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 

Everyone who works in the life sciences space knows that early-stage pharma, biotech & life sciences companies are their own beast. In all the recent talk about doing away with quarterly reporting, these companies – particularly pre-revenue – have been called out as one group that would uniquely benefit from a shift away from the requirement to file quarterly financial statements, since investors focus on a limited number of key data points and developments, like remaining cash, trial data and regulatory approvals.

Compensation programs for early-stage pharma, biotech and life sciences companies must also be designed to address these differences. This ClearBridge alert says:

Most public companies align executive pay with shareholder value over time. But among PBLS companies, value creation is often binary and episodic, hinging on regulatory approvals, clinical trials, and more […] PBLS companies, particularly earlier-stage, favor tools that align with unpredictable value-creation:

– Milestone-based vesting reflects binary clinical progress

– Stock options preserve cash and reward long-term upsid

[A]s companies grow:

– Restricted stock unit (“RSU”) and performance-vested award prevalence increases, while the prevalence of stock options decreases (though options remain majority practice across all sizes)

– Note: Performance-vested awards typically introduced ~5 years post-IPO

– Most common performance award metrics shift from predominately project milestones to TSR and financial metrics

Because of the inherent volatility, quantums are benchmarked by “dollar value and as a percentage of market cap, to account for valuation swing.” The alert goes into greater detail on the evolution of the vehicle mix and addresses common performance periods and vesting terms.

– Meredith Ervine 

Here’s the latest 154-page guide for compensation committees from Wachtell. This year’s guide notes that we’re in a state of flux. Here’s an excerpt from the intro:

As we enter the 2026 proxy season, compensation committee members are participating more actively than ever in the process of disclosing executive compensation and soliciting shareholder feedback. Shareholders and proxy advisory firms have increasingly signaled that compensation committees should play a role in seeking input from shareholders on a company’s executive pay philosophy, and committee members are expending increased time and energy to engage with shareholders on these issues.

The preparation of the annual proxy statement, which is often a tool to highlight how executive pay has been tailored in response to shareholder feedback, has evolved into a purpose-driven, intensive collaboration among management, the compensation committee, the compensation consultant, and external legal counsel to produce a document that serves as an executive compensation mission statement, state-of-the-union update on the performance of the business, and catalogue of shareholder engagement efforts, while at the same time complying with technical disclosure rules, the scope and breadth of which are constantly expanding.

Against this backdrop, the state of executive compensation disclosure regulation appears to be in flux, as U.S. Securities and Exchange (“SEC”) Commissioner Paul S. Atkins shared his vision on February 17, 2026 for enacting “SEC disclosure reform” that would prescribe the “minimum effective dose of regulation,” and it remains to be seen how potential changes in the disclosure requirements may impact the role of the compensation committee.

Other developments addressed by this year’s guide include:

– The state of non-compete bans and enforcement actions aimed at anticompetitive activity

– Notable Delaware decisions on compensation

– Whistleblower compliance reviews

– Updates to proxy advisor policies

As usual, the guide includes a sample “Compensation [and Management Development] Committee Charter” as an exhibit, although it notes, “It would be a mistake for any company to simply copy published models. The creation of charters requires experience and careful thought . . . we recommend that each company tailor its compensation committee charter and written procedures to those that are necessary and practical for the particular company.”

– Liz Dunshee

Be sure to tune in at 2 pm Eastern today, March 18th, for our webcast – “Pre-IPO Through IPO: Compensation Strategies for a Smooth Transition” – to hear Morgan Lewis’s Timothy Durbin, Alpine Rewards’ Lauren Mullen, Cooley’s Ali Murata, Pearl Meyer’s Aalap Shah, and Latham’s Maj Vaseghi share practical guidance on key compensation considerations from the pre-IPO phase through the offering and into the first chapter of public company life. Our panelists will also address questions submitted by members in advance (the deadline was March 13th).

Topics include:

– Assessing Existing Arrangements and IPO Impact
– Designing and Adopting New Equity Plans and ESPPs; Share Pool Strategy
– Managing “Cheap Stock” Issues; 409A Valuations
– Designing and Communicating Special IPO Awards
– Negotiating New Employment Agreements; Change-in-Control and Severance Terms
– Navigating Lockups, Blackout Periods and Post-IPO Selling Mechanics
– Establishing the Post-IPO Executive Compensation Program
– Building Compensation-Related Policies, Governance and Controls
– Communicating with Executives and Employees Through the Transition
– Transitioning Director Compensation (time permitting)
– Q&A: Answering Questions Submitted in Advance (15 minutes)

Members of this site can attend this critical webcast (and access the replay and transcript) at no charge. Non-members can separately purchase webcast access. If you’re not yet a member, you can sign up for the webcast or a CompensationStandards.com membership 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.

We will apply for CLE credit in all applicable states (with the exception of SC and NE which require advance notice) for this one-hour 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.

– Liz Dunshee

Here are some helpful pointers that John shared yesterday on TheCorporateCounsel.net:

Disclosure of executive security arrangements is a topic that’s received a lot of attention over the past year, including from SEC Chairman Paul Atkins, who suggested that the SEC’s continued treatment of executive security arrangements as a perk doesn’t reflect modern business realities.  While Chairman Atkins’ comments may give companies reason to hope that perk disclosure of these arrangements may soon end, for this year at least, the old rules continue to apply.

So, with all the attention being paid to executive security, what should companies disclose about these arrangements in their proxy statements?  Over on Real Transparent Disclosure, Broc recently provided some answers to that question. Here’s an excerpt:

– Rapid Growth in Executive Security Spending: Personal security services (home security, cybersecurity, security personnel, travel security) are increasing in prevalence and cost. Disclosure rates show 64% of the S&P 100, 35% of the S&P 500 – and 10% of the Russell 3000 provide executive security services, with expectations of continued growth.

– ISS’s Evolving Position on Security Perks: While ISS historically cited security expenses critically in negative Say-on-Pay recommendations, it recently relaxed its stance. ISS now indicates it is unlikely to raise significant concerns if companies provide robust proxy disclosure explaining the rationale and assessment process behind security programs.

– Disclosure Expectations from Proxy Advisors: Adequate disclosure should describe:

-The nature of the security program
– The benefit to stockholders
– The internal or third-party security assessment
– The arm’s-length decision-making process

Broc also says that companies expecting a significant increase in executive security expenditures need to involve the compensation committee and the relevant executives early on in order to ensure a robust assessment and approval process. These companies should also provide clear disclosure of that process in the CD&A in order to mitigate any criticism they might receive from proxy advisors.

– Liz Dunshee

As we’ve shared on this blog, investors have become slightly more open to companies motivating performance through equity awards that vest over an extended period of time (e.g., 5+ years) – rather than based on performance objectives.

For example, in response to the Policy Survey conducted last fall by ISS Governance, 38% of investors said time-based awards were acceptable as one component of compensation plans – and 31% said that time-based awards were acceptable as all or part in certain industries.

However, a new report announced by ISS Corporate (available for download) flags that relying on time-based awards is still a minority practice, and perhaps performance awards have not been misguided after all. Here are the key takeaways:

– “Standard” companies, which incorporate performance-based awards, generally show stronger long-term shareholder returns and more measured CEO compensation growth than companies that rely solely on time-based equity. Vote support for Say on Pay was higher at these companies as well.

– Standard companies perform better across all Governance QualityScore categories, including non-compensation categories suggesting a broader pattern of stronger governance practices where performance-based awards are used. However, this is partially due to the inclusion of factors related to performance-based awards in the Compensation category.

– No-Performance Based Awards (NPBA) and Extended-Timed Based Awards (ETBA) programs remain minority practices and are becoming even less common, reinforcing performance-based equity as the dominant market expectation.

– Companies with extended time-vesting awards and companies with no-performance-based awards are smaller in size than companies with a “Standard” compensation program. They also have a similar distribution to Standard companies.

My personal view is that every company should do what their board thinks is best – taking into account how to motivate performance and retention, administrative burdens, and investor preferences. But it can be helpful to revisit the conversation from time to time, with consideration of the trends and data points covered in reports like this one. In this blog from last summer, I also shared some pros & cons of shifting to time-based awards.

– Liz Dunshee

This Pay Governance alert discusses the disconnect between company disclosures addressing pay-for-performance and the shifting approaches of proxy advisors and institutional investors. Companies continue to use varied approaches to describe pay-for-performance alignment, and the confusion created by PvP meant that these required disclosures didn’t fill the gap created by this lack of comparability.

Most companies describe the rationale for their performance measures, and in some cases the rigor of their performance targets, but provide limited disclosure demonstrating how pay outcomes align with performance. Some companies use realized or realizable pay analyses and supporting charts to illustrate alignment with shareholder outcomes, while others focus on “take-home” pay as evidence of alignment. These varying disclosure methods make it difficult to readily assess pay-for-performance alignment across companies.

Institutional investors and proxy advisors similarly have varied approaches to pay analysis. But the memo suggests there is a push towards a greater use of outcome-based measures:

The proxy advisors’ pay-for-performance models up until now have generally relied on SCT compensation, which reflects the grant date value of long-term incentives, rather than outcome-based compensation, which reflects the actual number of shares earned and the updated stock price.

One of the proxy advisory firms has added two outcome-based tests to its pay-for-performance model this year to supplement its SCT compensation tests . . . Vanguard has incorporated outcome-based measures in evaluating pay-for-performance in its proxy voting guidelines, and it is likely that other institutional investors are also relying on similar approaches to inform their voting decisions.

The memo suggests that companies that don’t already might want to start proactively supplementing the required PvP disclosures with realizable pay.

As proxy advisors begin to supplement traditional models with outcome‑based tests and large institutional investors increasingly rely on proprietary pay‑for‑performance methodologies, boards would be well served to proactively adopt and disclose more robust, outcome‑oriented analyses. Supplementing required PVP disclosure with clear, contextual explanations of CAP and realizable pay and visual demonstrations of alignment with shareholder outcomes can enhance credibility, improve investor understanding, and strengthen the overall pay‑for‑performance narrative.

– Meredith Ervine 

Managing the process of granting equity awards to employees in the U.S. alone is already a huge compliance effort, but multiply that by 10+ for multinational companies that grant awards to employees around the world — navigating many securities, tax, data privacy, etc., regulatory regimes. If you administer a global equity plan, this McDermott alert is your annual reminder to consider new regulations adopted in applicable countries in 2025. The memo addresses developments in China, the EU, Japan, the Philippines and the UK. It also shares these overall trends:

Income tax and social insurance rates

A number of countries have proposed income tax and social insurance rate and threshold changes for 2026. Similar to the last few years, during which most changes have increased the taxes due, many of these adjustments will increase the applicable tax rates, although there are a few exceptions this year.

Restrictive covenants

In 2025, various countries introduced legislation that curtailed restrictive covenants and limited their use solely to executive-level employees for short durations. We expect to see similar legislation in additional countries in 2026. The trend is based on a concern that these restrictions had become too common and were restricting the mobility of rank-and-file employees.

– Meredith Ervine 

We have two webcasts coming up this month focused on the IPO process and newly public companies. The first – “Pre-IPO Through IPO: Compensation Strategies for a Smooth Transition” – is coming up next week on CompensationStandards.com. We’re also hosting a webcast the following week on TheCorporateCounsel.net called “From S-1 to 10-K: Avoiding Disclosure Pitfalls,” addressing the new disclosure expectations and increased compliance demands for companies entering into the Exchange Act reporting cycle.

Join the first webcast on Wednesday, March 18th, from 2 to 3:30 ET on CompensationStandards.com to hear our stellar panelists discuss key compensation considerations from the pre-IPO phase through the offering and into the first chapter of public company life, with a focus on practical strategies for designing, implementing and communicating compensation programs and governance frameworks that support a smooth transition. Timothy Durbin of Morgan Lewis, Lauren Mullen of Alpine Rewards, Ali Murata of Cooley, Aalap Shah of Pearl Meyer and Maj Vaseghi of Latham will discuss:

On Friday, Corp Fin announced new and updated Compliance & Disclosure Interpretations, most of which relate to Rule 701, which exempts offers and sales of securities issued pursuant to a compensatory benefit plan by a private company to employees, directors, officers, consultants, advisers, and other individuals providing bona fide services to the company. Here are the updates to the Securities Act Rules CDIs:

New Question 271.26 clarifies when companies must provide disclosure under Rule 701(e)(1)–(6) if the aggregate sales price of securities sold under this exemption during a consecutive 12-month period exceeds $10 million.

New Question 271.27 states that the Rule 701 exemption is lost for the entire offering during the 12-month period in which the $10 million threshold is exceeded if the issuer fails to provide the required Rule 701(e) disclosure within a reasonable period before the date of sale.

Revised Questions 271.10, 271.12, 271.14, 271.16, 271.23 and 271.24 are updated solely to replace outdated references to $5 million with $10 million (which was updated in Rule 701(e) in 2018).

The other updated CDI addresses the definition of “ineligible issuer” (Securities Act Rules CDI 203.03 (redline)). A new CDI confirms a new CIK is not required following a reorganization (Securities Act Forms CDI 101.06), and another states that the failure to check the SRC status box does not result in loss of SRC status or the ability to use SRC accommodations (Regulation S-K CDI 102.06). 

– Meredith Ervine