Meredith recently shared summer compensation planning activities that will make your “future self” happy. One key to that type of advance prep is understanding what you (and your compensation committee) can actually control given all of the external factors that may be affecting compensation programs. This Pay Governance memo offers helpful perspectives. Here’s an excerpt:
Drawing on discussions from hundreds of compensation committee meetings during the first half of 2026, we highlight the issues that are receiving the greatest attention in today’s boardrooms. In this first installment, we focus on the external forces influencing compensation committees, from market volatility, proposed SEC disclosure changes, evolving shareholder engagement practices, and the changing proxy voting landscape. To best address these developments, committees should:
– Define principles that guide the determination of any adjustments (e.g., adjustments to reflect factors outside of management’s control),
– Assess the pros and cons that would be associated with implementing the SEC’s proposed curtailed executive pay disclosure rules (for public companies with float below $2 billion), if finalized, and
– Seek input from their investors on how they are evaluating executive compensation structures in the current environment.
We’ve posted the transcript for our recent CompensationStandards.com webcast, “Proxy Season Post-Mortem: The Latest Compensation Disclosures,” during which Mark Borges, Principal, Compensia and Editor, CompensationStandards.com, Dave Lynn, Partner, Goodwin Procter and Senior Editor, TheCorporateCounsel.net and CompensationStandards.com, and Ron Mueller, Partner, Gibson Dunn & Crutcher, discussed the “lessons learned” from the 2026 proxy season that companies can start carrying forward into next proxy season. This was a jam-packed program! The webcast covered the following topics:
– Today’s Incentive Compensation Challenges
– The State of Say-on-Pay During the 2026 Season
– Experience with Proxy Advisors’ New Pay-for-Performance Analyses
– Shareholder Engagement Challenges & Responsiveness Disclosures in 2026 Proxy Statements
– BlackRock, State Street, and Vanguard Stewardship Approaches in 2026
– Compensation Clawbacks: Evolving Disclosures and the Coming Three-Year “Lookback”
– The 2026 Shareholder Proposal Process; Executive Compensation-Related Shareholder Proposals
– Proxy Advisors: Status of Lawsuits and Regulation
– Waning Proxy Advisor Power, the Rise of AI, Emerging Institutional Investor Policies and Managing – – Divergent Shareholder Views
– What’s To Come: Musings on Recent SEC Rule Proposals and the Impact on Equity & Compensation Disclosures
– What’s To Come: Musings on Potential Executive Compensation Disclosure Rulemaking
– What’s To Come: Musings on the Potential Overhaul of Regulation S-K
Members of this site can access the transcript of this program. If you are not a member, email info@ccrcorp.com to sign up today and get access to the full transcript – or sign up online.
Tune in at 2:00 pm Eastern to hear about the SEC’s proposed amendments to simplify the filer status framework and expand eligibility for scaled disclosure and other accommodations currently available to smaller or newly public companies (many of which relate to executive compensation disclosure requirements). Our panel includes seasoned practitioners and senior SEC staff:
– Luna Bloom, Associate Director (Legal and Regulatory Policy), SEC’s Division of Corporation Finance
– Howard Dicker, Partner, Weil, Gotshal & Manges LLP
– Raquel Fox, Partner, Skadden, Arps, Slate, Meagher & Flom LLP
– Dave Lynn, Partner, Goodwin Procter LLP, and Senior Editor, TheCorporateCounsel.net
They will discuss the SEC’s proposed rule changes and explore the practical implications of the new filer definitions and expanded accommodations. Topics include:
Overview and Policy Objectives of the Proposal
Revisions to Filer Classifications and Definitions
Expanded Accommodations and Scaled Disclosure
Initial and Annual Determinations of Filer Status; Transition Rules
Requests for Comments and Potential Changes to the Proposed Rules
Considerations for Companies Considering Scaled Disclosure
Relationship of the Proposal to Other SEC Initiatives
As usual, 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 live program. 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.
If the Reg Flex Agenda is any indication, there’s more to come from the SEC and Corp Fin Staff, and there will be no shortage of things to talk about at our October Proxy Disclosure and Executive Compensation Conferences. Don’t miss our discounted “early bird” rate, which covers in-person and virtual this year. It expires on July 24th! Register online at our conference page or contact us at info@CCRcorp.com or 1-800-737-1271.
I recently noted that only a small group of companies has introduced explicit AI metrics into their incentive plans, and even those have typically weighted these metrics modestly. On the other hand, some select companies are going all in. Salesforce is one such example, and I wanted to share some of its proxy disclosures on AI metrics here, even though I risk stealing this proxy disclosure highlight from Mark and not doing it justice.*
Anyway, here are some snippets of sections of Salesforce’s latest proxy statement that got my attention:
From “Financial Highlights”: In Q4 of fiscal 2026, we introduced Agentic Work Units (“AWUs”) to measure tasks accomplished by an artificial intelligence (“AI”) agent, with 2.4 billion AWUs delivered to date across Agentforce and Slack.
From the Compensation Committee Letter: Previously, the performance-based option tranche was tied 100% to Agentforce & Data 360 ARR. For fiscal 2027, we are splitting that measure equally between Agentic Work Units (AWUs) and Agentforce & Data 360 ARR. This change reflects the evolution of our product strategy: AWUs are a direct measure of agentic activity and customer engagement, not just contracted revenue, and we believe they are among the most important leading indicators of where Salesforce is headed. Cash compensation and the PRSU structure — including the Rule of and rTSR split — remain unchanged.
From the CD&A “Summary Information on Fiscal 2027 NEO Compensation Decisions”: For fiscal 2027, we refined our performance option program to better align executive incentives with our long-term transformation and focus on accelerating Agentforce adoption. To prioritize the scaling of Agentforce, we introduced Agentic Work Units (AWUs) as a new performance metric. AWUs and Agentforce & Data 360 ARR will be equally weighted, with payouts based on fiscal 2027 achievement. Any earned options will remain subject to a four-year vesting schedule to ensure continued long-term alignment.
– Agentic Work Units: Measures discrete tasks executed by AI agents in production across the Salesforce platform, including Agentforce and Slack.
– Agentforce & Data 360 ARR: Measures annual recurring revenue through our Agentforce and Data 360 platform.
In addition, the performance options continue to have a direct tie-in to building stockholder value, as executives only realize value if our stock price increases above the stock price at the time the performance options are granted.
*Compensia’s Mark Borges has been blogging up a storm on his Proxy Disclosure Blog for members of CompensationStandards.com. He provides new, interesting or best-in-class examples of executive- or director-compensation-related proxy disclosures. Give it a follow!
Earlier this month, I shared some data on how companies are using one-time awards and noted that structural considerations are key to mitigating investor concerns. This Semler Brossy article (which Liz blogged about last month) compares the size of a special grant to the likelihood of an “against” recommendation from ISS. Not surprisingly, smaller grants, especially grants made to NEOs other than the CEO, are more likely to fly under the radar (i.e., not raise concerns).
Proxy advisors generally scrutinize special awards, but they do not uniformly recommend ‘Against’ programs that include them. Most awards are noted but do not have a substantial impact. Award size is a major indicator of whether a particular award will draw an ISS ‘Against’ recommendation. Smaller awards, while not immune from criticism, are accepted as a necessary reality by investors. Larger awards receive significantly less leeway, though those do not guarantee an ‘Against’ recommendation.
Among the awards Semler Brossy reviewed, if the award was less than half of target compensation, ISS recommended ‘Against’ about 25.8% of the time. Once the award was greater than three times target annual compensation, ISS recommended ‘Against’ 68.1% of the time. Many of the smaller awards were not the direct “cause” of the low vote but were instead caught up in broader circumstances, such as a pay-for-performance misalignment or an outsized award for another executive.
Over 1x target compensation seemed to be the level at which ISS was more likely than not to recommend against say-on-pay.
Late last month, I shared three approaches to incorporating AI into incentive plans. This FW Cook article in Corporate Board Member also shares thoughts on that topic and predicts that:
As spending on AI leadership, infrastructure and enterprise-wide transformation efforts continue to escalate, investors may begin pressing companies to measure whether those investments are actually creating value. “As companies get clarity around the best way of quantifying returns on AI investment, it will serve as the logical bridge to incorporating related metrics into compensation programs,” says Kaplan. “At that point, the qualitative goals that we are currently seeing in bonus plans will likely morph into quantitative metrics that are more meaningfully integrated into incentive plans.”
It also points out that AI has broad implications for compensation design beyond AI metrics themselves, since, like anything uncertain that is central to corporate strategy, it’s exacerbating the already challenging process of setting multi-year goals.
As companies lean further into AI-driven strategies, the unpredictability surrounding future business models and operating results could make traditional multi-year financial goal setting more difficult, says Kaplan. “An indirect consequence of this may be a shift back toward metrics tied to share price or total shareholder return, or a re-examination of stock options as an equity vehicle, all of which are strategically agnostic and reward for shareholder value creation without relying on precise long-term forecasting.”
In 2022, Liz shared many ways companies grappled with forecasting challenges in response to COVID-19 uncertainty. At the time, she noted that these practices “were carried into the 2021 compensation year – and may linger even longer.” With tariffs, geopolitical conflicts and AI, perhaps Liz’s title, suggesting that some of these practices were “here to stay,” was prescient.
Our 2026 Proxy Disclosure and Executive Compensation Conferences are just around the corner. Our conferences will be held on October 12th & 13th in person in Orlando and will also be available online for virtual participants. Our discounted “early bird” rate expires on July 24th, so you need to act fast to ensure that you don’t miss out!
With an agenda featuring two days of fast-paced, topical panels, an all-star speaker lineup, and Dave Lynn’s interview with Corp Fin’s Deputy Director Christina Thomas, attendees will receive critical insights into the latest SEC rulemaking initiatives and developments in governance, disclosure practices, activism & shareholder engagement, and executive compensation.
If you’ve been following our blogs, webcasts, podcasts and newsletters, you know that the SEC has turned on the rulemaking firehose – and the agency has indicated that there’s plenty more to come! This year more than ever, you can’t afford to miss the insights that our expert panelists will provide on the latest developments.
Register online at our conference page or contact us at info@CCRcorp.com or 1-800-737-1271. Do it today so you don’t miss out on our discounted “early bird” rate!
Even though we (thankfully) put the pandemic behind us several years ago, we can’t say the same for business complexities and surprises. When it comes to compensation plans, that may be why a few pandemic-era practices have continued.
This memo from ISS Corporate says that compensation committees continue to prioritize flexibility for short-term incentives. They’re doing this by using a greater number of metrics than in pre-pandemic times, including non-financial metrics that may involve subjective measurements. Here’s an excerpt:
Although the growth of metric counts and the use of individual/non-financial metrics has slowed slightly from immediate post-Pandemic levels, neither trend shows signs of returning to pre-Pandemic levels. Short-term incentive program design has thus undergone a paradigm shift: more complex programs and more qualitative metrics are used to mitigate the risk of non-vesting and provide flexible opportunities to ensure vesting independent of performance. That protects executive paydays (and, ideally, executive retention) well after the macroeconomic shocks of the Pandemic have subsided.
Thus, short-term incentive design implies a riskier and more challenging business environment than before the Pandemic, even if not directly due to the lingering effects of the Pandemic. This situation is seen as justifying enhanced executive compensation in ways notably different than pre-Pandemic norms and expectations, both in terms of investor understanding of program design and achievement and the importance of a direct link between pay and performance. Declining rates of say-on-pay failures seem to affirm the investor viewpoint that business now is harder than before the Pandemic and executive compensation focused on outright compensation is more acceptable.
The memo says that companies with more metrics tend to have higher payouts – but those payouts may not translate neatly to higher returns for shareholders. Investors could take issue with that if the short-term incentive plan is supposed to incentivize year-over-year stock price increases. However, the memo acknowledges that this component of compensation programs may be geared more towards retention. Here’s concluding food for thought, which may be helpful in communicating about plan design:
At the same time, these trends are partially explainable by reflecting on the focus of incentivization: if the intent is to promote executive retention by constructing near-term awards that are realistically obtainable — and that remain so even in years of market turmoil such as during the Pandemic — the question of the relationship between payouts and performance takes on a different contour when market participants consider the role of short-term versus long-term incentive compensation.
Whether these trends extend beyond the 2026 annual meeting cycle remains uncertain. In the absence of a significant external disruption comparable to the Pandemic, prevailing market norms are likely to continue favoring more complex short-term incentive structures with reduced reliance on purely financial metrics. Although some trends, such as complexity, appear to have plateaued, emerging practices, once established, can proliferate as companies seek to remain competitive in attracting and retaining executive talent, given the central role of peer benchmarking and comparative assessments in executive compensation decisions. From this perspective, short-term incentive design can be understood less as a direct reflection of company performance and more as an expression of the board’s assessment of, and confidence in, management’s leadership.
The Division is considering recommending that the Commission propose rule amendments to Item 402 of Regulation S-K to rationalize executive compensation disclosure requirements.
In addition to proposing changes to Item 402, the Reg Flex Agenda says that – among other things – the SEC is considering proposing rules that would modernize the Rule 14a-8 requirements for shareholder proposals, amend other proxy rules, and rationalize disclosure requirements.
As we’ve shared in prior blogs, the SEC’s May 2026 proposals on filerstatus and semi-annual reporting could also have big implications for executive compensation disclosure.
As John noted in his blog, the dates tied to these items are aspirational and signify general timeframes versus precise dates. And while the Reg Flex Agenda provides insight into the SEC’s current rulemaking priorities, it isn’t a definitive guide for anyone trying to predict SEC rulemaking for purposes of specific board agendas, budget and workflow. Still, it will be exciting to see what may be in store!
As Meredith noted last week, we’ve been seeing relatively strong say-on-pay support this year. Average say-on-pay support clocked in at 91% as of June 1st for S&P 500 companies, according to this FW Cook memo. But the memo explains why it’s important for compensation committees and their advisors to look beyond the numbers – for signals that could improve your fall engagements and potentially influence compensation decisions in the coming year. Here’s an excerpt:
Context determines what a result means more than the number itself. Modest erosion from a historically stable baseline reads differently than a fourth consecutive decline. A drop that would look manageable in isolation is more significant when it comes from long-supportive holders, or when the proxy advisor’s critique, shareholder feedback, and vote pattern all point to the- same issue.
Start by taking the vote apart before explaining it. Compare it to prior years. Determine whether opposition was concentrated or broad-based. Review how large holders appear to have voted and connect the result to any concerns heard during pre-meeting shareholder engagement. Low-90s support, and in some cases high-80s support, may not require action, but it may still warrant a closer read if opposition is concentrated, recurring, or tied to known concerns.
When it comes to using voting results to inform off-season engagements, the memo says:
Off-season engagement should start with the questions the Committee needs answered rather than starting with a promise of change.
Ain’t that the truth! The memo shares the types of questions that companies might want to ask depending on their circumstances.