We’ve posted the transcript for our last webcast “Pre-IPO Through IPO: Compensation Strategies for a Smooth Transition.” During this program, Morgan Lewis’s Timothy Durbin, Alpine Rewards’ Lauren Mullen, Cooley’s Ali Murata, Pearl Meyer’s Aalap Shah, and Latham’s Maj Vaseghi shared practical guidance on key compensation considerations from the pre-IPO phase through the offering and into the first chapter of public company life. They are superhuman and managed to cover all of these topics — with a lot of detail! – in 90 minutes, in addition to addressing some commonly asked questions.
Assessing Existing Arrangements and IPO Impact
Designing and Adopting New Equity Plans and ESPPs; Share Pool Strategy
Managing “Cheap Stock” Issues; 409A Valuations
Designing and Communicating Special IPO Awards
Negotiating New Employment Agreements; Change-in-Control and Severance Terms
Navigating Lockups, Blackout Periods and Post-IPO Selling Mechanics
Establishing the Post-IPO Executive Compensation Program
Building Compensation-Related Policies, Governance and Controls
Communicating with Executives and Employees Through the Transition
Transitioning Director Compensation
If you are working on an IPO, contemplating one or are recently public, do yourself a favor and read this transcript or listen to the replay. This program covered so many traps for the unwary! Members of this site can access the transcript of this program for free – and for the lawyers out there, you can also get on-demand CLE credit for watching the replay. If you are not a member of CompensationStandards.com, email info@ccrcorp.com to sign up today and get access to the replay and full transcript.
Compensation Advisory Partners recently provided an early look at 2025 CEO pay levels, based on disclosures from 50 companies with fiscal years ending between August and October 2025. Here are some of their key findings:
– 2025 financial performance was generally flat to up.
– Median CEO total direct compensation increased +8% year over year, driven by a +9% increase in the grant-date value of long-term incentives (LTI).
– Annual incentive payout was up +4% generally due to increases in the target opportunity.
– [M]edian bonus payout for CEOs was around target (i.e., 98% of target).
– While median and 75th percentile payouts were consistent with the prior two years, we saw a modest rise in the 25th percentile payout due, in part, to fewer companies having a payout below 50% of target than in prior years.
– About 25% of companies increased the CEO’s bonus payout above the corporate funded amount through either individual performance or positive committee discretion.
Not surprisingly, that 25% of companies that increased the CEO’s payout mostly did so through an individual performance component.
In 2025, about a quarter of companies increased the CEO’s payout above the corporate funding factor. The average increase ranged from 8 – 50 percentage points above the funding factor. Most of these increases were provided through an individual performance component although some companies did so through a discretionary adjustment. When a company provides a positive discretionary adjustment, it typically does not raise a below target payout to above target. Only one company reduced the CEO’s payout in 2025.
Since this disclosure requirement became effective, I’ve now seen a smattering of companies where the completion of a recovery analysis ran up against the filing deadline for the proxy statement. In these instances, the company either filed an amendment to its proxy statement once the result of the analysis was known or, if the investigation went beyond the scheduled annual meeting date, disclosed the result in a current report on Form 8-K. The scenario is still sufficiently rare that a “best practice” has yet to emerge.
One such example is found in the definitive proxy statement of Core Scientific, Inc., which discloses that the company’s recovery analysis is ongoing and it has yet to determine whether a clawback will be required. Mark shared language from the company’s Compensation Discussion and Analysis.
If you aren’t yet a member with access to the Borges’ Proxy Disclosure Blog and all of the other resources on this site – such as our checklists, resource libraries, and the essential Lynn & Borges’s “Executive Compensation Disclosure Treatise” – email info@ccrcorp.com, call 1.800.737.1271, or sign up online.
Given the risks associated with using AI in hiring, I’ve been curious for some time now about other ways HR professionals are leveraging AI (or experimenting with it) for information gathering, decision-making, and streamlining day-to-day tasks. So I was happy to see that topic addressed in the latest Compensation Best Practices Report, which shares the results of Payscale’s most recent broad and comprehensive survey of HR professionals. In this 23-minute episode of “The Pay & Proxy Podcast,” Amy Stewart, Manager of the Content & Research Team at Payscale, joined me to dive deeper and share her perspectives on the survey results. We discussed:
The broad perspectives covered in the Compensation Best Practices Report
How survey respondents are currently using AI or have in the last 6 months
What motivated survey respondents to use or try AI for these tasks
What AI tools HR teams are using
The benefits they’ve seen / risks they’re worried about
Respondents’ thoughts on AI for compensation benchmarking
What’s holding nonusers back
Strategic considerations for HR teams as workforces expand AI adoption
If you have insights on compensation and proxy disclosures you’d like to share in a podcast, I’d love to hear from you. Email me at mervine@ccrcorp.com.
It’s hard to believe that we are already into the second quarter of 2026. If you’re involved with executive compensation, public company disclosures, and corporate governance, you still have a lot to look forward to. In particular, we expect the SEC to propose significant rule changes – including on executive compensation disclosure – as soon as this summer.
Our fall conferences – happening October 12th & 13th in Orlando – will be the perfect opportunity to understand how new rules could affect your company and board. We will be covering all the hot topics! Now is the time to register – our “super early bird” rate ends tomorrow, Friday, April 3rd! This rate applies to both in-person and virtual attendance. Register online at our conference page or contact us at info@CCRcorp.com or 1-800-737-1271 by tomorrow, April 3rd, to lock in the best price.
Last year, nearly 25% of Russell 3000 companies submitted an equity plan proposal to a shareholder vote. Under current voting frameworks, most companies need to go back for approvals every 2 to 3 years – and while 99% of companies get the support they need, there are always a few outliers.
For obvious reasons, you want to do whatever you can to stay out of that category. This Pay Governance memo shares what you can do to increase the likelihood of a successful outcome:
1. Analyze the share reserve pool under various stock price scenarios to estimate how many shares are needed over the next 1 to 3 years.
2. Calculate current and potential dilution levels and share usage levels on an absolute basis and relative to the company’s peer group and overall industry sector.
3. Understand the voting guidelines on new share requests of the company’s largest institutional shareholders, including any brightline policies such as excessive dilution or burn rate thresholds.
4. Understand proxy advisor “dealbreakers” and estimate the likelihood of proxy advisors’ vote recommendations on the proposal. If opposition is anticipated, consideration should be given to engaging with the largest shareholders well before the annual shareholder meeting. (Remember, ISS introduced a new negative overriding factor for 2026, which makes plan features extra important.)
5. Ensure the proxy disclosure of the equity plan proposal is clear and complete. Within the equity plan proposal disclosure, highlight shareholder friendly design features and practices (e.g., reasonable dilution and share usage levels, requiring shareholder approval of option repricings or cash buyouts) and the role equity plays in attracting, motivating, and retaining employees as well as why it is important to the success of the company.
The memo notes that some industries tend to fare better than others with their equity plan proposals – by far, communications services drew the most opposition from proxy advisors in 2025. ISS opposition was also relatively higher in pharma/biotech, information technology, consumer discretionary, and real estate – compared to industries like utilities and energy.
According to the Investment Committee presentation, the updated framework is intended to further align the interests of executives with long-term shareholders. My take in looking at the framework’s “foundational priorities” is that CalPERS wants more than just alignment between pay and long-term performance – it also wants pay programs to be transparent and understandable. This isn’t a huge substantive change, but it’s spelled out more clearly now. Here’s the full list of these priorities:
• The design and structure of compensation plans should promote long-term shareholder value creation.
• Compensation should not be overly volatile, as significant fluctuations in compensation can undermine the stability and focus required for long-term strategic execution.
• Long-term incentive compensation should be designed to reward senior executives for above market performance, not overall market appreciation.
• Compensation plans should be straightforward and easily understood by both shareholders and executives, avoiding unnecessary complexity that can obscure true performance objectives.
• Compensation plans should not be excessively dilutive to existing shareholders, ensuring that equity awards are granted judiciously and in a manner that preserves long-term value.
• Equity awards should have long multi-year vesting periods to promote a long-term perspective.
• CEOs and senior executives should have significant personal stock ownership in the company.
CalPERS’ quantitative analysis will continue to be in a scorecard format, based on five-year performance and Equilar’s P4P formula. The P4P score looks at realizable pay vs. five-year cumulative TSR. Although that element of the scorecard doesn’t refer to grant date target pay, the overall scorecard continues to look at grant date target pay to assess whether CEO pay incentivizes excessive risk-taking.
The updated framework (and the proxy voting guidelines) also list examples of plan design and governance issues that may result in an “against” vote for say-on-pay. Here are a few factors that might warrant special consideration if CalPERS is a significant shareholder for your company:
• Overly complex plan design
• Excessively high CEO compensation relative to other named executive officers (NEOs)
• Majority of annual equity grants are to NEOs
• CEO-to-median employee pay ratio is disproportionately high
The FAQs are attached as an appendix and give more detail about CalPERS’ preferences for equity award holding periods, peer group benchmarking practices, etc.
Compensation committees with oversight responsibility for human capital management should also know that HCM is one of CalPERS’ three key priorities for 2026. Specifically, as flagged in this presentation, the pension fund is prioritizing:
As discussed in this 32-page Meridian memo, most companies have migrated to using severance agreements for CEOs in lieu of entering into employment agreements when an executive comes aboard. However, employment agreements are still a useful approach for some companies. About 36% of Russell 3000 companies continue to go this route – with it being more prevalent in industries like consumer discretionary, health care, communication services and financial services. Employment agreements are also more common at small-caps than large-caps.
In addition to stats on prevalence, the memo shares trends in key terms from the 100 or so S&P 500 companies that have entered into agreements – including:
• Exclusivity requirements
• Duration and renewal terms
• Compensation provisions
• Post-termination arrangements
• Restrictive covenants and releases
• Clawback provisions
• Change-in-control protections
• Indemnification and D&O insurance requirements
• Administrative provisions
Appendix C gives a convenient summary of typical provisions. In evaluating existing or potential CEO employment agreements, the memo suggests that boards consider whether the agreement:
• Serves as a useful tool for talent acquisition, retention and risk management (which, as noted above, may depend on the company’s size and industry, among other factors)
• Provides competitive levels of compensation, benefits and severance,
• Safeguards corporate interests
• Allows for terms to be reset through sunset provisions
• Reflects the current corporate governance environment
• Addresses dispute resolution
• Complies with applicable regulatory requirements, and
• Includes terms which clearly and unambiguously reflect the intent of the parties.
In December, Liz blogged about a new California law that restricts the ability of companies to require certain repayments by employees upon separation. This WilmerHale alert explains that California isn’t a major outlier here. A few states already have similar requirements (Connecticut and Colorado, for example), and New York is now taking action.
New York’s “Trapped at Work Act” (the “Act”) was enacted on December 19, 2025, and amended on February 13, 2026 [. . .] The Act prohibits an employer from requiring, as a condition of employment, an employee or prospective employee to execute an “employment promissory note”—defined as any instrument, agreement or contract provision requiring an employee to pay the employer a sum of money if the employee’s employment relationship with that employer terminates before the passage of a stated period of time [. . .]
In addition to contracts related to residential property, sabbatical leaves and collective bargaining agreements, the amended Act expressly permits the following types of repayment agreements:
Bonuses and relocation assistance. Agreements requiring repayment of a financial bonus, relocation assistance or other noneducational incentive upon separation from employment are permitted unless (x) the employee was terminated for any reason other than misconduct (which term is not defined but likely has the same meaning as under New York unemployment law) or (y) the duties or requirements of the job were misrepresented to the employee. Unlike its California counterpart and the tuition repayment exception below, this exception does not require a standalone agreement or have other repayment limitations.
Certain tuition assistance. Similar to the California law, employers may recover the cost of tuition, fees and required educational materials for a “transferable credential.” To qualify, the repayment agreement must (a) be in a written contract offered separately from the employment contract; (b) not condition employment on obtaining the transferable credential; (c) specify the repayment amount (not to exceed the employer’s actual cost) in advance; (d) provide for prorated repayment proportional to the total repayment amount and the length of the required employment period with no accelerated payment schedule upon separation from employment; and (e) not require repayment to the employer if the employee is terminated, except if the employee is terminated for misconduct.
Unlike California’s law, the New York Trapped at Work Act does not provide a private right of action. Instead, the New York State Department of Labor is granted authority to bring enforcement actions. Employers found to have violated the Act may be fined between $1,000 and $5,000 per violation, with each affected employee representing a separate violation.
The alert has some suggestions for HR and legal teams:
Employers should review their existing offer letters and any employee repayment policies to ensure that any repayment obligations are compliant with applicable state law.
Personnel responsible for negotiating and drafting employment offers and contracts should be trained on these new laws.
Employers should consult with employment counsel before attempting to collect repayment from a departing employee. Deducting from final wages presents heightened legal risk, particularly in certain jurisdictions.
We’ve talked a lot about the shifting views of proxy advisors and institutional investors toward programs that consist primarily of time-based awards, provided vesting or retention requirements ensure these time-based awards have a sufficiently long-term horizon. This FW Cook insight summarizes the proxy advisor policy shifts concisely:
ISS will no longer automatically criticize companies granting less than 50% in PSUs, provided the time-based equity component is sufficiently “long-term,” defined as meeting one of the following thresholds:
5-year ratable or cliff vesting;
4-year vesting plus a 1-year post-vest holding requirement; or
3-year vesting plus a 2-year post-vest holding requirement.
Glass Lewis will also no longer automatically criticize companies granting less than 50% of LTI in PSUs. However, they will evaluate the overall LTI program holistically. Any reduction in PSUs should be offset by a reduction in target pay opportunity (to account for the greater certainty of time-vested awards), longer vesting periods, and sufficient rationale in the proxy statement.
The insight discusses moves being considered in light of these shifting views — specifically, compensation committees reconsidering where their LTI program falls on the spectrum of performance focus to ownership focus. They call out these examples of changes being considered:
Rebalancing the LTI mix: Reducing PSUs to 30–40% of LTI while allocating the remainder to long-term time-vested equity (e.g., RSUs with a 5-year ratable vest). This preserves a performance component while shifting the center of gravity toward long-term ownership and retention.
Repositioning stock options as “performance-based”: Options inherently carry performance leverage; they only deliver value if the stock price appreciates. But, they are not perceived as “performance-based” by proxy advisors. Attaching a 5-year vest/hold strengthens retention while satisfying proxy advisor expectations. Read FW Cook’s piece Could Stock Options Make a Comeback?
The “1-3-5 PSU”: Maintaining PSUs, but compressing the performance period from three years to one year to mitigate financial goal-setting challenges. Earned shares do not vest until the third anniversary of grant with a subsequent two-year post-vest holding period (i.e., 1-year performance period, 3-year vest, 5-year hold). This design can be further enhanced by applying a relative TSR metric or modifier over the 3-year vesting period.
But they also warn – consistent with Liz’s note that PSUs remain a “safe bet” – that “a premature shift away from PSUs could trigger a low Say-on-Pay vote, regardless of proxy advisor flexibility.” So, they suggest that 2026 be treated as a “diagnosis year” – meaning that compensation committees should focus on evaluating the current program and explore creative alternatives where appropriate.