The Advisors' Blog

With the increasing fragmentation of investor views and voting power becoming less concentrated on one or two leading perspectives — plus the struggle to get frank shareholder feedback on pay decisions — companies may be doubling their internal efforts to anticipate and address investor concerns with executive pay programs. This Glass Lewis report (available for download) gives a step-by-step guide that addresses analysis, disclosure and adjustments. On the analysis front, it recommends:

Leading companies generally assess alignment from multiple angles, examining how various definitions of total compensation, such as granted, realized, and realizable pay, compare to performance across multiple time horizons. This analysis could include financial, operational, and total shareholder return metrics, and account for both absolute performance and relative positioning. Consideration of these multiple views builds a stronger understanding of how executive pay might be viewed by a diverse group of investors.

For example, Glass Lewis’ own quantitative pay-for-performance (P4P) assessment uses a series
of five to six tests to provide a holistic analysis.These include tests of pay alignment using multiple calculations of granted and realized pay, integrating comparisons to peers identified by Glass Lewis as well as broader market benchmarks. From 2026, our quantitative analysis is expanded to include a five-year assessment window (previously three years), a longer-term view of pay alignment that reflects evolving investor practices

With this, companies will have “a deeper understanding of pay and performance alignment,” which can inform the “clear and compelling story” the company should ensure is coming through in its CD&A and in engagements with investors. When it seems that, despite analysis and disclosure, the compensation program needs to shift, it suggests scenario modeling to understand potential payouts in various scenarios.

Scenario modeling can be an especially helpful tool in this process. Companies can gain significant insights from assessing how pay outcomes would appear under different performance environments, including best-case, expected, and downside scenarios. For example, what would incentive payouts look like if the company underperforms its peer group, but still achieves internal targets? How might shareholders view high payouts during periods of share price volatility or underperformance relative to the broader market? These analyses can inform not just the quantitative aspects of plan design, but also qualitative assessments around risk-taking, rigor, and the likelihood of future say-on-pay support.

When modeling changes, companies might also consider whether structural elements, such as caps on payouts, minimum performance thresholds, or clawback provisions, are sufficient to guard against risks.

– Meredith Ervine