensation season once the fall arrives. What might that look like? The alert suggests starting with your comp committee meeting checklist and figuring out where you might be better off if you gave yourself the gift of a head start. That might mean you start to:
– Evaluate how in-flight 2026 compensation programs are faring, and, as a result, whether there may be reason to give early thought to changes for the 2027 programs.
– Evaluate whether the existing programs are resulting in any unanticipated risks due to changes in economic and geopolitical circumstances since grant.
– Evaluate whether new-hire practices remain generally appropriate to avoid undue scrambling at the time of hire.
– Evaluate the adequacy of share reserves given dilution projections so that you can start marshaling support for an increase.
– Consider whether any additional clawback protections may be appropriate considering your circumstances.
– Evaluate the adequacy of compensation governance procedures generally and whether changes should be put in place for the coming compensation season.
– Give thought to whether the annual proxy disclosure could benefit from a fundamental refresh, which is a notoriously time-consuming exercise and ill-fitted to a pivot late in the year.
– Make sure any annual stockholder outreach is on track and preferably ahead of pace, whether driven by reason of say-on-pay results or otherwise.
If you don’t yet have such a checklist, the alert also suggests how to start developing one.
Pearl Meyer reported in this HLS blog post that the growing importance of AI has yet to be reflected explicitly in many incentive compensation programs.
Based on a review of approximately 2,500 public company proxy statements filed in 2026, we identified 58 companies that incorporate AI into executive incentive programs through formal metrics, strategic objectives, or executive performance assessments—just 2%. Of those, only 12% use an explicit AI metric.
They identified three approaches to incorporating AI into incentive plans — using explicit AI metrics, embedding into broader goals or incorporating into individual performance considerations.
Explicit AI Metrics. A small group of companies has introduced discrete AI measures, typically with modest weighting.
For example, one industrial company has replaced a prior ESG component in its annual incentive plan with a roughly 5% AI adoption and utilization metric focused on enterprise deployment. In another example, a large retailer has taken a different approach, incorporating AI into long-term incentive awards tied to digital tools and technology experience, linking AI to customer engagement and operational execution over a multi-year period.
AI Embedded in Broader Goals. Sixty percent of the public companies we identified are incorporating AI within broader technology or transformation objectives focused on execution and efficiency.
Companies are embedding AI within broader transformation objectives in several different ways. For example, a specialty insurance company incorporates AI-related objectives into its short-term incentive plan through operational efficiency and technology deployment goals, with achievement directly influencing payout levels. A life sciences company includes AI within broader workforce and enterprise transformation initiatives tied to training, governance, and adoption. Similarly, a financial services organization links AI governance, adoption, and deployment milestones to a broader multi-year transformation strategy.
Qualitative and Individual Performance Considerations. A third group of companies (28% of the identified public companies) addresses AI through individual performance assessment rather than formal metrics.
In these cases, compensation committees consider leadership in advancing AI initiatives, enterprise adoption, and contribution to innovation. For example, one organization includes AI usage and governance as part of an executive’s individual performance goals, such as establishing guidelines for AI use and managing associated risks. Another incorporates AI-driven productivity and insights into broader executive performance evaluations.
The blog says that measurement is one of the major hurdles. “Metrics tied to adoption can encourage activity without ensuring results.” If this is something you’re thinking about, check out the blog’s list of governance considerations for compensation committees.
ISS announced last week that their peer group submission window will open at 9:00 AM ET on Monday, July 6, for companies with annual meetings between September 15, 2026, and January 31, 2027. Submissions will be accepted until 8:00 PM ET on Friday, July 17. Here’s a reminder from the announcement:
As part of ISS’ peer group construction process, on a semi-annual basis, corporations are requested to submit changes they have made to their self-selected peer groups for their next proxy disclosure. ISS considers companies’ self-selected peer groups as an important input as part of its own peer group construction methodology [. . .]
Companies that have made no changes to their previous proxy-disclosed executive compensation benchmarking peers, or companies that do not wish to provide this information in advance, are under no obligation to participate. For companies that do not submit any information, the proxy-disclosed peers from the company’s last proxy filing will automatically be factored into ISS’ peer group construction process.
Additional information on the ISS peer submission process, including links to ISS’ current recent peer selection methodology for the U.S. and Canada is available on the ISS STOXX website here.
This Forbes article from Bruce Brumberg – longtime friend of the site and Editor-in-Chief / Co-Founder of myStockOptions.com – provides a number of helpful reminders about employee equity compensation in the wake of an IPO.
While the article is primarily aimed at individual financial planning, it’s also a helpful read for anyone involved with equity plan administration or employee compensation strategy. Here’s something that companies on the path to public may want to remind people of:
Post-IPO Lockup On Stock Sales Does Not Delay Taxes On Equity Comp
A “lockup” after an IPO prohibits employees from selling their shares for an extended time. Even though you cannot sell shares to pay taxes, the lockup does not delay the taxes you owe on income recognized when you exercise stock options or when your RSUs vest, including the alternative minimum tax (AMT) on incentive stock options (ISOs). While this seems illogical, as the stock price could drop by the time you can sell, you will need to find a way to pay those taxes other than selling the locked-up shares.
Members can find benchmarking and other helpful resources about IPO-related compensation issues in our “IPOs” Practice Area. If you’re not already a member, sign up today!
We’ve blogged about the waning influence of proxy advisors. This Semler Brossy memo, posted on the HLS Corporate Governance Forum, highlights that the decline has been happening for several years and, like most public company issues, isn’t black & white. Here are a few themes that are affecting the 2026 proxy season:
Three dynamics stand out. First, proxy advisors have experienced a meaningful, multi-year decline in their influence over Say on Pay voting, a trend that predates this proxy season and has accelerated as large asset managers have built out their own independent stewardship frameworks. Second, even as companies gain more room to diverge from proxy advisor recommendations, investors continue to exercise direct judgment on specific pay practices, particularly special awards to senior executives. Third, compensation committee chair elections remain a backstop mechanism for shareholder dissatisfaction, though one that is still rarely triggered in practice. Together, these dynamics point to a governance environment that is simultaneously less centralized and no less demanding.
When it comes to equity plan proposals, the negative overriding factor that ISS introduced on its equity plan analysis this year does not seem to be creating a huge hurdle for most companies. The Semler Brossy memo explains:
The most prominent illustration of the decline in proxy advisory influence is their limited influence on equity plan proposals. The percentage of plans that ISS recommended ‘Against’ has increased significantly over the past few years. However, the higher number of ‘Against’ recommendations has not carried over into the vote results; they have remained rather static. The absence of change despite a shift in ISS’s recommendations clearly demonstrates the limits of ISS’s influence, as the change in voting policy that drove the higher percentage of ‘Against’ recommendations did not meaningfully affect voting behavior.
For the 2026 proxy season, ISS introduced a new provision to its equity tests that allows an override to the Equity Plan Scorecard (EPSC) if there are few or no positive plan features. Plan features are a specific subcategory within the EPSC that relates to what is allowed by the plan. The plan contrasts cost and grant practices, focusing on size versus grant history. Positive plan features include the absence of liberal share recycling or broad discretionary vesting authority and the presence of a minimum vesting requirement. In the past, companies had been able to structure their plans to trigger ‘For’ recommendations even if they did not include any features that ISS considered beneficial, so long as they also did not trigger any overriding factors (liberal change-in-control definition, permit of share repricing, plan is excessively dilutive, plan contains an evergreen, etc.) and received sufficient points under the EPSC evaluation.
Despite these changes to ISS’s recommendation rate and methodology, the failure rate for equity proposals has remained consistently low over the past ten years. Two to three companies in the Russell 3000 fail in most years, with four or five failures being a notable year. Eight companies failed in 2023, but that proved to be a one-off event tied to a single industry, rather than a general trend (six of the eight failures were smaller pharmaceutical companies, which tend to have high dilution and plan costs due to the prevalence of options in that sector.) The most consistent feature of companies with a failed equity plan vote is excessive dilution. Companies that requested shares under an existing evergreen plan or a proposed plan that allows for share repricing were also common among recent plan failures.
As the memo points out, companies are experiencing stable voting outcomes compared to prior years – so at the moment, the proxy advisor and pass-through voting dynamics are causing subtle shifts rather than huge swings. Shareholder support may even be drifting upwards. Overall, that’s good news for companies – but that could also mean you’ll stick out like a sore thumb if you are one of the few companies getting a low vote.