I must admit I haven’t given enough thought to the August executive order that aims to facilitate the inclusion of alternative assets in 401(k) plans. This Cleary alert addresses what boards of companies that sponsor 401(k) plans need to know. First, the alert says the order doesn’t “usher in any immediate regulatory changes,” but it did direct “the DOL to reexamine its guidance regarding the investment of 401(k) plans in alternative assets and, to the extent deemed appropriate by the DOL, to issue clarifying guidance by early February 2026.” That’s now, and it sounds like that guidance may be imminent. Troutman Pepper reports that the DOL submitted that rule to the Office of Management and Budget on January 13, so we should see that soon. In the meantime, the Cleary alert suggests the following actions:
Determining the Board’s Role: Consider what role (if any) the board will play in determining next steps (if any) relating to alternative assets and the 401(k) plan.
Assessing Current Plan: Encourage management to review the current governing documents, investment policy statement and investment line-up for the company’s 401(k) plan to determine whether investment options with exposure to alternative assets are permitted and/or currently held by the plan.
Evaluating Fiduciary Capabilities: Consider evaluating whether the 401(k) plan’s current fiduciaries (e.g., retirement committee or third-party investment advisor/manager) have the requisite expertise to select, evaluate and monitor investment options with exposure to private equity.
Changes to CEO and employee pay get a lot of attention during the runup to an IPO. But with board composition being an important factor in public company success, it’s also important to understand how (and when) to add qualified independent directors.
This Semler Brossy article gives a helpful overview of how director compensation changes as a company approaches its public debut – based on awards granted by high-profile tech companies to independent directors in the 12 months prior to their IPO. Here’s an excerpt:
Compensation packages for incoming directors at private companies generally consist of Restricted Stock Units (RSUs), stock options, or some combination of the two. They are frequently front-loaded equity grants meant to cover multiple years, as opposed to the annual grants common in public companies.
In general, we found that these grants are usually coupled with a 3–4-year vesting period, and more than half of them also require an actual IPO for vesting (known as an “IPO Trigger”). Compensation is almost entirely equity based — of the 20 pre-IPO companies studied, only two offered any direct cash pay — which is typical for pre-IPO companies.
Here’s more detail about how pay structures tend to shift as the IPO approaches:
– When the IPO is 36+ months away, pay is typically in the form of RSUs or stock options, intended to cover multiple years, 3-4 year vesting schedule, no cash compensation, and shares are granted as a percentage of the company. An example median grant is 20-50bps stake in the company with a 4-year vesting period.
– When the IPO is 18-36 months away, the compensation shifts towards RSUs, still with 3-4 year vesting schedules and intended to cover multiple years. The equity portion of awards frequently matches employee awards, compensation may include a cash component, and awards are often expressed as a dollar value instead of a percentage of the company. An example median grant is an up-front grant valued at $300k-$750k, in the form of RSUs, options, or a mix.
– When the IPO is less than 18 months away, director compensation mimics a traditional public company model – mostly in the form of RSUs with annual awards and 1-year vesting periods. Cash compensation is more likely, and awards are expressed as a dollar value. An example median grant is $250k–$350k in annual total compensation, comprised of a mix of cash and equity.
Last fall, over on the Proxy Season Blog on TheCorporateCounsel.net, I shared observations on how US and European investors (and asset managers) are diverging in terms of what they expect from their portfolio companies. This also holds true with say-on-pay, but I didn’t realize how large the delta is in support levels of US asset managers compared to their European counterparts:
2025 proxy voting research reveals that Vanguard, State Street, Fidelity and BlackRock are among the most likely to vote in favor of Say-on-Pay proposals, with Vanguard topping the list by voting in support more than any other asset manager in the report — 97.6% of the time. State Street came in second, with Fidelity and BlackRock following close behind.
The voting results of American asset managers studied contrast sharply with two European managers, Legal & General (LGIM) and UBS. LGIM America, the U.S. arm of London-based LGIM, reported $1.53 trillion in assets under management (AUM) and only voted in favor of executive compensation packages 9% of the time. UBS — based in Geneva, Switzerland, and reporting $6.6 trillion of AUM —only supported these packages 29% of the time.
That’s according to a recent report from United Church Funds, based on NP-X filings made in August 2025. The report identifies a few areas that European asset managers deem problematic. Paraphrasing:
– Setting vesting or holding periods of less than 3-5 years, and/or having too few metrics, may be viewed as too short-term and lead to against votes. The US asset managers apply a more case-by-case analysis and don’t apply specific yardsticks.
– Increasing compensation purely based on peer benchmarking is not acceptable, and heavy reliance on peer groups as a pay-matching mechanism is discouraged.
– High pay ratios may lead to an against vote, especially when companies are underperforming.
As I mentioned yesterday, the fragmented voting landscape means it’s more important than ever to know your investors and their expectations. If you have international institutions as stockholders, don’t be surprised if they take a different approach than the big US asset managers.
It’s wild to think this year will be the 15th year of say-on-pay votes. In that time, the ecosystem of frameworks and modeling has grown into something advisors track each year – because many compensation committees want to understand how their company’s programs will fare under the models. In some cases, it even seems like the goal of truly motivating executives to perform takes a back seat to designing and disclosing pay in a way that will get the blessing of proxy advisors, whose recommendations many institutions follow.
Or at least, that was the case for 10+ years! Now, we may be entering a new era with institutions moving towards their own customized voting policies – and we’re in the early stages of seeing AI models that will apply those policies, instead of an army of proxy advisor and/or stewardship employees. While some companies are happy about that, the fragmentation actually means that votes could get harder to predict. This Pay Governance memo summarizes the state of play – and offers a few predictions for 2026:
The above said, it is likely that mid-size and smaller institutional investors will continue to rely on the proxy advisor firms for voting recommendations in the near-term due to the extensive amount of time and resources necessary to review and responsibly vote on a multitude of proxy voting decisions across a wide range of holdings. Regardless, we also expect institutional investors of all sizes to harness the power of AI for data collection and the development of preliminary voting recommendations, which could further erode proxy advisor influence barring meaningful evolutions in proxy advisor offerings.
Finally, we note that proxy advisory firms have shown tremendous resilience over the years to adapt their business models to changing governance landscapes. For example, the current proxy advisor pivot toward voting recommendations that are more customized/customizable is likely to ensure a degree of relevance and help to respond to regulatory scrutiny in the face of multiple challenges. Although the decline in proxy advisor influence among the largest investors may not fully extend to smaller and mid-size investors, the Say on Pay and governance landscapes are increasing in complexity, thereby creating a more uncertain (but potentially less adverse) U.S. Say on Pay environment.
Even though we’re in a time of change, it sounds like age-old advice of understanding who your investors are – and what they want – is still the best way to predict how your say-on-pay resolution will land. Of course, delivering strong company performance usually helps too.
I blogged recently about best practices for designing performance awards. If you want to stay in the good graces of your compensation committees and executives, it’s also helpful to have a few creative ideas up your sleeve – especially during times of business uncertainty, which seems to be pretty much all of the time right now. This Semler Brossy alert suggests five ways to “think outside the box” on performance award design:
1. Brutal simplification – Pick the one or two things that matter most right now that you can measure. Maybe it’s maintaining gross margin in the face of rising input costs. Maybe it’s the ramp-up speed of domestic manufacturing. Whatever it is, make it crystal clear and put serious money behind it.
2. The five to seven-year bet – Cancel next year’s standard equity grant cycle. Instead, make a single, multi-year grant that vests based on where the company stands in 2030 or 2032. No annual refreshes, no short-term metrics. Just one big bet on long-term value creation.
3. The horse race – If you can’t tell what “good” looks like in absolute terms, measure relative position. Rank your company against a carefully selected peer set or the broad economy—”the market”—and pay only for outperformance. This isn’t just about stock price; it can include market share gains, margin protection, or other competitive metrics. You could even combine absolute and relative performance: “We did well, and we won.”
4. The conscious placeholder – Implement a one-year fully discretionary program with transparent guardrails. Tell executives, “We don’t know exactly what success looks like, but we’ll recognize it when we see it.” Then, document your reasoning meticulously. Apply that discretion in the bonus and give everyone a modest RSU grant to totally get out of the goal-setting business.
5. Business as usual, with consequences – Keep your existing program but accept the tradeoffs: you might end up with outcomes that don’t align with your actual assessment of performance. Goals may need to be set so widely that they lose meaning, and you may spend the year-end in complex adjustment debates.
The alert delves into the pros and cons of each approach. It also explains which business situations would be most likely to benefit from each approach.