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.
This 36-page report from Pave + Infinite Equity (available for download) provides data from both public and private companies on the structure of employee equity programs, based on grants made in 2025. It’s especially helpful if you’re looking to understand how practices change as a company goes from privately held to publicly held. Here are a few key takeaways:
– 80% vs. 32% – prevalence of equity vesting cliffs in new hire grants at private companies compared with public companies, showing a key difference in strategy for attracting talent.
– 2024 – The year the majority of public companies broke from the four-year vesting standard that private companies still follow.
o 70% of new hire grants and 61% of ongoing grants at public companies in 2025 had a vesting duration of less than four years.
o The report shares data on variations in public company vesting structures and schedules. It also explains that companies aren’t changing vesting schedules in isolation – they are simultaneously adjusting other aspects of their equity programs such as grant frequency – which shows that an equity program should be a strategic, integrated strategy.
– 3.9% – Median net equity burn rate at private AI-native companies, nearly 40% higher than the 2.8% at other tech companies.
The report also explains that when it comes to benchmarking burn rates, there may be more than meets the eye. It also covers grant eligibility and participation data.
IPOs are (hopefully) becoming great again, and there are many compensation matters to sort through on the path to public. This checklist from Pay Governance breaks down the key topics for the compensation committee to consider – and why they matter. Among other topics, the checklist addresses:
– Compensation philosophy
– Peer group
– Executive pay levels
– Equity program strategy
– Initial equity reserve
– Director pay
– Severance arrangements
There’s no “one-size-fits-all” approach to compensation, so if your company or client is planning an IPO, make sure to consider what’s best for your particular circumstances and assess all the legal issues alongside internal and external communications, logistics, etc. For a great collection of perspectives, check out the transcript from our recent webcast for members on “Pre-IPO Through IPO: Compensation Strategies for a Smooth Transition.”
This report on 2025 CFO compensation from Compensation Advisory Partners (CAP) examines pay outcomes for CFOs in comparison to CEOs based on a sample of 140 companies with a median revenue of $15.6 billion. Here are some of their key findings:
– The median change in base salary in 2025 was 3.7% for CFOs and 2.1% for CEOs
– Median target bonus opportunities remained consistent for CFOs at 100% of salary and increased slightly for CEOs to 162.5% of salary (from 160% in 2024)
– LTI awards increased significantly, 12% for CFOs and 9% for CEOs at median, which is almost double the increase from last year (7% and 5%, respectively). LTI often leads other elements of pay in magnitude of increase. Over the 10-year period from 2016 through 2025, LTI awards have increased an average of 8.7% and 7.0% per year for CFOs and CEOs, respectively
– TDC increases in 2025 were approximately 8% for CFOs and 9% for CEOs at median. This is the first time in several years where the TDC increases for CFOs and CEOs are very close, driven by strong performance and increased focus on retention of key talent in this environment
– CFO total compensation as a percentage of CEO total compensation remains at approximately 1/3 in 2025
– CFO pay consists of 63% long-term incentives (73% for CEOs) in 2025
Earlier this week, in Ayers v. Foley, the Delaware Chancery Court relied on the new heightened presumption of disinterestedness for independent directors of listed companies in granting in part a motion to dismiss derivative claims challenging a special equity award to a listed company’s chairman. At the same time, the court denied the motion to dismiss the claims challenging a board committee’s approval of non-employee director compensation since the approving directors are “inherently interested.” Here’s a brief summary of the facts:
The company’s compensation committee approved increases to non-employee director compensation — cash and equity — three times between November 2022 and October 2024, totaling $40,000 in cash compensation and $30,000 in equity compensation plus a one-time special equity grant of $100,000 for each NED, vesting over three years. The committee cited “FNF’s superior financial performance, including the success of the F&G acquisition in 2020” as its rationale for the special grant.
After a media report suggested that the board chair might be looking to leave the company, the compensation committee members discussed an retentive equity award for the chairman. He requested a $60 million grant, but the committee determined a $44 million grant was more appropriate based on market data from its compensation consultant. After negotiations, they landed on a $50 million equity grant vesting over three years, with the chairman to receive no further equity during that period. The compensation committee determined that the board’s related person transaction committee should also approve the grant, given its significance.
The plaintiff argued that the two transactions should be analyzed as one (presumably to apply an entire fairness review to both), but Vice Chancellor Will declined to do that, noting that they were separate transactions and would be analyzed separately. And, in fact, she analyzed these two challenged transactions very differently, for good reason. One (the chairman’s grant) was approved by two independent committees, while the other (the NED compensation) involved an inherently conflicted transaction that must meet the entire fairness standard, absent a stockholder vote.
With respect to the chairman’s grant, VC Will found that the plaintiff failed to plead demand futility because he failed to show that a majority of the board was conflicted:
The plaintiff [. . .] questions the independence of the other five directors (Ammerman, Hagerty, Rood, Thompson, and Quirk). If he were to succeed in impugning these directors’ impartiality, then—combined with Foley—he would have adequately pleaded demand futility under Rule 23.1. But he falls short of the high bar set by Section 144(d)(2) to plead that three of the five challenged directors [. . .] have a material relationship with Foley.
Section 144(d)(2) of the General Corporation Law of the State of Delaware includes the recently adopted heightened presumption of disinterestedness for directors of listed companies found by the board to be independent under exchange rules. Vice Chancellor Will said that presumption “may only be rebutted by substantial and particularized facts” showing a material interest or relationship and determined that the business ties of the three directors whose disinterestedness was challenged — including overlapping service on boards of other companies affiliated with the chairman and coinvestments in sports teams — weren’t enough to rebut the presumed independence. Because the plaintiff failed to present any particularized allegations supporting an inference of bad faith, the board did not face a substantial likelihood of liability, and the demand was not excused. The outcome was different for the non-employee director compensation claims, which VC Will allowed to proceed past the pleading stage, at least against the approving directors.
[T]his case concerns directors awarding compensation to themselves [. . .] Delaware courts generally view the unfair dealing component to be effectively satisfied at the pleading stage for self-compensation claims [. . .] As for unfair price, the plaintiff’s allegations also meet his burden. He alleges that the directors’ compensation consistently and significantly outpaced FNF’s peer group while FNF underperformed.
Plaintiff cited data showing that the company’s NED compensation was above the median, while its market cap, income and revenue were comparably lower. Defendants countered that above peer average compensation is not necessarily excessive and that the company had outperformed its peers on operating margin. VC Will noted that defendants’ points are “persuasive points [and] may well pose a formidable barrier to the plaintiff’s ultimate success and dampen expectations for a significant recovery,” but that they present a “factual dispute inappropriate for resolution on a motion to dismiss.”
At present, I cannot adopt the defendants’ preferred performance metric (title operating margin) and ignore the plaintiff’s identified metrics (market capitalization, revenue, and net income). By pleading that the directors’ compensation rose to a large premium over the peer median while FNF lagged in key financial metrics, the plaintiff has pointed to “‘some facts’ implying lack of entire fairness.”