The Advisors' Blog

Over on TheCorporateCounsel.net, we’ve been sharing a few “blocking & tackling” reminders for our members who are beginning to think about their Form 10-K and proxy statement. This blog from Winston & Strawn (soon to be Winston Taylor) shares reminders specific to executive compensation. Here’s an excerpt:

– Pay vs. Performance – The 2025 proxy season marked the third year that companies provided pay versus performance (PVP) disclosures under Item 402(v) of Regulation S-K. Large accelerated filers, which first became subject to the rule at its effective date, have now completed the phase-in period and, for the first time, are providing a full five years of PVP disclosure. [… Even though PVP as we know it may be withdrawn,] companies should be prepared to include the usual disclosure in their 2026 proxy statements and take note of any phased-in requirements to which they are newly subject. The SEC continues to require inline XBRL tagging for PVP disclosures, but SRCs are exempt from this requirement until their third filing of PVP disclosures. Therefore, some SRCs may still be exempt for the 2026 proxy season, depending on their individual filing history.

– CEO Pay Ratio Disclosure – Companies are likely familiar with the requirement to disclose in their proxy statements a ratio comparing their CEO’s total compensation (which covers all the components of total compensation disclosed in proxy statements, including base salary, bonus, and equity and non-equity incentives) to the total compensation of a median employee. Although companies may refer to the same median employee for up to three years, those that have undergone significant changes to their workforces or their employees’ compensation may need to redetermine a median employee sooner. Companies making significant workforce adjustments in 2025 should prepare for any required adjustments to their pay ratio disclosures as early as possible.

– Pay Adjustments – In addition to companies dealing with low say-on-pay vote results from last year, any company that has made adjustments to 2025 compensation will need to address these matters in this year’s CD&A. Clear and effective narrative explanation of the rationale for such adjustments, including how they align with company goals, performance outcomes, and board oversight, will be increasingly important to demonstrate responsiveness to shareholder feedback and governance best practices in the 2026 proxy season.

– GAAP Reconciliation – Companies are not required to provide a GAAP reconciliation when disclosing non-GAAP performance targets or results compared to performance targets in the CD&A, provided that they explain how these figures were calculated from their financial statements. However, for all other purposes, companies must include a GAAP reconciliation when disclosing non-GAAP financial measures. Companies may provide this reconciliation in an annex to the proxy statement with a conspicuous cross-reference or by conspicuous cross-reference to a reconciliation in their Form 10-K.

The blog also urges companies to plan ahead for any new or amended equity compensation plans – in particular, now is the time to start modeling overhang:

As a reminder, when determining whether to recommend “for” or “against” an equity compensation plan proposal, ISS applies its own “equity plan scorecard.” Specifically, the ISS scorecard evaluates three key pillars: (i) plan cost, (ii) plan features, and (iii) the company’s historical grant practices.

Companies should review their equity compensation plan proposals with their independent compensation consultants and assess whether such proposals are likely to receive a positive scorecard result and favorable ISS recommendation when considering issues like the size of the plan’s share pool and the company’s overhang and burn rate. Given increasing investor focus on dilution and overhang, companies should engage with compensation consultants early to model share utilization scenarios under different plan proposals.

Of course, this isn’t just the season for proxy disclosure – we’re also heading into the time of year when many compensation committees will be considering executive pay structures for 2026. The blog points out that AI-related responsibilities and goals may factor into this year’s plans:

Additionally, as artificial intelligence (AI) becomes a strategic priority for an increasing number of businesses, companies have begun to expand the responsibilities of their executives or even added new executive-level roles focused exclusively on AI. Expanding the responsibilities of existing executives may justify increased compensation, while new hires may command high sign-on bonuses in the current competitive talent market. Companies should be ready to justify these compensation decisions, especially while benchmarking data is limited. Since companies will vary greatly in how critical AI is to their business, an individualized assessment and explanation is key. If companies choose to use performance awards with metrics based on the successful adoption of AI, they should also consider how they will measure and disclose performance achievement of those metrics.

Altogether, these are good reminders that a little upfront work can go a long way toward a smoother 2026 proxy season.

– Liz Dunshee