ISS recently released its 2025 Proxy Season Review: United States – Executive Compensation (available to institutional subscribers). The related press release highlights these key say-on-pay takeaways from the 2025 season:
– Shareholder support for say-on-pay proposals decreased slightly, while failure rates remained near all-time low. Median say-on-pay support levels decreased from 94.9% in 2024 to 94.5% in 2025. Failure rates remained low at 1.2% in 2025.
– CEO pay reached a record high in the S&P 500 for the second consecutive year. Median S&P 500 CEO pay was $16.9 million, the highest pay level ever observed. Median CEO pay in the Russell 3000 was $5.7 million, tying the historic high in 2021.
This Pay Governance alert discusses factors influencing say-on-pay trends, which it summarizes in these bullets:
– Proxy Advisor SOP Opposition Has Declined. So far in 2025, Glass Lewis (GL) issued its lowest rate of SOP opposition (10%) in recent years and is converging with the 10% to 12% opposition rates historically observed from ISS. The ISS SOP opposition rate in 2025 of 9% remains low relative to historical rates but is slightly above the 8% dip observed in 2024.
– Proxy Advisor Impact on SOP Outcomes Has Diminished but Remains Influential. The percentage of proxy advisor-opposed SOP proposals that ultimately fail has declined markedly from 2021 to 2025. However, when both proxy advisors oppose SOP, shareholder support levels, on average, are reduced by -34 percentage points (i.e., from 93% support to 59% support).
– Sustained 1- and 3-Year TSR Performance Correlates with Stability in SOP Outcomes. The consistent SOP outcomes in 2024 and 2025 mirror the sustained relatively strong 1- and 3-year S&P 500 TSR performance observed for the years ending in both 2023 and 2024.
As Liz shared yesterday, in threeparts, on TheCorporateCounsel.net, ISS Governance published results from its annual global benchmark policy survey — part of the process for developing its annual voting policy updates — on Monday. As we shared when the survey was released, questions solicited input from investors and non-investors on non-executive director pay, time- vs. performance-based equity, say-on-pay responsiveness and the modification or removal of ESG metrics, among other things. Here’s a brief summary of some of the compensation-related survey results:
Non-executive director pay. The survey asked respondents to identify specific problematic practices in director pay that should warrant immediate concerns and potentially adverse ISS vote recommendations (even if only in one year). Investors chose:
– 34% – Inadequate disclosure or lack of clearly disclosed rationale in the proxy for unusual NED payments
– 32% – Excessive perquisites (such as travel), performance awards, stock option grants, or retirement benefits
– 33% – Particularly large NED pay magnitude or NED pay that exceeds that of executive officers
Among non-investors, 25% of their choices were for “No”, indicating that a quarter of this group does not believe that any of these problematic practices should immediately trigger an adverse vote recommendation.
Time- vs. performance-based equity. When asked if time-based equity structures are acceptable for part or all of executive long-term incentive awards, the results among investors were:
– 38% – Yes, but only for part of the awards; plans should provide a mix of time- and performance-based awards
– 31% – It depends. The adoption of time-based equity compensation with an extended time horizon may be acceptable for certain industries or due to specific factors disclosed by the company
When asked to provide views on a reasonable mix, investors’ responses did not highlight any significant preference. Non-investors supported “not exceed 50% of the awards” (30%) and “Time-based awards with a sufficiently long-term time horizon are not problematic and they can comprise either all or a majority part of long-term executive incentives” (30%).
In terms of what represents long-term vesting or retention periods to dispense with performance awards, all or in part:
– 46% of investors responded, “At least 5 years vesting and/or post-vesting retention requirement in aggregate (for example, 3 years vesting plus 2 years post-vesting retention)”
– 57% of non-investors responded, “At least 3 years vesting, without a further post-vesting retention period”
Say-on-pay responsiveness policy.
– 64% of investors and 88% of non-investors responded that, “The absence of disclosed shareholder feedback should not be viewed negatively if the company discloses that it attempted but was unable to obtain sufficient investor feedback”
– 80% of investors and 91% of non-investors responded, “Yes, pay program changes, when showing improvement in remuneration practices, can be considered responsive, even in the absence of disclosed shareholder feedback”
Modification or removal of ESG metrics. When asked how ISS should assess the removal of E&S or DEI-related metrics from in-flight awards:
– 73% of investors responded, “Continue with the current approach, whereby changes to in-flight awards are generally viewed negatively absent a compelling rationale”
– 76% of non-investor respondents preferred “The removal of E&S or DEI metrics from in-flight awards generally should not in and of itself be considered problematic absent other concerns”
ISS will over the coming weeks release key draft policy updates and open a public comment period for all interested market participants on certain proposed changes to its voting policies for next year. The open comment period is designed to elicit objective and specific feedback from investors, companies, and other market participants on implementing the proposed policy updates. Final policy updates are expected to be announced around late November and will take effect for shareholder meetings occurring on or after Feb. 1, 2026.
In the LinkedIn post I shared yesterday on share pool depletion issues, Aon’s Laura Wanlass referenced the inducement grant exception and suggested that companies should understand the benefits and drawbacks of this option. If you haven’t used this before — or advised companies that have used this before — Laura is referring to the exemption for new hire inducement awards made outside of a shareholder-approved plan in both NYSE and Nasdaq rules. This alternative involves additional complexities, but it is a welcome exception and not infrequently used approach.
Here are a few things to keep in mind if you are considering granting inducement awards:
− Inducement grants are not covered by the company’s existing registration statement on Form S-8. You may want to file a Form S-8 for the shares covered by inducement awards.
− You will need to make some modifications to your standard resolutions and award agreements (e.g. you will need to spell out provisions that are typically incorporated from the plan) – you may want to keep alternative forms available for this situation, if it happens with any frequency.
− You must notify the exchange that you are relying on the inducement grant exemption, and promptly disclose in a press release the material terms of the award, including the identify of the recipient and the number of shares involved.
− You’ll need to file a supplemental listing application with the exchange for the shares covered by the grant.
These tips are from our “Checklist: New Officers – Managing Arrivals,” so they’re focused on large, one-time grants to new exec hires. But for more widespread use, as Broc noted in 2018, companies often adopt an inducement plan. As far as other drawbacks, keep in mind that proxy advisors and investors closely scrutinize these types of awards, and exchanges encourage companies that anticipate using inducement grants for all new-hires to adopt a shareholder-approved plan for that purpose.
I’m really looking forward to the “Key Issues in LTI: Structure & Disclosure” panel at our October Proxy Disclosure & 22nd Annual Executive Compensation Conferences featuring Semler Brossy’s Blair Jones, Davis Polk’s Kyoko Takahashi Lin, Aon’s Stephen Popowski and Latham’s Maj Vaseghi. ISS’s latest investor survey gathered more investor (and non-investor) input on potential changes to its policy on performance-based equity. (More on that tomorrow.) For now, companies continue to navigate complex LTI programs and are struggling to set rigorous, achievable long-term performance goals in an uncertain environment. Our panel will discuss managing equity plan cost & burn rate, the latest on performance equity, plan design considerations and managing in-flight adjustments.
Our conferences are less than a month away! You can’t afford to miss out on the critical guidance our PDEC speakers — featured on every panel of the SEC’s June Executive Compensation Disclosure Roundtable — will share. What are you waiting for!? Register now! You can sign up online or reach out to our team to register by emailing info@ccrcorp.com or calling 1.800.737.1271.
This is one risk/consequence of the accelerated pace of AI development & adoption — or at least AI hiring — that I hadn’t considered: your share pool replenishment may not keep up! On LinkedIn, Aon’s Laura Wanlass shared some insightful takeaways from the work Aon is doing right now on preliminary share pool analyses for calendar year-end companies. Here’s what she said on this point:
The competition for AI talent is accelerating the use of available share pools more quickly than many anticipated. Small- to mid-cap companies, in particular, are leveraging shares from shareholder-approved equity compensation plans to attract top talent, rather than relying on cash awards or utilizing NYSE and Nasdaq inducement grant exceptions. As a result, many organizations are contemplating reductions in broad-based equity awards for other business units, often without fully exploring alternative strategies that may be available.
At the same time, fluctuating share prices aren’t helping:
Ongoing stock price volatility and depressed valuations across certain sectors are making it increasingly challenging for companies to deliver market-competitive equity grants using targeted economic value approaches, maintain prior levels of companywide participation, or preserve historical long-term incentive vehicle mixes. This environment necessitates a more creative approach to equity compensation. Companies should consider strategies such as implementing effective Employee Stock Purchase Plans (ESPPs) or adopting fixed share grant methodologies for different employee segments to maintain broad-based share ownership.
Laura says companies may struggle to secure FOR recommendations from ISS and Glass Lewis due to dilution & burn rates, and she makes some suggestions:
Proactively providing investors with clear, contextual information about dilution and burn rates can be instrumental in engagement efforts–especially when you cannot pass ISS or Glass Lewis policies.
It is more important than ever for companies to begin share modeling by first assessing internal needs and ensuring sufficient funding for critical talent initiatives, rather than focusing solely on proxy advisor guidelines.
These days, everyone’s got an opinion on executive pay – even the Pope! This article from The Guardian is one of several sources that recaps remarks that Pope Leo made in his first media interview – to Crux, a Catholic-focused newspaper. He had this to say when discussing why the world is so polarized:
Add on top of that a couple of other factors, one which I think is very significant is the continuously wider gap between the income levels of the working class and the money that the wealthiest receive. For example, CEOs that 60 years ago might have been making four to six times more than what the workers are receiving, the last figure I saw, it’s 600 times more than what average workers are receiving. Yesterday the news that Elon Musk is going to be the first trillionaire in the world. What does that mean and what’s that about? If that is the only thing that has value anymore, then we’re in big trouble…
Will the Pope’s remarks affect upcoming faith-based voting policies? Here’s what ISS’s Catholic US Voting Guidelines currently say for shareholder proposals on limiting executive compensation:
▪ Vote for proposals to prepare reports seeking to compare the wages of a company’s lowest paid worker to the highest paid workers.
▪ Vote case-by-case on proposals that seek to establish a fixed ratio between the company’s lowest paid workers and the highest paid workers.
The say-on-pay sections are not much (or any?) different from the regular benchmark policy – they focus on alignment of pay & performance, excessive risk taking, etc.
I sorta doubt the Pope’s remarks are going to make a dent in executive pay practices and voting outcomes, but like his predecessor, Pope Leo is a member of the Jesuit order – and as John has pointed out, you can never underestimate the Jesuits.
The Pope will not be speaking at our upcoming “2025 Proxy Disclosure & 22nd Annual Executive Compensation Conferences” – but plenty of folks who are steeped in compensation practices, SEC disclosure rules, and corporate governance will be there. Check out the full agenda – two days of great info on the many regulatory and practical updates we expect going into the 2026 proxy season – and here are the fabulous speakers. The Conferences are happening in Vegas on Tuesday & Wednesday, October 21st & 22nd. Fly in on Monday, October 20th, to join us at our 50th anniversary celebration!
Register now to attend in person or virtually. You can also reach out to our team by emailing info@ccrcorp.com or calling 1.800.737.1271.
We’ve noted a couple of times on this blog that Glass Lewis is updating its say-on-pay methodology for the upcoming proxy season. The proxy advisor has now launched a new pay for performance modeling tool that is built on the updated assessment methodology – which companies can use to forecast scores and analysis that investors will see in 2026. Companies can download the modeler on the Glass Lewis website.
Meredith recently blogged about engagement topics following a low say-on-pay vote. This memo from ClearBridge Compensation Group looks at the characteristics of the 29 companies that failed say-on-pay in 2024 – and what they said in 2025 about their compensation programs. Here were some of the most common changes:
– Commitment to No/Limited New Special Awards – 41%
– Increased Disclosure of Incentive Metrics/Goals – 34%
– Modified Performance Share Unit Metrics – 31%
– Decreased CEO Target Compenstion – 28%
– Increased Weighting of Performance-Vested LTI – 21%
– Added or Modified Stock Ownership Guidelines – 10%
ClearBridge notes that 92% (~27) of the companies that failed say-on-pay in 2024 achieved majority support in 2025. That’s good news, although the memo doesn’t specify whether the companies also reached the higher thresholds needed to get credit with ISS and Glass Lewis, which are described in Chapter 19 of “Lynn & Borges’s Executive Compensation Disclosure Treatise.” Mark Borges also recently blogged about an example of “responsiveness” disclosure on his “Proxy Disclosure Blog” on this site.
If you’re not already a member with access to those resources and the rest of our content library, sign up today so that you’re ready for the upcoming proxy season! New members can take advantage of our no-risk 100-day trial by signing up online, calling 800-737-1271, or emailing info@ccrcorp.com.
As I shared last month, many investors still like performance-based awards and it’s unlikely that companies will entirely abandon that structure anytime soon. At the same time, if you’ve worked with companies that grant options, you know that it can come as a surprise and create more than a small amount of resentment that this type of award is not considered “performance-based” – even though it is only valuable if the stock price increases.
Those companies, and others that just like to have more flexibility in plan design, were happy to see (via proxyadvisor surveys) that some investors may be open to giving “credit” for equity awards that vest over a 5-year period or have some combination of a vesting plus holding requirement that reinforces executives’ alignment with long-term stock performance. If proxy advisor policies do become more flexible, this FW Cook blog discusses some things to think about if your company considers shifting its equity mix to incorporate stock options. Here are the three main concepts (paraphrased):
1. Options may be more effective than time-based restricted stock when it comes to maintaining leverage in long-term incentive programs, because a greater number of stock options than restricted shares are granted for a given award, and they allow for leveraged, pre-tax wealth accumulation over a longer time period.
2. Not all institutional investors may view long-horizon restricted stock as performance-based. Depending on a company’s ownership profile, certain investors may perceive the company as having a performance-based LTI program if they use a blend of long-horizon restricted stock and stock options. To add more certainty that investors (and proxy advisors) assess an LTI program as performance-based while avoiding the need to set multi-year financial goals, companies could add stock price hurdles (i.e., 15% cumulative stock price growth over three years) to stock options before any vesting or could grant premium-priced stock options.
3. Higher market volatility may make stock options more appealing. Volatility often increases the magnitude of in-the-money exercise opportunities for executives, and it also increases the accounting cost per stock option, which reduces share usage for companies that have dollar-denominated equity programs.
I mentioned the proxy advisor policies. The FW Cook blog highlights how influential those policies have been in shaping compensation practices, along with accounting standards. That’s contributed to the homogenization of executive pay that Meredith recently discussed – where differences in pay structures and effectiveness turn on subtle details. The FW Cook team explains a couple of inflection points that have affected pay practices:
The 2007 and 2008 FW Cook Top 250 Long-Term Incentive Reports described the reallocation of long-term incentives from stock options as the sole LTI vehicle to a portfolio approach of stock options and full-value shares (performance shares or restricted stock). The primary driver of the change was the implementation of Accounting Standards Codification (ASC) Topic 718 (formerly known as FAS 123R), which resulted in a charge to earnings for granting stock options and a greater focus on controlling potential shareholder dilution.
A few years later, the 2011 FW Cook Top 250 Long-Term Incentive Report marked the first time in the history of the report that the prevalence of performance shares was higher than stock options, reflecting the advent of Say on Pay and the increased influence of proxy advisors, such as Institutional Shareholder Services (ISS) and Glass Lewis. Neither ISS nor Glass Lewis credits time-based stock options as performance-based, so companies implemented performance shares at higher rates to receive credit for performance-based LTI programs and bolster the likelihood of a “For” vote recommendation on Say on Pay from the proxy advisors.
Obviously, proxy advisor policies are not the only driver when it comes to structuring executive pay programs, but it does look like companies have tried to do what investors say they want.
As John shared last Friday on TheCorporateCounsel.net, the SEC’s Spring 2025 Reg Flex Agenda was released late last week. Here’s where things stand on some of the potential SEC rules that we’ve been following:
John said this is probably the most issuer-friendly Reg Flex Agenda he’s ever seen and, based on SEC Chairman Paul Atkins’ statement on the Agenda, that seems by design.
While executive compensation disclosures and equity practices may be implicated in some of the above topics (e.g., EGC accommodations, shareholder proposals), John pointed out that all of the SEC’s recent activity on the executive comp disclosure front is not specifically called out in the Reg Flex Agenda. He guessed that proposed changes to those rules may be part of the “Rationalization of Disclosure Practices” agenda item – and that agenda item’s title suggests that there may be more areas of the public company disclosure regime that the SEC is thinking about revamping.
John’s blog notes that this is also one of the most ambitious Reg Flex Agendas he’s ever seen. Corp Fin has its work cut out for it — and a newly named Corp Fin Director coming in to lead the charge!
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The IRS has finally rolled out a way to submit Section 83(b) elections through an online filing system. Until very recently, taxpayers were obligated to write a letter to the IRS to claim the Section 83(b) election and mail that letter to their designated IRS office within 30 days.
The IRS adopted a one-page standard form for a Section 83(b) election that incorporates the requirements of Treasury Regulations Section 1.83-2 and IRS Revenue Procedure 2012-29 (Form 15620). This is a streamlined way to notify the IRS of the election, but taxpayers are still permitted to use alternative forms.
The adoption of IRS Form 15620 paved the way for electronic filing of Section 83(b) elections, which the IRS launched earlier this year. Taxpayers who want to submit the election online must sign in or create a new account on the IRS’s ID.me page, complete IRS Form 15620 on the IRS website and then either submit the completed form electronically (preferred method) or download the completed form and file it by mail.
This Sidley alert highlights some quirks of the online filing system that filers and companies should be aware of:
A cap on quantity. Each online filing currently accepts a maximum of 999,999 securities per submission. Very large founder grants and early-exercise option exercises can exceed this.
Two-decimal input for per-security values. The online form only allows two decimal places for the fair market value per security and the amount paid per security. This could be a problem for many typical startup early common stock prices (e.g., US$0.0001 per share) and a source of rounding noise in the form’s auto-calculated totals.
With these issues in mind, the alert suggests:
– Quantity: If your grant runs over [the] limit, consider filing by mail on paper Form 15620 (or a compliant letter election) to preserve accuracy and avoid partial filings until the online tool is updated.
– Per-security value: In our view, where the amounts are not material, rounding in a manner that is most conservative from a tax perspective is the better approach. The election’s legal effect is to include in income the difference between the fair market value and the purchase price of the underlying security as of the transfer date (thus eliminating the need to later include the value of the underlying securities in income as they vest), so if the per security purchase price is a fraction of a cent the total purchase price (or taxable spread) may not be material.
Additionally, a filer’s actual cost basis and consideration paid and actual fair market value determinations are evidenced by the grant/purchase documents and other records and should be reflected on the applicable tax return, as well as in the company’s records. (For avoidance of doubt: keep precise calculations and documentation in your files, and if the chosen rounding convention results in a material difference in basis or taxes consider doing a paper filing with the correct fractional purchase price and/or correct fractional fair market value.)