I’m not fluent in ERISA, but I still appreciated the takeaways from the Fourth Circuit’s decision last month in Milligan v. Merrill Lynch highlighted in this Gibson Dunn alert. The Fourth Circuit addressed whether Merrill Lynch’s WealthChoice Award program, which provided annual contingent cash awards to select high-performing financial advisors who remained continuously employed through an eight-year vesting period, was an ERISA-covered pension plan. A former advisor forfeited unvested awards when he voluntarily resigned, and filed a class action lawsuit alleging that the program violated ERISA’s vesting and anti-forfeiture requirements.
The court []surveyed decisions from other circuits and identified a non-exhaustive list of factors relevant to determining whether a program is a bonus payment plan rather than an ERISA pension plan:
– whether the program contemplates universal employee participation or imposes heightened eligibility requirements;
– whether the program is funded with money that would otherwise be immediately payable to the employee;
– whether the program is actually funded or instead involves phantom or notional investments;
– whether employees can unilaterally postpone payment until termination or beyond;
– whether the program is presented as a vehicle for obtaining retirement income; and
– whether firm performance affects program payments.
The court emphasized that these factors are not exhaustive and that not every factor must be present in every case.
Applying those factors, the Fourth Circuit held that the WealthChoice Award program “comfortably qualifie[d] as a bonus payment plan.” The court emphasized that the program was limited to high-performing advisors who met production thresholds; awards were contingent on continued employment and were not funded with money employees were otherwise immediately entitled to receive; notional accounts were unfunded and unsecured; vesting triggered automatic and mandatory payment; approximately 92% of advisors who were paid WealthChoice Awards between 2018 and 2024 were current employees; and the program was communicated as a retention and business-alignment incentive, not as a pension or retirementincome vehicle.
This may be the expected conclusion, but the alert says there are still some helpful structuring and communication takeaways from the facts the Fourth Circuit emphasized in its decision. For example:
– Long vesting periods do not necessarily create an ERISA pension plan. The Fourth Circuit rejected the notion that an eight-year vesting period, standing alone, transformed the WealthChoice Award program into an ERISA pension plan. The key question was not simply whether payment was delayed, but whether the program systematically deferred
income until termination or retirement or was designed to provide retirement income.
– Program design and communications matter. The court relied on how Merrill Lynch described and structured the program. Employers seeking non-ERISA treatment should consider whether plan documents, award agreements, and employee communications consistently describe the program as a bonus, incentive, performance, or retention arrangement—not as a retirement, pension, deferred compensation, or savings program.
– Employee control over payment timing can be important. The court distinguished arrangements in which employees may elect to defer compensation or choose payment at termination or retirement. In Milligan, advisors could not unilaterally defer payment; once the vesting conditions were satisfied, payment was automatic and mandatory. That
feature supported non-ERISA treatment.
– Unfunded notional accounts may support bonus-plan treatment. The program’s use of unfunded, unsecured notional accounts indexed to reference investments did not convert the arrangement into an ERISA plan. The court viewed those features as consistent with a contingent promise to pay a bonus, not as evidence that employees had deferred earned income.
On May 5, the SEC proposed amendments that would allow public companies to elect to file semiannual reports on new Form 10-S, rather than filing quarterly reports on Form 10-Q. For companies that may be interested in taking advantage of optional semiannual reporting, should the proposed rules be finalized, there are many considerations to work through — including some executive compensation-related considerations. This Pearl Meyer alert notes that semiannual reporting might implicate:
– Annual incentive plans that are informed by quarterly reporting (e.g., interim performance reviews or explicit quarterly modifiers)
– Existing contractual commitments like incentive-based compensation arrangements tied to quarterly performance (though rare)
– Communicating pay-for-performance alignment (to use only annual or multi-year narratives)
There are also implications related to transactions in the company’s equity, like:
– Potentially longer blackout periods
– The decision to release information more frequently than semiannually to accommodate trading by employees
This Pearl Meyer alert says that companies aren’t waiting for new executive compensation disclosure rules to start transitioning the Compensation Discussion & Analysis sections of their proxy statements to focus more on how compensation committees think about their compensation programs. This includes “expanding their discussion of goal-setting processes, the role of discretion, and how compensation programs respond to both planned and unplanned business conditions.”
Even in the absence of finalized SEC rules, current proxy disclosures offer an early indication of where executive compensation disclosure is heading—and what will be required to do it well. This proxy season, many companies are recalibrating CD&A content toward more deliberate, decision-focused narratives that better align with how compensation committees actually evaluate performance and make pay decisions.
This is not a move away from rigor or quantitative disclosure. Rather, it reflects growing pressure from investors and proxy advisors to understand the framework and discipline behind those outcomes—predominantly how performance targets are set, calibrated, and assessed over time.
Companies with these evolved CD&As are ensuring their disclosures are:
– Articulating how targets incorporate internal budgets and external market conditions
– Explaining how “rigor” is defined and tested
– Describing how compensation committees apply judgment in determining final payouts
The alert also suggests that a simplification of the requirements may not necessarily reduce the burden on internal teams since market expectations may require “more planning, stronger internal processes, and more thoughtful communication.”
Zayla Partners recently took an early look at 2026 proxy disclosures to glean insights into pay design trends. Here are the five key early-season trends that they identified:
rTSR Modifiers: Large-caps are adding relative TSR modifiers to LTI plans — calibrating absolute payouts against peers to counteract rising/lowering tide impacts.
AI in Pay Design: At this stage, trends are industry-linked. Techs like Microsoft and IBM explicitly linked compensation program changes to AI strategy execution. For these companies, AI is now a structural rationale, not just narrative context. Side note, the number of “AI” references in 2026 Q1 was greater than “earnings” references.
PSUs are Standard: While proxy advisory firm policy changes weren’t announced until late in 2025, we note one of the key updates involved the “acceptance” of more time-vested awards in the mix. However, early filers are indicating 60% performance-weighted equity is consolidating as the standard for seasoned NEOs. Newly promoted executives typically receive transitional time-based grants.
Succession Planning in Focus: Speaking of newly promoted executives, succession planning is creating complexity in both plan designs (as noted above) and in disclosure burdens. Oracle and Celanese are two early filer examples of these points.
Engagement as Infrastructure: Year-round, committee-led engagement with named institutions — and documented program changes in response — is now a disclosure expectation, not a best practice. Expect this to continue as institutions lessen focus on proxy advisor firms and if SEC disclosure requirements change.
They dive deeper into these five trends in the blog. Here’s what they say about the rTSR modifiers:
Pressure for relative performance measurements has been increasing of late, thanks to market unpredictability. Large-cap companies are adding rTSR modifiers to long-term incentive plans as a result. IBM’s 2026 proxy is the clearest early example: rather than replacing its core operational metrics, the company introduced a modifier that adjusts payouts based on whether TSR outperformed or underperformed its performance peer group.
This is a meaningful design change. Modifiers allow committees to keep metrics that best capture business performance — free cash flow, operating EPS, ROIC — while meeting both the investor concern that strong absolute results during a broad market rally can produce outsized pay and the management concern that an over-reliance on absolute performance metrics can create “no win” scenarios if macro conditions are overly unfavorable.
The key design details boards should understand:
– Modifier ranges are typically ±10–20% of target; ranges outside this band attract scrutiny;
– Peer group definition matters as much as the modifier itself — vague peer groups undermine the mechanism;
– ISS and Glass Lewis view rTSR modifiers favorably; their absence is increasingly a talking point in SOP analyses, including scenarios where companies don’t have negative absolute TSR cutbacks.
Speaking of 2026 proxy disclosures, I’m excited to hear more insights during our upcoming webcast, “Proxy Season Post-Mortem: The Latest Compensation Disclosures 2026.” Go to the webcast landing page and add it to your calendar (it’s Wednesday, June 10, at 2 pm ET) so you don’t miss out on hearing all about interesting compensation disclosures this proxy season from Mark Borges of Compensia, Dave Lynn of CompensationStandards.com & Goodwin and Ron Mueller of Gibson Dunn.
A recent review by FCLT Global of 2,100+ global public companies suggests that companies have stronger long-term performance when independent directors have “skin in the game.” Here are a few key takeaways:
Across our analysis, companies with increasing and durable board ownership significantly outperformed over a five-year period. A sustained rise in director equity ownership over that timeframe is associated with:
– 35–40 percentage points higher total shareholder return.
– Approximately 50 percentage points higher risk-adjusted returns.
The data also highlights what happens when ownership declines. Companies where independent directors reduced their holdings saw materially weaker outcomes, including:
– An average decline of 9.7 percent in TSR.
– 11 percent reduction in risk-adjusted returns.
Beyond returns, the research shows that board ownership is linked to how companies make decisions. Higher director ownership is associated with greater investment in innovation, with roughly 3 percent higher R&D intensity relative to revenue. At the same time, companies where directors hold more equity than executives exhibit significantly lower volatility — reduced by more than 50 percent over five years.
However, the report calls out that the positive results hinge on appropriate design of equity ownership plans and holding periods – and those structures aren’t all that common. Here’s another excerpt:
Despite these implications, structured and durable board ownership remains uncommon across public markets. As the next section explores, a combination of short-term pressure, governance norms, incentive design, and investor dynamics has limited the extent to which the evidence on board ownership has translated into practice.
To avoid these pitfalls, the report offers these tips:
The same evidence and practitioner insights that highlight the risks of symbolic or short-lived ownership also point to concrete design features that appear more consistent with long-term alignment.
– Meaningful and sustained equity ownership, typically reflected in holding periods of 5 years or more
– Ownership aligned with the full arc of board service, including expectations that extend through tenure and, in some cases, beyond departure
– Meaningful ownership held by independent directors, supporting effective oversight and long-term perspective relative to executive ownership
– Ownership that is broadly understood and accepted by long-term investors, reinforcing good judgment without undermining independence
Tune in tomorrow for our webcast – “The Top Compensation Consultants Speak” – to hear Blair Jones of Semler Brossy, Ira Kay of Pay Governance and Jan Koors of Pearl Meyer discuss what compensation committees should be learning about – and considering – today. Among other topics, this program will cover:
– The Compensation Committee Landscape in 2026
– 2026 Say-on-Pay Outcomes and Challenges
– Aligning and Disclosing Pay and Performance
– Special Awards Under the Microscope: Retention, Sign-On, Make-Whole and “Moon Shot”
– 2026 Equity Plan Approval Outcomes and Challenges
– Time-Based vs. Performance-Based Equity: Rethinking Vehicle Mix and Award Design
– Shifting Proxy Advisor Power: Be Careful What You Wish For?
– Competitive Strengths of the US Executive Pay Model
– Compensation Committees and AI
– Compensation Consultants’ View of Potential Disclosure Rulemaking
Members of this site can attend this critical webcast (and access the replay and transcript) at no charge. Non-members can separately purchase webcast access. If you’re not yet a member, you can sign up for the webcast or a CompensationStandards.com membership 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.
We will apply for CLE credit in all applicable states (with the exception of SC and NE which require advance notice) for this one-hour webcast. You must submit your state and license number prior to or during the live program. 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.
As we enter the height of annual meeting season, you may be getting questions about say-on-pay trends across the market. Here are Semler Brossy’s observations from say-on-pay votes as of late April:
• The current Russell 3000 average vote result of 92.1% is 150 basis points higher than the index’s 2025 full-year average
• The current S&P 500 average vote result of 91.6% is 220 basis points higher than the index’s 2025 full-year average
• The current Russell 3000 average vote result is 50 basis points higher than the current S&P 500 average vote result
• These initial summary vote results continue a multiyear trend of positive early-season vote support; it is still a small sample and summary results are likely to change over the course of the year
• 6.9% of Russell 3000 companies and 5.0% of S&P 500 companies have received an ISS “Against” recommendation thus far in 2026
• It is still early in the proxy season; the Russell 3000 ISS “Against” recommendation rate started lower (5.0%) at this time last year and increased over the course of the proxy season
Here’s what the write-up says about equity plan support so far:
• Average vote support for equity proposals thus far in 2026 (87.3%) is 220 basis points below the average vote support observed at this time last year (89.5%)
• No companies have received vote support below 50% in 2026
• ISS has recommended “Against” 29.7% of equity proposals, which is 240 basis points below the 2025 full-year rate (32.1%)
• Average support for equity proposals that received an ISS “Against” recommendation thus far in 2026 (76%) is aligned with average vote support observed for companies that received an ISS “Against” in the past decade (75%)
In April, the SEC’s Office of Mergers and Acquisitions issued an exemptive order providing issuers and, in some cases, third party bidders with the flexibility to shorten the time period during which tender offers for equity securities must be open from 20 to 10 business days. In order to take advantage of the shorter tender offer period, the tender offer must satisfy several conditions, which vary depending on whether the target is a reporting or a non-reporting company.
The exemptive order isn’t just relevant to M&A. This Cooley alert explains how the new guidance can also help companies with equity award tenders in some circumstances. Here’s an excerpt:
Because of the conditions attached to the reduced 10-day tender period, the SEC relief should generally work in favor of companies, but it is limited. For both private and public company equity award tender offers, the 10-day window is effectively limited to company self-tenders for cash. Notably, it does not apply to tender offers in connection with repricings, modifications or option exchanges – areas where incentive equity compensation often implicates the tender offer requirements.
In the right circumstances – for instance, an option award buyback – a company will now be able to launch and close a cash tender offer more quickly than has been the case in the past, and can do so without inadvertently disqualifying options intended to qualify as incentive stock options.
Two caveats to note:
– First, because of the procedure used to grant the relief, it may be revoked by the SEC at any time.
– Second, and more importantly, the tender offer rules remain a highly technical and complicated thicket requiring great care to successfully navigate.
If you’re wondering about the impact of the SEC’s tender offer rules on option repricings, check out Meredith’s blog from last year as a starting point.
Here’s something Dave shared yesterday on TheCorporateCounsel.net about an announcement by the Division of Investment Management:
The SEC’s Division of Investment Management and Division of Corporation Finance recently provided guidance regarding the federal securities implications of pooled employer plans (also known as “PEPs”), which are defined contribution retirement plans that permit multiple, unrelated employers to join together in a single plan. These types of plans can be particularly attractive for small businesses seeking to provide retirement plan benefits to employees.
In its Staff Statement Regarding Pooled Employer Plans, the Division of Investment Management provided its views regarding the applicability of the “single trust exclusion” in Section 3(c)(11) of the Investment Company Act to pooled employer plans, as well as the applicability of Securities Act Rule 180 to interests in collective investment trusts maintained by a bank and issued to those pooled employer plans that cover self-employed individuals.
In parallel, the Division of Corporation Finance updated its Corporation Finance Interpretations (CFIs) to address two interpretive issues relating to pooled employer plans. In new Securities Act Sections CFI Question 118.01, the Staff states:
Question: Are pooled employer plans (“PEPs”) eligible to claim the Section 3(a)(2) exemption for any interest or participation in a “single trust fund”?
Answer: The staff will not object if a PEP that meets the qualification requirements of ERISA and Section 401 of the Internal Revenue Code and otherwise meets the conditions of Section 3(a)(2) claims the Section 3(a)(2) exemption for any interest or participation in a “single trust fund” even though multiple, unrelated employers participate in the PEP. As with any plan that meets the exemption in Section 3(a)(2), the offers and sales of any securities in connection with the PEP are subject to the anti-fraud provisions of the Securities Act. See Section 17(c). In addition, the exclusion in Section 3(a)(2) for investments in employer securities would apply. Therefore, if a participating employer offers its own securities to its employees as an investment option in a PEP, the Section 3(a)(2) exemption would not be available for the plan interests offered to the employees of that employer. Please refer to Securities Act Forms CFI [126.45] regarding the availability of Form S-8 to register the offer and sale of an employer’s own securities and the plan interests in connection with a PEP at https://www.sec.gov/rules-regulations/staff-guidance/compliance-disclosure-interpretations/securities-act-forms. For the views of the staff of the Division of Investment Management regarding the application of section 3(c)(11) of the Investment Company Act of 1940 and rule 180 under the Securities Act to PEPs, see here.
Question: An employer participant in a pooled employer plan (“PEP”) offers its own securities to its employees as an investment option in the PEP, such as by offering an employer securities fund in which employee contributions may be invested. May the employer use Form S-8 to register the offers and sales of those securities? If so, must the PEP also register the offer and sale of plan interests on that form?
Answer: An employer participant in a PEP may register on Form S-8 offers and sales of its own securities to eligible employees. In addition, the PEP must register the offer and sale of plan interests to the employees of that employer on the same Form S-8. Along with the employer registrant’s signatories, the PEP’s trustees or other persons who administer the PEP must sign the Form S-8 for the plan. See Instruction 1 as to Signatures on Form S-8.
Alternatively, the staff will not object if the employer files a Form S-8 to register the offering of its securities to its employees and the PEP separately files its own Form S-8 to register plan interests offered and sold by the PEP to the employer’s employees, as long as the employer, in addition to incorporating its own periodic reports, incorporates the PEP’s periodic reports by reference into its Form S-8. If filing a separate Form S-8:
• The PEP should register an indeterminate amount of plan interests in accordance with Rule 416(c).
• The staff will not object if the PEP applies Rule 457(h)(2) by analogy and does not pay a fee for the registration of the offer and sale of the plan interests as long as the PEP includes a reference to the employer’s related Form S-8 by name and file number and provides a hyperlink to the filing.
• The PEP’s Form S-8 need only incorporate the documents related to the plan in order to comply with Item 3.
• The employer and the PEP must ensure that investors receive all of the information constituting a Section 10(a) prospectus pursuant to Rule 428 and that such information is updated in accordance with General Instruction G of Form S-8.
• The staff will not object if a PEP registers plan interests offered and sold to employees of multiple employers on a single Form S-8 as long as each employer’s separate Form S-8 is referenced and hyperlinked. [May 4, 2026]
We now have more data on CEO pay trends from 2026 proxy disclosures — this time from ISS-Corporate. They reviewed 2026 proxy disclosures by 318 companies in the S&P 500 with no CEO turnover in the last two years. Here’s what they found:
– Median CEO pay […] stood at $17.7 million. More than 74 percent of S&P 500 CEOs in the study received a pay increase while compensation fell for the remaining 26 percent.
– For the segment of companies that increased pay for their chief executives, the median change was 15.6 percent, while compensation decreased by a median of 9.5 percent among those companies where pay dropped.
– Notably, pay increased by more than $10 million for 27 CEOs, and 21 CEOs saw their pay more than double in 2025.
– Median CEO pay increased for these large cap companies by 10.6 percent from the 2025 to 2026 filing periods, the analysis found, representing an acceleration from the 7.5 percent rise observed between the 2024 and 2025 filing periods.
While increases in base salary were modest, as is often the case, growth was primarily driven by an increase in the value of new equity awards.