The Advisors' Blog

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.

– Meredith Ervine