After a significant increase in 2023, this Pay Governance alert analyzing historical trends in CEO actual total direct compensation (TDC) shows that CEO pay moderated a bit in 2024, increasing by 5%, at median, over the prior year, which the alert describes as modest given TSR performance during the year.
TSR performance remained exceptionally strong for the second consecutive year. This sustained TSR performance reflects a robust equity market environment and reinforces the continued recovery from the volatility and negative TSR experienced in 2022. While CEO actual TDC increases were positive, this level of growth is more modest than the increases typically observed during periods of elevated TSR performance. One likely contributor to the pace of pay growth in 2024 is the substantial +14% increase in CEO actual TDC in 2023, which followed the rebound in market performance after 2022. The compensation actions taken in 2024 reflect a shift back towards more normalized year-over-year adjustments after a year of significant upward adjustment.
Here’s the alert’s description of longer-term trend data:
From 2010 through 2023, S&P 500 CEO actual TDC increased steadily, generally in line with TSR cycles. Actual TDC growth was modest in the early 2010s, accelerated during strong equity markets from 2017 to 2019, remained flat in 2020 amid COVID-related disruption, and increased more meaningfully from 2021 to 2023 as TSR and company performance rebounded.
CEO actual TDC outcomes have historically tracked S&P 500 TSR performance. Median CEO actual TDC reached approximately $16.1M in 2023, reflecting a 14% year-over-year increase supported by strong S&P 500 TSR of approximately 26%. In 2024, median CEO actual TDC grew at a more moderate pace, rising by only 5%, from $16.1M to approximately $17M (Figure 1).
In terms of LTI, while Pay Governance expects performance shares to continue to dominate CEO pay, they also anticipate that use of PSUs has peaked, given ISS’s recent policy change that looks more favorably on extended time-vested equity.
In mid-January, ISS-Corporate announced the release of a report on CEO perks covering fiscal 2024, which represented a five-year high in terms of the number of S&P 500 companies reporting at least one perk (70%). The number of Russell 3000 companies providing at least one perk stayed steady at 43%. The announcement gives more detail on personal use of corporate jets and personal security services.
Personal use of corporate aircraft remains among the most common perquisites provided to CEOs, the study found. In Fiscal Year 2024, more than 41 percent of S&P 500 CEOs were provided this benefit, reaching a new peak and continuing a positive trend exhibited in recent years; median value of the perquisite of use of corporate aircraft decreased slightly from the previous year to $149,379. For Russell 3000 companies (excluding companies included in the S&P 500), corporate aircraft usage began to stall in 2024, experiencing a minor drop in prevalence to 7.9 percent.
The prevalence of security perquisites continues to increase for the S&P 500 and Russell 3000, with the largest annual increases in prevalence seen in 2024 for both indexes. The prevalence of security benefits among S&P 500 companies now stands at a five-year high, with 22.5 percent of companies offering the perk. Adoption rates in the remaining Russell 3000 companies remain low at just 2.7 percent of the index but nevertheless increased significantly in 2024.
The report notes that security spend has definitely increased again in fiscal 2025. While the report found that greater perks correlated with lower say-on-pay outcomes, investors seemed focused on outliers that fail to provide supporting disclosure. As Liz recently shared, ISS’s FAQ updates clarify that ISS is unlikely to raise significant concerns for relatively high executive security-related perks, as long as the company discloses a reasonable rationale (like an internal or third-party assessment) and a broad description of the security program and its connection to shareholder interests.
On Friday, Corp Fin Staff released updated Regulation S-K CDI 217.01. The update provides additional clarity on the need for historical compensation information for a spun-off registrant. The CDI now reads:
217.01 In the context of a spin-off transaction and in subsequent filings, historical Item 402 compensation information for a spun-off registrant may not always be required. A spun-off registrant should focus its analysis on whether, before the spin-off, it operated as a separate division or standalone business of the parent and, if so, whether there was continuity of management. For example, where a spun-off registrant consists of portions of different parts of the parent’s business or has new management who will be named executive officers after the spin-off, compensation information for the named executive officers for periods before the spin-off would not be required. In contrast, if the parent spun off a subsidiary that conducted one line of its business, and, before and after the spin-off, the executive officers of the subsidiary: (1) were the same; (2) provided the same type of services to the subsidiary; and (3) provided no services to the parent, historical compensation disclosure likely would be required. When historical compensation is not required, the registrant need only report compensation awarded to, earned by, or paid to the spun-off registrant’s named executive officers in connection with and following the spin-off. [Jan. 23, 2026]
It’s not even February, but it’s fair to say that 2026 has already been full of surprises for me – and most of those surprises are being delivered by our federal government. In the executive compensation sphere, one thing that wasn’t on my bingo card was a January 7th executive order that calls on defense contractors to ramp up production – “or else.” I’m paraphrasing, but as you can see from the fact sheet, the threatened consequences include limiting buybacks – which Dave blogged about last week on TheCorporateCounsel.net – as well as stepping in on executive pay. Here’s an excerpt:
The Secretary shall further take steps to ensure that future contracts permit the Secretary to, upon determining that a contractor is experiencing such issues, cap executive base salaries at current levels (with inflation adjustments permitted) while scrutinizing executive incentives to ensure they are directly, fairly, and tightly tied to prioritizing the needs of the warfighter.
The Order requires that executive incentive compensation under future contracts be tied to on-time delivery, increased production, and necessary operating improvements rather than short-term financial metrics.
As this article from the Federal News Network notes, the President also posted on social media that no executive should be allowed to make more than $5 million, but that didn’t make it into the EO. The article gives this color:
A cap on executive compensation already exists in some form — contractors can pay their executives whatever they choose, but the government only reimburses costs up to a certain limit.
The executive order, however, goes a step further — it’s shifting from how much the government will reimburse the contractor to limiting how much the company can pay its executives.
“Pretty significant difference, but maybe they’ll fall back on the same mechanisms. I don’t know that yet. Nobody in the department is talking yet about how they’re going to implement this. I’m sure they’re still trying to work that out,” Chvotkin said.
“It’s fine to debate executive compensation, in GovCon and across the economy, and whether it is aligned with long term performance. It’s not as simple as saying you can only make ‘X’. Compensation has multiple dimensions and the government’s role in controlling many of them is not at all clear. The EO does nothing to clarify how or by what measures, or even authority, the government plans to do so,” Soloway said.
This McDermott blog gives a bunch of practical suggestions for affected companies – here are a few that relate to executive pay:
Contractors should anticipate that future government contracts may include explicit provisions linking executive compensation to delivery and production outcomes and may also incorporate salary caps or other limits consistent with the administration’s stated priorities. Companies are advised to review current compensation structures and prepare to adjust incentive plans to align with these new requirements.
Review existing government contracts and evaluate those where EO‑driven clauses are likely.
Review past and current performance metrics, with a focus on production levels and on-time delivery rates.
Boards and management should assess whether the prohibition on stock repurchases affects previously issued earnings per share (EPS) guidance. Many companies’ EPS projections assume ongoing buybacks, which reduce the number of shares outstanding and can impact reported EPS. Management, the disclosure committee, and the board should evaluate whether current guidance remains accurate or if updates are needed.
Prepare to demonstrate performance using program‑specific metrics.
Distinguish government‑driven changes or delays from contractor‑controlled factors and document approved baseline changes.
If possible, prepare a narrative that shows month‑over‑month improvements to performance metrics.
If distributions occurred, explain the board’s capital allocation rationale and any simultaneous investments that increase capacity and performance.
The Executive Order could face litigation challenges on the ground that it proposes an unprecedented federal government intrusion upon traditional corporate governance matters such as executive compensation, capital allocation and return of capital for the defense industry. Companies in the defense and other industries will need to carefully monitor developments here to see how any such litigation plays out over time and how the Executive Order is ultimately administered and enforced. More broadly, companies will need to monitor whether the concepts established in this Executive Order expand into other areas of U.S. government contracting.
While the executive order is directed at companies in the defense industry, this administration seems to have zero qualms about involvement with Corporate America. So, companies in other industries may also want to keep an eye on what happens. If the government gets into the business of dictating executive pay arrangements, any excitement about pay-for-performance disclosures getting easier, and proxy advisors getting less powerful, may be short-lived.
As I noted in a blog last fall, the “conventional wisdom” for executive pay is that a high percentage should be “at risk” – i.e., keyed to performance objectives. With such a large portion of executive pay coming in the form of performance awards, it’s important to get the design right. This Meridian alert outlines three best practices that compensation committees should keep in mind:
1. Choose appropriate performance metrics – Metrics need to have the right blend and degree of emphasis on advancing profitability/efficiency vs. growth. This depends on where a company is along the profitability continuum.
2. Set Appropriate Performance Goals – Performance goals – whether for short- or long-term performance incentives, generally require both quantitative and qualitative assessments. It is important to consider not just “target” but the performance range around target (threshold and maximum). The alert shares five perspectives that, in combination, should lead to sound performance goals.
3. Maintain Good Governance and Oversight Process – Process and oversight matter. The alert explains the importance of benchmarking, implementing ownership, vesting and clawback features, communicating clearly, and regularly reviewing and (if needed) adjusting to reflect changes in business strategy and conditions.
Tune in at 2:00 pm Eastern today – Tuesday, January 20th – for our annual 90-minute webcast, “The Latest: Your Upcoming Proxy Disclosures.” We’ll hear from Mark Borges of Compensia and CompensationStandards.com, Alan Dye of Hogan Lovells and Section16.net, Dave Lynn of Goodwin Procter and TheCorporateCounsel.net and Ron Mueller of Gibson Dunn on a variety of compensation “hot topics” – including:
– Status of SEC Executive Compensation Disclosure Requirements
– Other Possible Topics for SEC Review
– Incentive Compensation – Disclosure Considerations for Tariff Challenges and Discretionary Adjustments
– Executive Security and Other Key “Perks” Disclosures
– Investor Perspectives: “Homogenization” and Performance Equity
– Proxy Advisors – Impact of the Executive Order
– Proxy Advisors – Voting Policy Updates for 2026
– Proxy Advisors – Impact of Announced Move Towards “Customization” of Voting Policies
– Proxy Advisors – Status of Legal Challenges in Texas and Florida
– New Challenges with Shareholder Engagement
– Clawback Policies – Lessons from 2025
– Compensation-Related Shareholder Proposals in 2026
– ESG and DEI Goals: Impact of Shifting and Conflicting Perspectives
– Managing Stock Price Volatility When Granting Equity
Members of this site can attend this critical webcast at no charge. If you’re not yet a member, you can sign up 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. The webcast cost for non-members is $595.
We will apply for CLE credit in all applicable states (with the exception of SC and NE who require advance notice) for this 1-hour webcast. You must submit your state and license number prior to or during the live program using this form. 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.
Derek Chien, Vice President, Assistant General Counsel, Synopsys Richard Fields, Head of Board Effectiveness Practice, Russell Reynolds Associates Tracey Heaton, Chief Legal Officer and Corporate Secretary, Heidrick & Struggles J.T. Ho, Partner, Cleary Gottlieb Jennifer Kraft, Former Executive Vice President & General Counsel, Foot Locker
They plan to discuss:
Long-term succession planning
Emergency succession planning
The role of the board and management in succession planning
When an executive chair role may be appropriate
Shareholder perspectives and communications
Executive compensation considerations
Disclosure considerations and requirements
Members of this site can attend this critical webcast at no charge. If you’re not yet a member, you can sign up 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. The webcast cost for non-members is $595.
We will apply for CLE credit in all applicable states (with the exception of SC and NE, which require advance notice) for this 60-minute webcast. You must submit your state and license number prior to or during the program using this form. 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.
Despite their prevalence — actually near ubiquity at large-cap companies these days — the research on whether PSUs actually accomplish their goal is mixed. A recent report, The Debate on Performance Shares—Who Has It Right?, by Charles Tharp and Ani Huang of the CHRO Association lists these key research findings:
– Pay Governance found companies with PSUs show robust alignment of realizable pay (Compensation Actually Paid) with TSR, but not Summary Compensation Table pay. This was the only study to find an advantage with PSUs.
– Farient Advisors’ Marc Hodak showed that PSU-heavy companies paid their CEOs more but delivered weaker shareholder returns.
– Norges Bank found that among their US holdings, firms using PSUs underperformed sector peers without PSUs.
– Virginia Tech Professor Felipe Cabezon found companies that change their pay structure to become more similar to other firms (often, by adopting PSUs) underperform in shareholder returns and firm valuation compared to those with tailored designs.
– WTW reported that “enduring high-performance firms” relied more on stock options, had longer vesting, and fewer metrics—tailoring incentives instead of adopting the most common practice.
Not surprisingly, institutional investors hold varying views on what mix of performance-based or time-based equity is best. In addition to recent proxy advisor survey results, a recent Pay Governance survey found that 37% of large investors surveyed expressed a preference for PSUs, 34% both PSUs and long-vesting time-based RSUs and 24% long-vesting time-based RSUs.
In terms of what the conflicting data and views mean for executive compensation programs right now, the report suggests:
The takeaway isn’t to abandon PSUs overnight but to ensure they are a part of a thoughtful, strategy-driven mix rather than a reflexive adoption of prevailing practice. Ask: Does our LTI mix reinforce our strategy, or just proxy advisor references? Test: Would a more tailored blend—longer vesting, some options, greater ownership— better align with our performance and talent goals? Remember: Homogeneity reduces criticism of incentive design, but it may also reduce shareholder value.
The Delaware Supreme Court may have concluded the Tornetta case by weighing in only on the recission issue, but does the Court’s decision imply that mega awards aren’t inherently unfair to a corporation? This Fried Frank article says:
The decision can be read as implicitly sanctioning the concept of super-sized compensation. The Court of Chancery, in the opinion below, appeared to suggest that super-sized compensation, at least at some extreme point, might be inherently unfair to a corporation and its shareholders. The Supreme Court, however, by leaving the compensation intact and awarding the Plaintiff nominal damages of $1, seems implicitly to have rejected that view. Moreover, although the Supreme Court stated that partial rescission (i.e., reducing the amount of the compensation) would have been a proper remedy if there had been evidence in the record as to what amount of compensation would be fair, the Supreme Court did not remand the case to the Court of Chancery for such evidence to be developed, but instead awarded nominal damages of $1—suggesting that it viewed the Plaintiff as not having been much damaged by the super-sized compensation that was granted.
And this, it suggests, may facilitate mega awards at other companies, especially when considered with the 2025 DGCL amendments and the Trade Desk decision.
Notably, the new safe harbors for controller transactions, provided under the 2025 DGCL amendments to the Delaware General Corporation Law (the “DGCL Amendments”), also will facilitate super-sized compensation for controller-executives. However, for the most part, the only public companies that are likely to want, and to be able, to grant super-sized compensation will be those that, like Tesla, are controlled or semi-controlled, have a superstar CEO, and have the potential for venture capital company-style growth even though a public company . . .
In 2021, The Trade Desk awarded its founder-CEO-controller a ten-year equity-based incentive compensation package of up to $5.2 billion, dependent on specified milestones being met. This package is the largest ever granted, other than Musk’s packages. The package was approved by the company’s board, but not submitted to a vote of shareholders. In In re The Trade Desk (Nov. 6, 2025), the Supreme Court affirmed the Court of Chancery’s dismissal of the suit, on demand futility grounds.
The Court of Chancery had ruled that, although Green is the company’s controller (with majority voting power), the plaintiffs failed to establish with sufficient particularity their contentions that (i) the purportedly independent directors were beholden to Green based on professional, financial, and personal ties, (ii) Green’s attending compensation committee meetings exerted undue influence on the process, or (iii) the minutes of the committee meetings reflected a lack of negotiation over the compensation package.
The article made some pretty interesting predictions:
When large private tech companies (such as the next Facebook or Uber) go public, we expect to see super-sized compensation “baked in.”
[I]n future cases challenging super-sized compensation, the judicial result could be a reduction in the compensation rather than its being left intact . . . Where a plaintiff seeks total rescission, the defendants will face a strategic decision whether to seek to enforce the full compensation, or instead (or in addition) to seek to avoid total rescission by arguing that at least part of the package is fair and submitting evidence into the record as to what amount clearly would be fair.
There may also be some upward pressure on executive compensation more generally, given dramatic increases at the very top of the scale.
On that last point, we’ve noted how Musk’s awards have already had that impact.
This Semler Brossy article asks, “Should compensation be a quiet validation of outcomes or a loud rallying cry for change?” It posits that the second most common reason pay programs fail — even though designed to drive strategy — is because the company doesn’t use the pay design to effectively communicate priorities. Here’s an example:
A retail chain emphasizes “increasing the percentage of online sales” for its executives, but the targets are set at 90% achievement rates. Since the percentage is easily achieved, these bonuses become an entitlement, not an incentive.
Between the two communication approaches, when is one better than the other? It concludes:
Go prominent when strategy is changing—turnarounds, new business models, M&A integration—or when performance has plateaued and you need a behavioral shift. Prominent programs also work when employee surveys show confusion about priorities, when the market is forcing existential choices, or when you need the entire organization rowing in the same direction on 1-2 critical outcomes.
Go quiet after you’ve hit strategic milestones and need to steady the ship, or when employees report ‘compensation fatigue’ from constant plan changes. Choose this approach when operational execution is solid, strategy is stable, and over-communication risks making pay feel engineered or manipulative. Quieter programs also make sense for large, stable workforces in low-growth environments—when the needle doesn’t move much, focusing attention on pay may not be the best use of organizational energy or management bandwidth.
The immediate action item for this time of year is to make sure communication is part of your 2026 compensation planning:
Before your next compensation committee meeting, ask one question: Are we designing incentives to be heard, or hoping they’ll speak for themselves? Boards that treat this as a strategic oversight question—not just an implementation detail—are far more likely to see compensation actually drive the behavior and focus they intended.