Yesterday on TheCorporateCounsel.net, Meredith shared a speech from SEC Chair Paul Atkins about “Revitalizing America’s Markets at 250.” One takeaway was that executive compensation disclosure reform is still very much on the Chair’s priority list – probably fitting under the umbrella of “Rationalization of Disclosure Practices” on the Reg Flex Agenda that was published a few months ago. Moreover, when they press the reset button, Chair Atkins’ speech suggests that a driving principle for any revised rules will be a focus on financial materiality.
Here’s an excerpt:
When the SEC’s disclosure regime has been hijacked to require information unmoored from materiality, investors do not benefit. In his recent and final Thanksgiving letter to shareholders, Warren Buffett highlighted a prime example of this hazard. Any summary I give cannot do justice to Mr. Buffett’s own words. So, I quote for you the following excerpt from his letter:
During my lifetime, reformers sought to embarrass CEOs by requiring the disclosure of the compensation of the boss compared to what was being paid to the average employee. Proxy statements promptly ballooned to 100-plus pages compared to 20 or less earlier.
But the good intentions didn’t work; instead they backfired. Based on the majority of my observations – the CEO of company “A” looked at his competitor at company “B” and subtly conveyed to his board that he should be worth more. Of course, he also boosted the pay of directors and was careful who he placed on the compensation committee. The new rules produced envy, not moderation.
The ratcheting took on a life of its own.
I share Mr. Buffett’s observations and concerns, which is why earlier this year, the SEC held a roundtable that brought together companies, investors, law firms, and compensation consultants to discuss the current state of the agency’s executive compensation disclosure rules and potential reforms. Somewhat to my surprise, there was universal agreement among the panelists that the length and complexity of executive compensation disclosure have limited its usefulness and insight to investors. We need a re-set of these and other SEC disclosure requirements, and this roundtable was one of the first steps to execute my goal of ensuring that materiality is the north star of the SEC’s disclosure regime.
Among other topics, Chair Atkins also reiterated his focus on disclosure accommodations for smaller and newly public companies – which may overlap with updates to executive compensation disclosure rules.
It may be too ambitious to hope for a rule proposal under the Christmas tree this year, but hey – my daughter is convinced she’ll get a unicorn. So, in the spirit of these holidays, I’m going to follow her lead and dream big. At any rate, it seems like it’ll be something to look forward to in the new year.
Meridian recently published its 2025 Corporate Governance & Incentive Design Survey. The survey contains 54 pages of benchmarking data, pulled from the latest proxy statements of 200 large-cap companies (median revenue of $25.4 billion and median market cap of $46.5 billion).
Here’s the scoop on proxy disclosure practices and compensation-related shareholder proposals:
– Compensation-Related Shareholder Proposals Decline; Support Remains Low: In 2025, 14% of companies received at least one compensation-related shareholder proposal. Most compensation-related shareholder proposals continue to receive limited shareholder support.
– Nearly All Companies Engage in Shareholder Outreach: 96% of the Meridian 200 disclose shareholder outreach efforts. 50% of the Meridian 200 provide specific details on feedback received and/or actions taken as a result of the feedback.
– SEC “Pay Versus Performance” Disclosures Remain Consistent: Consistent with last year, most companies (80%) choose to compare TSR against an industry specific index and a strong majority of companies (92%) use graphical disclosure to depict the relationship between “compensation actually paid” and performance.
Diving into shareholder proposals, the most common proposal topic that made it into company proxy statements related to ratification of severance pay. Aside from “other,” the second most common proposal encouraged companies to de-link pay from ESG metrics.
The decrease in compensation-related proposals was consistent with the decrease in number of Rule 14a-8 shareholder proposals across the board, a topic we’ve been covering on The Proxy Season Blog on TheCorporateCounsel.net. It will be interesting to see what happens in the coming season in light of this trend line and the gauntlet that SEC Chair Paul Atkins threw down a couple weeks ago.
The survey also covers annual & long-term incentive design practices, corporate governance practices, and clawback policies.
Tune in at 2:00 pm Eastern tomorrow — Wednesday, December 3rd — for our webcast “Equity Award Approvals: From Governance to Disclosure” to hear Jeff Joyce of Pay Governance and Sheri Adler and David Kaplan of Troutman Pepper Locke discuss common foot faults for equity award approvals and share best practices to help you dot your i’s and cross your t’s when awarding equity in 2026. Among other topics, this program will cover:
– Not Your Kindergartener’s Math: Share Counting
– Planning Ahead: Award Design
– Approval Formalities:
– Who Approves?
– What Gets Approved?
– Grant Timing, Sizing and Disclosure
– Documenting and Communicating Awards
Members of this site can attend this critical webcast at no charge. If you’re not yet a member, you can sign up by contacting our team at info@ccrcorp.com or at 800-737-1271. Our “100-Day Promise” guarantees that during the first 100 days as an activated member, you may cancel for any reason and receive a full refund. The webcast cost for non-members is $595.
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 program using this form. 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.
In this program, you will hear directly from Staff in the SEC’s Division of Corporation Finance about important takeaways from the Statement, the Staff’s procedural expectations for this year, and common questions. Additionally, Gibson Dunn’s Ron Mueller and Cooley’s Reid Hooper will be joining the program to share practical tips on navigating the new process – and its potential consequences for companies.
There are a few important things to know about this webcast that are different from our typical programming:
1. It’s free for anyone who wants to attend, even if you aren’t currently a member of TheCorporateCounsel.net. We want to do what we can to get the word out about the Staff’s approach so that the season is as smooth as possible for everyone (especially given the Staff’s workload after the shutdown).
2. It’s happening from 11:00 am – 12:00 pm Eastern.
3. Since this is a pop-up webcast, we aren’t offering CLE credit for this one. Members of TheCorporateCounsel.net can get lots of live and on-demand credits through our other programs, though! As you can see on that site’s home page, we have several good upcoming programs in December – including a program with former high-level Corp Fin Staff on December 11th, which will include practical guidance for companies to navigate this Rule 14a-8 process and other important SEC and Corp Fin initiatives.
There are a number of open issues to consider when it comes to how this year’s shareholder proposal process will play out, and you’ll want to have a strategy if you get a proposal relating to severance arrangements or other matters. So tune in tomorrow to hear the very latest on the Staff’s expectations and other practical pointers!
Yesterday afternoon (and earlier than usual!), ISS announced final updates to its 2026 benchmark proxy voting policies, which will generally apply to shareholder meetings held on or after February 1, 2026. Based on the handy executive summary of the changes ISS prepares, the final compensation-related updates are largely consistent with those proposed for comment back in October, with one non-substantive addition. The full policy updates document details all the changes (shown in redline).
Below is an excerpt from the executive summary for a reminder of the compensation-related changes that are consistent with the proposal.
– Long-Term Alignment in Pay-for-Performance Evaluation: Updates U.S. pay-for-performance quantitative screens to assess pay for performance alignment over a longer-term time horizon, considering a five-year period, above the current three years, while also maintaining an assessment of pay quantum over the short term.
– Time-Based Equity Awards with Long-Term Time Horizon: This policy update reflects the importance of longer-term time horizons for time-based equity awards and provides for a more flexible approach in evaluating the equity pay mix in pay-for-performance qualitative reviews.
– Company Responsiveness: Expands flexibility for companies to demonstrate responsiveness to low say-on-pay support, in light of recent SEC guidance on 13G vs. 13D filing status that may limit shareholder engagement.
– High Non-Employee Director Pay: Expands existing policy that addresses high NED pay practices, allowing for adverse recommendations in the first year of occurrence if considered highly problematic, or when a pattern emerges across non-consecutive years.
– Enhancements to Equity Plan Scorecard: Adds a new scoring factor under the Plan Features pillar to assess whether plans that include non-employee directors disclose cash-denominated award limits, and introduces a new negative overriding factor for equity plans found to be lacking sufficient positive features under the Plan Features pillar despite an overall passing score.
The new change reflects the addition of a cross-reference in the “Compensation Committee Communications and Responsiveness” policy, rather than repeating the factors from the say-on-pay responsiveness policy:
– Compensation Committee Responsiveness: Streamlines policy language by removing duplicated factors for evaluating responsiveness to shareholder input on executive pay. The section now cross-references the factors listed under the Board of Directors policy.
Also, check out Liz’s blog today on TheCorporateCounsel.net for a summary of the corporate governance-related updates for US companies.
Programming Note: You won’t find a blog email in your inbox tomorrow since we’re pausing our blogs for the holiday. Happy Thanksgiving, everyone! We’ll see you back here Monday.
After the SEC Staff’s February Schedule 13G guidance, there was concern that companies that saw their say-on-pay approvals fall below the key 70% threshold for ISS and 80% threshold for Glass Lewis in 2025 (triggering the proxy advisor “responsiveness” policies) may — if institutional investors are reluctant to provide feedback — have a harder time making the disclosures proxy advisors expect to see. Thankfully, the proxy advisors have recognized that this may be a challenge in 2026. ISS has already announced proposed changes to its benchmark voting policies, which contemplate this addition to its policy on company responsiveness to low say-on-pay:
If the company discloses meaningful engagement efforts, but in addition states that it was unable to obtain specific feedback, ISS will assess company actions taken in response to the say-on-pay vote as well as the company’s explanation as to why such actions are beneficial for shareholders.
Notably, this is a narrow change. The policy still expects companies to put in the same engagement efforts that they have in the past. If anything, this change may result in longer disclosures since presumably many companies will hear specific feedback from some investors, but not others, and, in the absence of extensive, consistent feedback, may need to provide a longer explanation of the “specific and meaningful actions taken” in response.
We’re well into the “off-season,” and this Winston blog on executive compensation issues and considerations for the 2026 proxy season says that companies with a low say-on-pay outcome last year should make an engagement plan, if they haven’t already, and start planning the related CD&A disclosure.
A well-executed action plan for shareholder outreach and engagement should include:
– reviewing proxy advisors’ reports from the prior year’s proxy to identify key issues flagged as concerns;
– evaluating how the company’s peer group is addressing executive compensation matters;
– assessing the company’s shareholder base to determine which investors should be engaged;
– planning shareholder meetings with clear talking points addressing key issues; and
– coordinating a response with both the engagement team and the compensation committee following shareholder meetings.
It will also be important for companies with lower say-on-pay results to clearly and effectively disclose in this year’s CD&A the rationale for 2025 compensation decisions, as well as any changes the compensation committee made to address shareholder concerns, including through shareholder outreach and engagement. In addition, companies and compensation committees should engage with advisors early to anticipate proxy advisor say-on-pay voting recommendations for the upcoming proxy season, considering both the quantitative assessments and qualitative evaluations that these firms will conduct.
If you’re in this boat, you should plan to tune in for our annual webcast “The Latest: Your Upcoming Proxy Disclosures” on Tuesday, January 20, at 2 pm ET. I know it’s a while from now, but you won’t want to miss this one! Head over to the webcast landing page to add it to your calendar.
CEO transitions are tough. But when other management changes immediately follow, an otherwise difficult (but not uncommon) event in a company’s history can turn into an unprecedented period of upheaval. Some boards try to avoid this with one-time grants to other members of the C-suite. Five years ago, FW Cook assessed the retentive effect of these grants and recently revisited the topic with an update to its prior study, which now also considers the retentive value of existing equity awards. Here’s an excerpt:
Our prior study found that special one-time equity grants made to the leadership team have a strong retention effect in the short term, but that the effect wanes quickly.
The findings in our updated study are largely aligned with those of the original analysis. Particularly, special equity grants made to non-CEO executives in the wake of CEO turnover continue to show a strong, but limited, retentive effect – typically lasting approximately two to three years. Prevalence and design of such awards remain consistent, although the dollar value of such awards has increased materially.
Both the original and updated studies show that the retentive power of special equity grants is strongest in the three year window following CEO turnover. Among NEOs who eventually depart the company, those who did not receive such a grant typically leave within the first year, while those who do receive a grant typically do so at year three – aligned with the most common vesting period of retention awards.
With additional data analyzed in this study, it also uncovered some new findings.
– Non-CEO executive grants are twice as common when the CEO is an external hire.
– A correlation between total outstanding equity and length of retention was identified, regardless of whether special retention grants were made.
These grants are made by a minority of companies (36%), but based on these findings, it sounds like you may want to seriously consider them if:
– Your incoming CEO is an external hire;
– Non-CEO NEOs do not already have significant unvested equity; and
– The company will benefit from extending retention from 1 year (the average tenure post-CEO turnover without retention awards) to 3 years (the average tenure post-CEO turnover with retention awards).
ICYMI, here’s something John shared on TheCorporateCounsel.net earlier this week:
Yesterday, the Division of Corporation Finance issued a statement indicating that, except for no-action letters seeking to exclude shareholder proposals under Rule 14a-8(i)(1), it’s out of the Rule 14a-8 no-action letter business for the remainder of 2025 and 2026. This excerpt summarizes Corp Fin’s action and reminds issuers of their continuing notice obligations:
The Division of Corporation Finance has thoroughly considered its role in the Rule 14a-8 process for the 2025-2026 proxy season. Due to current resource and timing considerations following the lengthy government shutdown and the large volume of registration statements and other filings requiring prompt staff attention, as well as the extensive body of guidance from the Commission and the staff available to both companies and proponents, the Division has determined to not respond to no-action requests for, and express no views on, companies’ intended reliance on any basis for exclusion of shareholder proposals under Rule 14a-8, other than no-action requests to exclude a proposal under Rule 14a-8(i)(1).
Pursuant to Rule 14a-8(j), companies that intend to exclude shareholder proposals from their proxy materials must still notify the Commission and proponents no later than 80 calendar days before filing a definitive proxy statement. We remind companies and proponents, however, that this requirement is informational only, there is no requirement that companies seek the staff’s views regarding their intended exclusion of a proposal, and no response from the staff is required.
In light of recent developments regarding the application of state law and Rule 14a-8(i)(1) to precatory proposals, the Division has determined that there is not a sufficient body of applicable guidance for companies and proponents to rely on. As such, the Division will continue to review and express its views on no-action requests related to Rule 14a-8(i)(1) until such time as it determines there is sufficient guidance available to assist companies and proponents in their decision-making process.
Corp Fin’s willingness to have the Staff continue to referee disputes over whether precatory proposals are excludable should be read in the context of Chairman Atkins’ remarks last month indicating the Staff’s readiness to entertain arguments that such proposals are excludable under Rule 14a-8(i)(1) as not being proper subjects for shareholder action under state law.
Corp Fin’s statement applies to the current proxy season (October 1, 2025 – September 30, 2026) as well as no-action requests received before October 1, 2025 that haven’t yet been responded to by the Staff.
Although no-action letters are mostly off the table for now, the statement provides that if a company wants to receive a response from the Staff about its exclusion of a proposal, it may include, as part of the required notification, “an unqualified representation that the company has a reasonable basis to exclude the proposal based on the provisions of Rule 14a-8, prior published guidance, and/or judicial decisions.” Companies that follow this procedure will receive a response from Corp Fin to the effect that based solely on that representation, the Division won’t object if the company omits the proposal from its proxy materials.
Commissioner Crenshaw issued her own statement on Corp Fin’s action, and it probably won’t surprise you to find that she’s doesn’t find much to like in it:
Today’s Announcement is a Trojan horse. It cloaks itself in neutrality by expressing that the Division will not weigh in on any company’s exclusion of shareholder proposals, but then it hands companies a hall pass to do whatever they want. It effectively creates unqualified permission for companies to silence investor voices (with “no objection” from the Commission). This is the latest in a parade of actions by this Commission that will ring the death knell for corporate governance and shareholder democracy, deny voice to the equity owners of corporations, and elevate management to untouchable status. In a neutral way, of course.
I’ve got to admit that I’m still processing this blockbuster, and at this point the first response that comes to mind is “Holy Smokes!” This is a huge change, and it’s likely to have some pretty profound implications for the shareholder proposal process. John’s speculated about some of what those implications might be in the next blog.
Compensation professionals, including CHROs and Total Rewards executives, may be involved in the shareholder proposal process from time to time, since they often address topics related to ESG, human capital management, including pay equity, DEI, workforce benefits and labor management, as well as executive compensation. While this change is certainly going to shake things up, shareholder proposals are not going away overnight. To that end, check out the recent “Shareholder Proposal Guide: A Playbook for CHROs and Total Rewards” from the CHRO Association.
Gallagher’s Executive Compensation Consulting recently released its latest annual report (available for download), analyzing executive pay trends across most of the Russell 3000 companies in 2024. Here’s the finding that most stood out to me:
Smaller companies, particularly those earning less than $50 million in revenue, saw a staggering 44.7% increase in median CEO compensation after two years of decline. This surge was driven by aggressive long-term incentive (LTI) grants.
I typically think of LTI being a smaller component of pay at smaller companies, but with this increase, “LTIs at smaller companies doubled in value compared to their slightly larger peers, making up 82.4% of total CEO compensation — the highest percentage of any revenue group.” Wow.
Why this surge? Smaller companies compete aggressively for leadership talent, often recruiting from larger firms. Smaller firms also tend to deliver higher growth, take higher risk and draw less scrutiny from institutional investors . . . Emerging sectors like technology and life sciences commonly employ LTI-heavy compensation to attract talent while conserving cash. LTI levels at these smaller firms rival those at much larger companies.
With equity awards representing such a significant portion of pay — and the possibility that large awards might be the subject of a legal challenge — it’s more important than ever to perfect your process. Tune in at 2 pm ET on Wednesday, December 3rd, for our webcast “Equity Award Approvals: From Governance to Disclosure” for a deep dive on award approvals. Our panelists — Troutman Pepper Locke’s Sheri Adler and David Kaplan and Pay Governance’s Jeff Joyce will address common foot faults and share best practices to help you dot your i’s and cross your t’s when awarding equity in 2026 and beyond. Head to the linked webcast landing page to add the program to your calendar.
The requirement to disclose executive security spend in the Summary Compensation Table’s calculation of “Total Compensation” has been a significant area of comment in letters submitted to the SEC on executive compensation disclosure requirements. In addition to addressing security spend, the letters have also commented on the two-part test and the disclosure thresholds.
Here’s more from the September-October issue of The Corporate Executive newsletter, which includes a deeper dive into the topics covered at the SEC’s Executive Compensation Roundtable, as well as the many issues that commenters have been raising for the SEC’s consideration in its retrospective review of executive compensation disclosure requirements.
Many comment letters ask the SEC to revisit the nuanced, two-part test since it is difficult to apply in practice. Cooley advocates for a “primary purpose” test — that is, whether the primary purpose of a benefit is to further a company’s legitimate business objectives, not whether it is necessary for the executive’s job.
As part of the Commission reconsideration of the definition of perquisites, the current interpretive standard should be revised in a manner to exclude arrangements provided primarily for legitimate business objectives. There should be a presumption, but not a requirement, that defers to the determination of a company’s board of directors or committee of independent directors. For example, rules or interpretive guidance could provide that an arrangement or item is not a perquisite if a company’s board of directors or a committee of independent directors have approved or ratified the benefit as being primarily to fulfill a business purpose, or have approved or ratified a business purpose policy under which the benefit is provided. Any standard for determining whether an item or arrangement is a perquisite should be applied on a facts-and circumstances basis instead of per se determinations that items are perquisites.
Commentators also advocate increasing the perquisite disclosure thresholds.
The National Association of Manufacturers and the NYSE Institute suggest that there be a $100,000 aggregated threshold for perquisite reporting, to be indexed to inflation going forward, while the Society for Corporate Governance offered a $50,000 threshold. The NYSE Institute and many other letters also cite the heightened threat environment and argue that amounts spent on executive security have become critical business expenses and should not be considered a reportable perquisite.
Cooley and Baker McKenzie also argue that work locations have become decentralized, such that travel between an executive’s approved work location and the company’s headquarters should not be deemed a commute, and when a company covers the cost of an executive’s travel between these locations, those amounts should not be considered perquisites.
The Corporate Executive newsletter often addresses compensation-related topics. If you are not already receiving the important updates we provide in The Corporate Executive newsletter, please email info@ccrcorp.com or call 1.800.737.1271 to subscribe to this essential resource.