The Advisors' Blog

It’s not particularly surprising, given all the news about executive turnover, that the value of sign-on and retention awards is increasing. Glass Lewis reports that this trend has a lot to do with the number of external hires and the use of make-whole awards.

With boards trying to either ensure a smooth transition, or avoid an unnecessary one, the average value of both sign-on and retention awards grew significantly from 2024 to 2025 among S&P 500 companies. […] One major reason for this trend is the increasing prevalence of make-whole sign-on awards for new NEOs.

Of the awards reviewed during the 2025 proxy season, 23% of sign-on awards were make-whole awards for Russell 3000 companies, up from 19% in 2024. The increase was more significant for S&P 500 companies, with 53% of sign-on awards citing make-whole considerations, a substantial increase from 39% the previous year (45% in 2023).

There’s simultaneously an increasing use of retention awards to avoid the disruption of turnover in the first place, but the blog argues that this can create a “feedback loop” contributing to the rising cost of executive transitions.

Such grants are likely intended, at least in part, to make it more expensive for other employers to poach executives – but run the risk of creating a feedback loop. Increases in the prevalence and value of retention awards can lead to further increases in the use of make-whole awards, which in turn lead back to further increases in retention awards.

Although often viewed with less suspicion than other one-time awards, investors still want more disclosure regarding the circumstances of significant make-whole awards.

In our 2024 Policy Survey, we asked about disclosure expectations for these awards, and found a significant gap in investor and non-investor views (Figure 4). On average, 63.4% of investors expect disclosure of the terms of the award, along with explicit confirmation that awards are time-restricted and the same size as those forfeited, vs. 30.1% among non-investors. By contrast, nearly half of non-investors responded that companies should only need to provide minimum disclosure (48.4% vs. 15.5% of investors).

One U.S. investor stated: “We would prefer a detailed breakdown, but often that is not made available. …[W]e will try to reconcile the terms and value of the award with any previous public disclosures made at the executive’s prior employer. Failing that, we will generally take the company at their word, but would engage if we hold a material position.” […]

Since then, use of the make-whole designation for sign-on awards has risen, as discussed above. In light of this trend and evident disparity in expectations, we followed up on our 2025 policy survey to better understand market perspectives on how make-whole awards are assessed – and in particular, if they are subject to the same level of scrutiny as other sign-on awards.

Non-investors were far more likely to view make whole awards as fundamentally different from other sign-on awards. Investors were split. While the top answer was to treat make-whole grants on the same basis as other sign on awards, nearly as many were willing to view them differently so long as the grants are fully disclosed and clearly equivalent to what was forfeited.

– Meredith Ervine