We’ve posted the transcript for our recent webcast “Top Compensation Consultants Speak” with Blair Jones of Semler Brossy, Ira Kay of Pay Governance and Jan Koors of Pearl Meyer. They discussed:
– DEI Programs, Disclosures & Metrics: The Compensation Committee’s Role
– Plan Design & Goal Setting Amid Uncertainty & Volatility
– Key Changes in Investor & Proxy Advisor Policies & their Impact in 2025
– Metrics & Perks: Notable Observations from the 2025 Proxy Season So Far
– Compensation-Related Shareholder Engagement
– Did Dodd-Frank Rules Reduce or Curb CEO Pay or Change Incentive Design?
During the program, Blair shared these thoughts on the use of discretion and investor perspectives:
Discretion is still suspect. I expect we will, again, from a tariff standpoint, start to see more discretion being used, particularly on short-term incentive programs, just because short-term incentive goals were set before we knew the full impact of the tariffs. We knew they were coming, but we had no idea what the impact was going to be.
A number of clients are trying to get ahead of that and to think about how they might create a framework for what discretion might look like, developing a scorecard, for lack of a better term, where they can look at the things that are within their control. Just to give a few examples, it might include things like:
How are you doing relative to mitigating the tariffs?
How are you doing on a relative performance basis, not just on TSR, but on financial measures, on market share, on relative gross margin, on relative ROIC?
Are you actually outperforming?
Are there strategic initiatives related to customers or channels that you can continue to move forward?
How are you performing operationally?
Discretion will be looked at with suspicion, but in order to have some basis for discretion around your business that is both compelling and does not play too strong a hand, you could think about it in terms of, “if you fall off your thresholds, or even if you’re right hanging at threshold, but you’ve outperformed your peers, there may be room for discretion.” We’ll have to see how the stock market performs and how shareholders feel.
Members of this site can access the transcript of this program for free. If you are not a member of CompensationStandards.com, email info@ccrcorp.com to sign up today and get access to the full transcript.
Programming Note: We won’t be blogging tomorrow in recognition of the Juneteenth holiday. Our blogs will be back on Monday.
I’m even more excited for our fall “Proxy Disclosure & 22nd Annual Executive Compensation Conferences” now that we’ve pulled together the agenda. Our experienced speakers will be covering all the things you want to hear about right now (and the things you’ll want to hear about in October)! Conference sessions include:
With the conferences in Vegas this year, we also had a little too much fun sprinkling phrases like “play your cards right” and “your ace in the hole” throughout the panel descriptions.
Our “early bird” registration deal is still available for in-person registrations! Our Conferences will be held Tuesday & Wednesday, October 21-22, at Virgin Hotels Las Vegas, with a virtual option for those who can’t attend in person. Reach out to our team to register by emailing info@ccrcorp.com or calling 1.800.737.1271.
Tune in at 2:00 pm Eastern tomorrow — Tuesday, June 17 — for our annual webcast “Proxy Season Post-Mortem: The Latest Compensation Disclosures” to hear Mark Borges of Compensia, Dave Lynn of CompensationStandards.com & Goodwin and Ron Mueller of Gibson Dunn discuss the ins and outs of compensation disclosures during the 2025 proxy season and share some thoughts on the SEC’s upcoming Executive Compensation Roundtable, for which all three of them are serving as panelists.
In the last two years, we’ve extended the runtime of this program to 90 minutes since we were all tackling major new rulemaking. (I’m talking about you, PvP and clawbacks!) So much has happened this proxy season, we’re sticking with 90-minutes so Ron, Mark and Dave have time to cover all these hot topics:
2025 Shareholder Engagement Challenges
2025 Proxy Statements — DEI and Other E&S Developments
2025 Proxy Statements — Executive Compensation Disclosures
– Say-on-Pay during the 2025 proxy season
– CD&A highlights
– Pay-versus-Performance disclosure
– Compensation clawbacks
– Perquisite disclosure
– Proxy advisory firm policies
– Equity award grant practices
Shareholder Proposals
Upcoming SEC Roundtable
Members of this site can attend this critical webcast at no charge. If you’re not yet a member, you can sign up 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. The webcast cost for non-members is $595.
We will apply for CLE credit in all applicable states (with the exception of SC and NE which require advance notice) for this 90-minute webcast. You must submit your state and license number prior to or during the program using this form. 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.
1. Executive Compensation Decisions: Setting Compensation and Informing Investment and Voting Decisions
2. Executive Compensation Disclosure: How We Got Here and Where We Should Go
3. More on Executive Compensation Disclosure: How We Got Here and Where We Should Go
The panelists include a mix of outside and in-house counsel, investors, compensation consultants, and more – including our very own Dave Lynn and Mark Borges, and several other folks who will be familiar to members of our sites! Mark just shared a few observations relating to topic #1 on his “Proxy Disclosure Blog” on this site – and Dave shared his perspective on creating the “summary compensation table” and “compensation discussion & analysis” disclosure rules.
The roundtable will be held at the SEC’s headquarters at 100 F Street, N.E., Washington, D.C., from 1 p.m. – 5:35 p.m. ET. The event will be open to the public and webcast live on the SEC’s website. Doors will open at noon ET. For in-person attendance, registration is required. For online attendance, registration is not necessary – you can find the broadcast on the SEC’s website.
We expect to see more activity around comment letters and suggestions after the roundtable.
You can’t go a day right now without seeing reports that a company or industry is laying off employees. The economic outlook seems to whipsaw every few days right now, so maybe things will turn around. But with the main reasons for cuts appearing to be the rise of AI solutions and uncertainty, it’s also possible the labor market for non-executives won’t recover any time soon.
As Meredith blogged just a couple years back, some companies find themselves in a tricky position if they implement generous executive pay plans that have to be justified many months down the road – perhaps following a reduction in force. Consider this blog a reminder for your comp committee to ask questions and think ahead on that issue – because even if it’s out of fashion to care about whether “CEO compensation justifications ring hollow amidst layoffs,” I also can’t think of anyone who wants to be the poster child for a future “eat the rich” campaign.
And fun fact! Meredith’s husband and brother-in-law were staffers at The Onion for years, working on the graphics and visual effects that readers know & love. You may even be able to spot a photo of Meredith’s parents accompanying an article.
As Meredith flagged last week, understanding your top investors’ public positions and voting behavior is more important than ever if the current environment leads investors to become less vocal in their engagements with portfolio companies. This Aon memo points out that although several high-profile investors revised their policies this year in a way that may be more deferential to boards when it comes to executive compensation decisions – or at least less explicit in terms of what will trigger an “against” vote – we don’t know yet whether those policy changes are actually impacting director votes.
The memo parses through updates from BlackRock, Fidelity, Invesco, Morgan Stanley Investment Management, State Street Global Advisors and T. Rowe Price Associates, highlighting what’s changed – and whether it’s consequential. It’s important to note that even where policies haven’t changed, the application might be different now in light of the overall environment. The Aon team notes:
We believe it will take longer than one proxy season to gauge the effect of these policy adjustments on director elections relative to executive compensation. The anti-ESG environment continues to evolve, and the voting impact of board “responsiveness” policies regarding say-on-pay proposals won’t apply until 2026. However, even as the market waits for the full impact to play out, companies embarking on off-season engagement and proxy planning in the fall will need insights on their investors and how they have been voting, especially if in-season feedback from their investors was constrained by the February 2025 SEC guidance.
The Aon team will be analyzing 2025 voting data once it’s disclosed in late summer – mostly for its own clients, but we’ll share data points here too as we have them. We’ll also be sharing loads of insights from voting behavior – and what to do for 2026 – at our “Proxy Disclosure and 22nd Annual Executive Compensation Conferences.” Our 2025 Conferences will be taking place Tuesday & Wednesday, October 21-22 at the Virgin Hotels in Las Vegas, Nevada, with a virtual option for those who can’t attend in person. The early bird rate is ending soon! You can get more info and sign up by emailing info@ccrcorp.com or calling 800-737-1271.
Last week, the SEC held a meeting of its Investor Advisory Committee – and one of the topics covered was market perspectives on non-GAAP financial disclosures. Jeff Mahoney – who is General Counsel at the Council of Institutional Investors – participated in that panel discussion. Although it has been a few years since CII submitted its rulemaking petition and follow-up letter on this topic, Jeff gave a strong reminder that transparency of non-GAAP measures in the context of executive compensation disclosures remains a priority for CII and its members. In fact, it’s one of the three main advocacy priorities that CII has identified for 2025. Here’s how CII describes the issue:
While there may be reasonable reasons for companies to use non-GAAP financial measures in executive compensation programs, there is the potential for boards to misuse them in a manner that may reward executives despite poor performance. Due to a loophole that permits companies not to reconcile non-GAAP target measures used for executive compensation with GAAP, investors are not always able to monitor the appropriateness of exclusions and other adjustments to GAAP being incorporated into executive compensation decisions.
Importantly, this loophole applies only to the Compensation, Discussion & Analysis (CD&A) section of the proxy statement. For over two decades, the SEC has generally required companies to give equal prominence to GAAP and non-GAAP financial measures as well as provide a quantitative reconciliation of the numbers in most financial filings. The solution is straightforward: The SEC should require that the CD&A include an explanation of why non-GAAP measures are better for determining executive pay than GAAP, and provide a quantitative reconciliation (or a hyperlink to reconciliation in another SEC filing) of these two sets of numbers.
Remember that ISS also encourages transparency around non-GAAP adjustments that affect compensation, as discussed in FAQ No. 41 and my blog from last year.
On The Proxy Season blog on TheCorporateCounsel.net, Liz recently shared a new 44-page report (available for download) from the team at AQTION that gives an up-to-date look at the perspectives of the world’s 65 largest institutional investors (asset managers, sovereign wealth funds, and pension funds) – including the extent to which they rely on proxy advisors, how they’re approaching engagements, and more. (AQTION is a London-based firm providing investor engagement advice using data from SquareWell Partners.)
Although proxy advisors do help these firms gather information about portfolio companies and execute votes, over 90% of votes are linked to the investors’ own custom policies. That means perspectives and reactions to your pay program may differ greatly among your large institutional investors. And, while 2025 updates to voting guidelines have generally become less prescriptive and more principles-based, “investors are increasingly expecting higher standards of board responsiveness to shareholder concerns; this includes on unequal voting rights, and exceptional remuneration, both of which were identified as trend topics for investors.”
With respect to “exceptional remuneration,” which refers to awards granted outside of the standard pay package, the report says 34 out of the Top 65 investors provide insight into their position.
Eight investors (including J.P. Morgan Asset Management and Aberdeen Investments) are against one-off awards “as a matter of principle.”
The remaining 26 take a case-by-case approach and may support special awards outside of where the company can demonstrate “truly exceptional circumstances and significant additional value creation.”
It notes that understanding your top investors’ public positions and voting behavior is more important than ever since investors are less vocal in their engagement with portfolio companies.
The popularity of relative TSR as a long-term incentive plans metric makes a lot of sense given how challenging it can be to set multi-year goals for absolute metrics. I have always thought of rTSR plans as pretty much identical company to company — with the exception of the rTSR comparison group. But this HLS blog from the Equilar team says it’s actually not so “plain vanilla” and discusses the variables to consider when using it as a metric. Those include:
– The length of time to measure
– The comparator group
– Whether to factor in stock price averaging
– The weighting or modifier effect on the overall payouts
– Whether to implement additional contingencies (e.g., absolute floors or caps)
– The payout scale (most commonly threshold payout of 50%, maximum payout of 200% and threshold/target/maximum goals of the 25th/50th/75th percentiles)
All these factors have an impact on the Monte Carlo valuation that determines the accounting expense the company recognizes on the awards. And they may have an impact on company performance. Looking at a sample of 1,049 CEO awards between 2020 and 2024 by Russell 3000 companies, the companies with more rigorous rTSR plan design outperformed the other companies in the sample (but the blog says a larger study is needed to determine whether there’s really a correlation).
When it comes to getting the votes you want during proxy season, if you want to look especially smart to your boss and save your company (and yourself) from time-consuming back-and-forth, the best thing you can do is sign up for our “Proxy Disclosure & 22nd Annual Executive Compensation Conferences.” We will close out the second day with our always popular panel “Navigating ISS & Glass Lewis,” which features a conversation with representatives from both proxy advisors – moderated by Davis Polk’s Ning Chiu. This is going to be a very practical session on the types of disclosures & practices that will (or won’t) help your cause on say-on-pay, compensation committee elections, and equity incentive plan approvals.
Our 2025 Conferences will be taking place Tuesday & Wednesday, October 21-22 in Las Vegas, Nevada, with a virtual option for those who can’t attend in person. Join us for engaging sessions full of essential and practical guidance, direct from the experts. Register now to lock in our early bird rate and save your seat!