On this blog, we spend a lot of time discussing executive pay, but as our readers well know, a company’s broader employee population is often eligible for awards under the equity plan, and those awards can be deployed in a variety of ways. This Cooley memo discusses where “equity refresh grants” fit in that strategy – noting that they can be an important tool for boosting employee morale and supporting a company’s long-term performance.
The memo discusses strategies, design structures and timing, calculating refresh award values, and communicating with employees. Here’s what it says about forms of equity:
Refresh grants can take various forms depending on the type of company and its equity compensation strategy. Stock options, including both incentive stock options and nonqualified stock options, remain a common form of equity used for refresh grants, particularly at earlier and mid-stage private companies. Restricted stock units (RSUs) are increasingly popular among late-stage private companies, typically companies with a valuation at or above $1 billion. Some companies also use performance-based equity or other structures depending on their specific circumstances and objectives. The choice of equity vehicle for refresh grants often mirrors the type used for initial grants, though companies may adjust their approach as they mature or as market practices evolve.
The memo points out that equity refresh grants carry important tax and legal implications that both employers and employees should understand. On the securities and compliance front, it says:
[C]ompanies must ensure that refresh grants comply with the terms of their equity incentive plans, including any limits on the number of shares available for issuance. Securities law considerations, including registration requirements and exemptions, also apply to refresh grants just as they do to initial equity awards.
Keep in mind that when it comes to public company say-on-pay votes and executive pay, investors sometimes frown on retention awards. As discussed at our Executive Compensation Conference a couple weeks ago, there are factors that can mitigate that risks – and in some cases, the risks are also outweighed by the benefits.
I am already feeling nostalgic about our recent conferences in Orlando – especially after enjoying Meredith’s blog with photo highlights. I have also already consulted my notes a few times and have been eager to refresh my memory on all of the insights that our speakers shared. So, good news! The archives – and transcripts – for the 2026 Proxy Disclosure & 23rd Annual Executive Compensation Conferences are now available!
If you registered for the conferences through our sites, you can access the video archives and transcripts via the access links on the 2026 Conference Archives page. Members of TheCorporateCounsel.net, CompensationStandards.com, Section16.com and DealLawyers.com who registered for the conferences can use their existing logins to access the Proxy Disclosure Archives and the Executive Compensation Archives.
If you are not a member, do not know your password, or are experiencing issues accessing the 2026 Conference archives, please reach out to our Member Services team by calling 800-737-1271 or send an email to info@ccrcorp.com.
Thank you again to all of our sponsors, speakers, hardworking CCRcorp team, and everyone who attended! Each of you made this year’s events extra magical.
This memo from Compensation Advisory Partners analyzed payouts from long-term performance plans over a 10-year period for 100 large U.S. public companies across 11 industries. The goal was to assess payout patterns across market cycles, understand the impact that relative total shareholder return (TSR) metrics have on payout patterns, and give management teams and compensation committees a “rule of thumb” for evaluating the degree of stretch in long-term performance goals. Here are the three key takeaways:
1. Based on our analysis of long-term incentive payouts over a 10-year period, the degree of difficulty, or “stretch” embedded in long-term performance goals translates to a 95% chance of achieving at least Threshold performance, a 70% chance of achieving at least Target performance, and a 20% chance of achieving Maximum performance, suggesting performance goals balance achievability at Threshold and Target with significant “stretch” at Maximum.
2. Funding on relative TSR metrics tends to be more evenly distributed while funding on financial metrics tends to skew toward target and above. This reflects the different roles the metrics play with financial metrics having clearer line-of-sight for plan participants and relative TSR being more of an outcome metric tied to the shareholder experience.
3. Long-term performance plans have generally been effective at aligning pay and performance as the top performers in each cycle consistently paid above target at a higher rate than the broader sample.
We’ve posted this analysis along with other resources for compensation committees and advisors in our “LTIPs” Practice Area.
As Meredith blogged late last week on TheCorporateCounsel.net, ISS has announced its proposed benchmark policy updates for 2027 and opened the corresponding comment period. The comment period will run through 5 p.m. ET on November 4th – and ISS is seeking input from investors, companies, and other market participants on its proposed voting policy changes for the 2027 proxy season.
There’s just one proposed compensation-related update applicable to the U.S. market:
Option Valuation Model: For equity plan evaluations and the EPSC, removes references to ISS’ binomial option pricing model, replacing it with Black-Scholes as the methodology to be used for ISS’ valuation of options to calculate Shareholder Value Transfer (SVT) from 2027.
ISS notes:
This policy update removes references to ISS’ binomial option pricing model, which is being retired. Beginning with Feb. 1, 2027, meetings, the methodology for ISS’ valuation of options for purposes of Shareholder Value Transfer (SVT), which is utilized as part of the equity plan cost analysis in the Equity Plan Scorecard framework as well as for certain other situations requiring option cost estimations including option exchanges, will be updated to Black-Scholes methodology. This will align the option valuation methodology for SVT and other proposals to the option valuation methodology already used for CEO and NEO option valuations used in ISS’ pay-for-performance, burn rate and realizable pay policies (as detailed in the US Executive Compensation Policies FAQ document).
As Meredith noted, the proposed updates applicable to the U.S. market seem pretty light compared to some prior years, and notably, quite a few topics addressed in ISS’s recent survey are not reflected in the proposed policy changes. That’s not particularly surprising for some survey questions that asked a “what if,” assuming pending SEC proposals are finalized as proposed.
ISS expects to release its 2027 benchmark voting policies, which will be effective for shareholder meetings occurring on or after February 1, 2027, in late November or early December.
We’re entering the “off-season” shareholder engagement window for calendar-year companies. This Compensia alert notes that you may receive more candid feedback during your engagement meetings this year due to three Corporation Finance Interpretations (CFIs) that the Corp Fin Staff issued in September of this year, which we covered on TheCorporateCounsel.net.
In September 2026, the SEC’s Division of Corporation Finance issued three new Corporation Finance Interpretations (“CFIs”) clarifying when a shareholder seeking to report beneficial ownership on Schedule 13G (used by “passive investors” not seeking to influence control) can engage with an issuer without losing their 13G eligibility.
The CFIs mitigate the uncertainty arising from the SEC’s February 2025 guidance on the same topic. Institutional investors may participate in off-season engagements, including discussions regarding executive compensation, without undue concern that such engagement will compromise their eligibility to report on Schedule 13G.
The memo also notes that direct, specific feedback matters more than ever as asset managers’ voting decisions increasingly diverge from the major proxy advisors’ recommendations. Teeing up questions may set you up for success.
The new CFIs underscore that the context of an engagement matters when determining whether a shareholder holds issuer securities with a disqualifying purpose or effect of influencing “control” of the issuer. While the determination ultimately depends on all relevant facts and circumstances, the CFIs give issuers and shareholders a clearer sense of when engagements can take place without jeopardizing a shareholder’s Schedule 13G eligibility.
One important factor is the initiation of the engagement:
If an issuer initiates a meeting to understand a Schedule 13G investor’s views or voting decisions on past matters or on matters likely to be submitted for a vote at an upcoming shareholder meeting, the shareholder’s participation in that discussion does not, on its own, disqualify it from reporting on Schedule 13G. Most notably, the SEC Staff indicates that an issuer-initiated conversation, or a response to an issuer’s request to understand a past vote, is less likely to reflect an attempt by the investor to influence control.
Finally, check out this blog from a few weeks ago for specific suggestions on making the most of your off-season engagement.
We’ve blogged a bit on this site about the transatlantic pay gap, which many have argued has been a competitive advantage for U.S.-based businesses and a disadvantage for companies across the pond. This ISS-Corporate press release suggests that this gap is narrowing. Its 2026 U.K. Proxy Season Review report (available for download), which analyzed compensation trends at FTSE 100 companies, found that a “growing number” of companies reviewed and revised their approach to CEO compensation following the publication of the Investment Association’s revised Principles of Remuneration in late 2024.
FTSE 100 companies proposed revamping their CEO compensation plans at an accelerated rate in the 2026 proxy season, suggesting that more boards are reassessing pay structures as they seek to remain competitive in an increasingly contested market for executive talent. In PY2025*, 40 FTSE 100 companies sought shareholder approval for a new remuneration policy, up 53.8 percent from the previous year. Notably, 16 of these companies proposed a new policy before their existing policy had reached the end of its three-year cycle. The trend continued in PY 2026 when 49 companies proposed a new remuneration policy, with 15 of them doing so before their current frameworks expired.
The report found that the pay increases were predominantly in long-term incentives. Like in the U.S., shareholder support remained high despite the increased pay levels, though there were signs of growing scrutiny.
Director deferred compensation programs have been popular for a long time, but this WTW alert says they’re far from universal. There may be opportunities there because deferred compensation programs “can strengthen a non-employee director pay program by providing financial planning flexibility while reinforcing long-term shareholder alignment — often without increasing underlying compensation levels.”
After reviewing disclosures of S&P 500 companies over the five-year period of 2020-2024, WTW found that 70% of the S&P 500 had a director deferral program in 2024. Deferral programs are less widely-adopted in mid- to small-cap companies.
Design also matters. Over half permitted directors to defer cash and equity compensation in 2024. Meanwhile, 32% permitted cash and 14% allowed equity deferrals.
Cash deferrals can help manage income timing and tax planning.
Equity deferrals may preserve or extend exposure to company stock and reinforce alignment with shareholders.
Programs that permit both cash and equity deferrals provide the broadest planning flexibility, and large-cap company prevalence of cash and equity deferral programs grew to more than 50% in recent years.
While shareholders generally don’t have a problem with them, there is a trade off that companies are balancing in that deferral programs mean added complexity and recordkeeping. The WTW team suggests that companies without deferral programs give them some thought and companies with deferral programs consider whether the design continues to be appropriate. They also share some questions to consider for any boards considering a new program or refreshing an existing program.
As John shared on TheCoprorateCounsel.net on Friday, Corp Fin just issued six new and two revised CFIs. With the exception of one CFI addressing the timing of Form 4 filings for transactions on a foreign stock exchange, the CFIs cover Form S-8 and Rule 701-related topics. As Broc said on Cooley’s Governance Beat blog, there are some “biggies” here. More from Broc:
One biggie is Question 271.28 under the ’33 Act Rules, which is a new CFI allowing companies to move outstanding pre-IPO compensatory awards that were originally granted in reliance on an exemption from registration onto a Form S-8 after the IPO.
Two other related biggies are Question 271.29 under the ’33 Act Rules and Question 126.14 under the ’33 Act Forms, which liberalize the treatment of assumed awards in acquisitions as assumed awards held by former target employees can now be covered by Form S-8 for public-company buyers or Rule 701 for eligible private-company buyers.
Also check out Question 126.46 under the ’33 Act Forms under which Corp Fin will allow companies to apply the filing fees associated with securities underlying forfeited RSUs to future registrations of offers and sales of securities underlying the RSUs. As a result, companies should no longer need to register extra shares on Form S-8 simply to account for shares underlying forfeited RSUs that return to the plan pool.
And Question 126.47 under the ’33 Act Forms is notable as well, under which Corp Fin will allow companies to register restricted stock and RSUs no later than the date of vesting, so long as a company was eligible to use Form S-8 on the date of grant. This brings the treatment of restricted stock and RSUs closer to the existing treatment of options under Question 126.02, which permits shares underlying options to be registered on Form S-8 at any time before exercise – regardless of when the options became exercisable.
Broc notes that some of this guidance follows engagement between the ABA’s Joint Committee on Employee Benefits (JCEB) and the Staff. People who have been working in executive compensation disclosure for a while know that the JCEB used to meet with federal agencies every spring to share common questions. The JCEB would share notes from the meeting, with the questions asked and the Staff’s response, until the format of the meeting changed in 2015. I believe the meetings were then suspended for some time due to COVID. So big thanks to the JCEB for re-engaging with the Staff and to the Staff for its open door policy, attention to pain points and willingness to issue guidance!
Though they’re old, I do still (for now!) find myself referencing pre-2015 JCEB notes from time to time. In case you need to too (or are interested in the history), keep in mind that we have those notes posted here on CompensationStandards.com (subject to the disclaimer at the top of the page), and they’re still available on the JCEB page on the ABA’s website.
I sure have been learning a lot this week at our Executive Compensation Conference and the NASPP Annual Conference – including creative approaches to equity awards. For example, time-based RSUs are attractive for their simplicity and predictability, but they aren’t perfect. In this memo, the Infinite Equity team outlines the challenges that can arise, such as:
1. “Rest & vest” criticism – shares vest regardless of whether shareholder value has increased, held flat, or declined, which can create misalignment between pay and performance and may raise questions with shareholders.
2. Settlement during challenging times – companies must satisfy employee tax withholding at each vest date, which can affect the market price if it involves large sell-to-cover transactions and can affect the balance sheet if the company uses net share withholding. If the company’s stock price is depressed or trading at low volumes, vesting events can have negative consequnces to the company.
3. Grant guideline confusion – for awards based on a dollar value at grant date, an employee that receives shares at a time the stock price is materially lower, may feel they are not getting the full value that the parties understood the award to represent.
The memo makes the case that “price-protected” RSUs could address these challenges – not by adding a performance condition, but by deferring delivery until the stock price recovers. Here are the key takeaways:
– Traditional time-based RSUs vest on schedule no matter what happens to the stock price. In our analysis of Russell 3000 companies that IPO’d after 2010, 41% of scheduled vesting events occurred while the stock traded below its grant price.
– The Price-Protected RSU keeps everything about a traditional RSU the same, except one thing: at each vest date, the tranche only vests if the stock price has held at or above the grant-date price.
– Missed tranches aren’t forfeited outright. They carry forward and remain eligible to vest later. Most eventually would have vested in the same analysis noted above; only 16% were ultimately forfeited assuming a three-year quarterly design with a two-year grace period.
– The design flexes by population: longer grace periods and carry-forward windows for broad-based grants, tighter parameters for executive awards.
The memo notes that for many companies, automatic vesting will still be the best approach. But for others, a modest amount of built-in flexibility may better align equity design with shareholder expectations, employee outcomes, and long-term program objectives. Always make sure to consider the accounting and legal implications if you are making a change!
FW Cook recently published its annual incentive plan report – which reviews plans at the top 250 largest S&P 500 companies by market cap, based on 2025 practices disclosed in 2026 proxy statements. Here are a few key highlights:
Core annual incentive design features have remained broadly stable over the last four years, including the prevalence of formulaic plans, the number and types of financial metrics, and the weighting of financial and non-financial measures.
The more notable changes are within the non-financial component. Team-wide strategic goals are more common than four years ago, individual performance goals are less common, diversity and inclusion measures have declined sharply, and artificial intelligence is beginning to appear explicitly in plan design.
Goal-setting showed more movement in 2025. More companies held revenue and profit targets close to prior-year actual performance, while threshold-to-maximum performance ranges widened. Those observations do not necessarily indicate easier goals: among companies with revenue goals and available beginning-of-year guidance, 61% set incentive-plan revenue targets above the guidance midpoint, and the median target across the full available sample was 0.4% above the midpoint.
Median CEO annual incentive payout for 2025 was 127% of target, in line with the 2023 median and below the 2021 median.
The report found that approximately 10% of the sampled companies that used team wide strategic measures disclosed an AI-related team-wide objectives. Here’s more detail on that topic:
• Most AI-related objectives were embedded within a broader strategic goal; two companies used AI as a stand-alone weighted metric. An additional ten Top 250 companies included AI-related performance within individual goals for select NEOs and are not included in the team-wide prevalence below.
• Almost all identified AI-related measures were assessed qualitatively rather than against defined quantitative goals; the two stand-alone AI metrics were assessed quantitatively.
• Current proxy disclosure may understate adoption because 2026 proxy filings generally report goals set for 2025; 2027 filings will provide greater visibility into AI-related goals adopted for 2026.
The report gives supplemental details by sector – which are worth reviewing since practices can vary across industries. It also identifies the companies included in the study.