I blogged yesterday about modest increases to compensation for public company directors over the past decade. That hasn’t been the case for their private company counterparts – who saw an average 25% increase last year, according to this survey from Private Company Director and Compensation Advisory Partners. Here’s more detail:
As private company board governance continues to evolve, the complexity and time commitment associated with board service has increased. The additional workload, coupled with greater competition to recruit qualified candidates, has caused private companies to increase pay levels and provide pay structures, such as annual retainers and long-term incentives, that are similar to public companies.
The 2025 Private Company Board Compensation and Governance Survey includes a robust dataset of 633 respondents who certified their data in April 2025 and provides an up-to-date analysis of director pay practices in the current competitive environment. About half of the survey respondents represent family-owned or -controlled companies. Another 17% of respondents represent closely held companies, 18% represent private equity-owned companies and 10% represent companies owned by employee stock ownership plans (ESOPs). The survey respondents span diverse industries and a broad range of revenue sizes.
The survey found that annual cash retainers are very common and that 37% of companies provide long-term incentives (mostly in the form of equity). Board compensation for private company directors is still lower than public company pay. But compared to the public company director compensation trends that I shared yesterday, it correlates more closely with company size.
If you think directors at large-cap public companies are bringing home a lot more in board compensation than their counterparts at smaller companies, you’d be wrong, according to FW Cook’s annual review of director compensation. The report summarizes trends at 300 companies of various sizes and industries. Here were a few key findings:
– Annual director compensation growth remains modest, particularly for mid- and large-cap companies.
– This trend goes back further than the three-year look on the prior page – looking across our last 10 studies, annualized growth in median total pay has been 2.9% for mid-cap companies and 2.2% for large-cap (4.9% for small-cap).
– Over the last 10 years, director pay has not kept pace with the increase in market value of companies. This is especially true for large-cap companies where, over this period, the median market cap rose 305% (11.8% annually) while median director pay rose 25% (2.2% annually).
– Large-cap companies, which in this study have a median market cap of >50x the small-cap median, pay directors roughly 1.5x what small-cap companies pay, compared to a multiple of 2.7x for CEOs.
FW Cook says that compression at the top of the pay scale is a problem for large companies looking to attract qualified directors and points out how this compression differs from what we see with CEO pay as companies grow.
While I can see that point, I’m taking it with a grain of salt. In my experience, high quality directors are more motivated by intrinsic rewards like reputation, connection, and staying relevant than money. I’ve heard recruiters and board chairs say it’s a red flag if the compensation is what’s attracting the candidate. Plus, with 60-70% of director pay coming in the form of equity that will continue to appreciate, board members at well performing large-cap companies aren’t exactly working for free.
The memo also has this to say about pay caps for directors:
– Prevalence of annual limits on director compensation continues to increase (82% of the total sample versus 79% last year and 67% five years ago).
– Limits on total pay typically range from $500,000 to $1,000,000 and equate to a multiple of roughly 2x to 3x total director pay.
Part of the reason that annual pay limits have become more common is because the Delaware Supreme Court decided several years ago that the entire fairness standard applies to the board’s director compensation decisions. I’ve shared commentary in the past about considering conflicts of interest in setting director pay – and those could be more of an issue if board compensation starts to track CEO pay patterns.
Finally, some good news in the world. This ClearBridge voting update says that equity plan proposals are doing very well – which should be a silver lining for companies facing share depletion. Here’s more detail:
▪ Consistent with last year, ~99% of equity plan proposals passed the shareholder vote – Reflects continued shareholder recognition of the importance of equity as a compensation and retention tool for companies
▪ While ISS recommended “Against” ~31.4% of companies in the Russell 3000, ~98% of companies that received an “Against” from ISS ultimately passed the shareholder vote
ClearBridge also recaps stats on say-on-pay and director elections so far this year – all in all, it’s been a pretty good year.
We’ll be discussing what this year’s proxy season results can tell us about next year – as well as key issues in short & long-term incentive plans and many other timely topics – at our “Proxy Disclosure & 22nd Annual Executive Compensation Conferences” – which are only 3 weeks away!! Register now online – or you can email info@ccrcorp.com or call 800.737.1271. Be sure to check out our agenda and our outstanding lineup of speakers.
The “Proxy Disclosure & 22nd Annual Executive Compensation Conferences” are happening October 21-22 at The Virgin Hotels in Las Vegas. There will be lots of great networking – so register and book your hotel! For convenience, we have a virtual attendance option – but we hope to see as many folks as possible in person! Remember that all Conference attendees – whether in-person or virtual – will have access to on-demand replays for a year after the event, as well as our valuable course materials.
As Meredith (and John) recently blogged, SEC Chair Paul Atkins has an ambitious list of priorities in the latest Reg Flex Agenda. This Gibson Dunn memo also points out what’s *not* on the agenda – specifically:
Certain Dodd-Frank-mandated rulemakings were dropped from short-term rulemaking and moved to long-term rulemaking in the 2025 Agenda, such as an interagency rulemaking intended to implement Section 956 of Dodd-Frank, which relates to incentive-based compensation practices at certain financial institutions that have $1 billion or more in total assets.
The Gibson Dunn team notes that four of six federal financial regulators re-proposed the Section 956 rule last year. Two of six, the SEC and the Federal Reserve, did not join in the issuance of the re-proposed rule – Meredith shared at the time that then-Commissioner Jaime Lizárraga was disappointed that the SEC didn’t jump on board.
Although the rule has made appearances on past Reg Flex Agendas, it’s not too surprising that it will remain “unfinished business” for now, given how issuer-friendly the Chair’s priorities appear to be.
ISS recently released its 2025 Proxy Season Review: United States – Executive Compensation (available to institutional subscribers). The related press release highlights these key say-on-pay takeaways from the 2025 season:
– Shareholder support for say-on-pay proposals decreased slightly, while failure rates remained near all-time low. Median say-on-pay support levels decreased from 94.9% in 2024 to 94.5% in 2025. Failure rates remained low at 1.2% in 2025.
– CEO pay reached a record high in the S&P 500 for the second consecutive year. Median S&P 500 CEO pay was $16.9 million, the highest pay level ever observed. Median CEO pay in the Russell 3000 was $5.7 million, tying the historic high in 2021.
This Pay Governance alert discusses factors influencing say-on-pay trends, which it summarizes in these bullets:
– Proxy Advisor SOP Opposition Has Declined. So far in 2025, Glass Lewis (GL) issued its lowest rate of SOP opposition (10%) in recent years and is converging with the 10% to 12% opposition rates historically observed from ISS. The ISS SOP opposition rate in 2025 of 9% remains low relative to historical rates but is slightly above the 8% dip observed in 2024.
– Proxy Advisor Impact on SOP Outcomes Has Diminished but Remains Influential. The percentage of proxy advisor-opposed SOP proposals that ultimately fail has declined markedly from 2021 to 2025. However, when both proxy advisors oppose SOP, shareholder support levels, on average, are reduced by -34 percentage points (i.e., from 93% support to 59% support).
– Sustained 1- and 3-Year TSR Performance Correlates with Stability in SOP Outcomes. The consistent SOP outcomes in 2024 and 2025 mirror the sustained relatively strong 1- and 3-year S&P 500 TSR performance observed for the years ending in both 2023 and 2024.
As Liz shared yesterday, in threeparts, on TheCorporateCounsel.net, ISS Governance published results from its annual global benchmark policy survey — part of the process for developing its annual voting policy updates — on Monday. As we shared when the survey was released, questions solicited input from investors and non-investors on non-executive director pay, time- vs. performance-based equity, say-on-pay responsiveness and the modification or removal of ESG metrics, among other things. Here’s a brief summary of some of the compensation-related survey results:
Non-executive director pay. The survey asked respondents to identify specific problematic practices in director pay that should warrant immediate concerns and potentially adverse ISS vote recommendations (even if only in one year). Investors chose:
– 34% – Inadequate disclosure or lack of clearly disclosed rationale in the proxy for unusual NED payments
– 32% – Excessive perquisites (such as travel), performance awards, stock option grants, or retirement benefits
– 33% – Particularly large NED pay magnitude or NED pay that exceeds that of executive officers
Among non-investors, 25% of their choices were for “No”, indicating that a quarter of this group does not believe that any of these problematic practices should immediately trigger an adverse vote recommendation.
Time- vs. performance-based equity. When asked if time-based equity structures are acceptable for part or all of executive long-term incentive awards, the results among investors were:
– 38% – Yes, but only for part of the awards; plans should provide a mix of time- and performance-based awards
– 31% – It depends. The adoption of time-based equity compensation with an extended time horizon may be acceptable for certain industries or due to specific factors disclosed by the company
When asked to provide views on a reasonable mix, investors’ responses did not highlight any significant preference. Non-investors supported “not exceed 50% of the awards” (30%) and “Time-based awards with a sufficiently long-term time horizon are not problematic and they can comprise either all or a majority part of long-term executive incentives” (30%).
In terms of what represents long-term vesting or retention periods to dispense with performance awards, all or in part:
– 46% of investors responded, “At least 5 years vesting and/or post-vesting retention requirement in aggregate (for example, 3 years vesting plus 2 years post-vesting retention)”
– 57% of non-investors responded, “At least 3 years vesting, without a further post-vesting retention period”
Say-on-pay responsiveness policy.
– 64% of investors and 88% of non-investors responded that, “The absence of disclosed shareholder feedback should not be viewed negatively if the company discloses that it attempted but was unable to obtain sufficient investor feedback”
– 80% of investors and 91% of non-investors responded, “Yes, pay program changes, when showing improvement in remuneration practices, can be considered responsive, even in the absence of disclosed shareholder feedback”
Modification or removal of ESG metrics. When asked how ISS should assess the removal of E&S or DEI-related metrics from in-flight awards:
– 73% of investors responded, “Continue with the current approach, whereby changes to in-flight awards are generally viewed negatively absent a compelling rationale”
– 76% of non-investor respondents preferred “The removal of E&S or DEI metrics from in-flight awards generally should not in and of itself be considered problematic absent other concerns”
ISS will over the coming weeks release key draft policy updates and open a public comment period for all interested market participants on certain proposed changes to its voting policies for next year. The open comment period is designed to elicit objective and specific feedback from investors, companies, and other market participants on implementing the proposed policy updates. Final policy updates are expected to be announced around late November and will take effect for shareholder meetings occurring on or after Feb. 1, 2026.
In the LinkedIn post I shared yesterday on share pool depletion issues, Aon’s Laura Wanlass referenced the inducement grant exception and suggested that companies should understand the benefits and drawbacks of this option. If you haven’t used this before — or advised companies that have used this before — Laura is referring to the exemption for new hire inducement awards made outside of a shareholder-approved plan in both NYSE and Nasdaq rules. This alternative involves additional complexities, but it is a welcome exception and not infrequently used approach.
Here are a few things to keep in mind if you are considering granting inducement awards:
− Inducement grants are not covered by the company’s existing registration statement on Form S-8. You may want to file a Form S-8 for the shares covered by inducement awards.
− You will need to make some modifications to your standard resolutions and award agreements (e.g. you will need to spell out provisions that are typically incorporated from the plan) – you may want to keep alternative forms available for this situation, if it happens with any frequency.
− You must notify the exchange that you are relying on the inducement grant exemption, and promptly disclose in a press release the material terms of the award, including the identify of the recipient and the number of shares involved.
− You’ll need to file a supplemental listing application with the exchange for the shares covered by the grant.
These tips are from our “Checklist: New Officers – Managing Arrivals,” so they’re focused on large, one-time grants to new exec hires. But for more widespread use, as Broc noted in 2018, companies often adopt an inducement plan. As far as other drawbacks, keep in mind that proxy advisors and investors closely scrutinize these types of awards, and exchanges encourage companies that anticipate using inducement grants for all new-hires to adopt a shareholder-approved plan for that purpose.
I’m really looking forward to the “Key Issues in LTI: Structure & Disclosure” panel at our October Proxy Disclosure & 22nd Annual Executive Compensation Conferences featuring Semler Brossy’s Blair Jones, Davis Polk’s Kyoko Takahashi Lin, Aon’s Stephen Popowski and Latham’s Maj Vaseghi. ISS’s latest investor survey gathered more investor (and non-investor) input on potential changes to its policy on performance-based equity. (More on that tomorrow.) For now, companies continue to navigate complex LTI programs and are struggling to set rigorous, achievable long-term performance goals in an uncertain environment. Our panel will discuss managing equity plan cost & burn rate, the latest on performance equity, plan design considerations and managing in-flight adjustments.
Our conferences are less than a month away! You can’t afford to miss out on the critical guidance our PDEC speakers — featured on every panel of the SEC’s June Executive Compensation Disclosure Roundtable — will share. What are you waiting for!? Register now! You can sign up online or reach out to our team to register by emailing info@ccrcorp.com or calling 1.800.737.1271.
This is one risk/consequence of the accelerated pace of AI development & adoption — or at least AI hiring — that I hadn’t considered: your share pool replenishment may not keep up! On LinkedIn, Aon’s Laura Wanlass shared some insightful takeaways from the work Aon is doing right now on preliminary share pool analyses for calendar year-end companies. Here’s what she said on this point:
The competition for AI talent is accelerating the use of available share pools more quickly than many anticipated. Small- to mid-cap companies, in particular, are leveraging shares from shareholder-approved equity compensation plans to attract top talent, rather than relying on cash awards or utilizing NYSE and Nasdaq inducement grant exceptions. As a result, many organizations are contemplating reductions in broad-based equity awards for other business units, often without fully exploring alternative strategies that may be available.
At the same time, fluctuating share prices aren’t helping:
Ongoing stock price volatility and depressed valuations across certain sectors are making it increasingly challenging for companies to deliver market-competitive equity grants using targeted economic value approaches, maintain prior levels of companywide participation, or preserve historical long-term incentive vehicle mixes. This environment necessitates a more creative approach to equity compensation. Companies should consider strategies such as implementing effective Employee Stock Purchase Plans (ESPPs) or adopting fixed share grant methodologies for different employee segments to maintain broad-based share ownership.
Laura says companies may struggle to secure FOR recommendations from ISS and Glass Lewis due to dilution & burn rates, and she makes some suggestions:
Proactively providing investors with clear, contextual information about dilution and burn rates can be instrumental in engagement efforts–especially when you cannot pass ISS or Glass Lewis policies.
It is more important than ever for companies to begin share modeling by first assessing internal needs and ensuring sufficient funding for critical talent initiatives, rather than focusing solely on proxy advisor guidelines.
These days, everyone’s got an opinion on executive pay – even the Pope! This article from The Guardian is one of several sources that recaps remarks that Pope Leo made in his first media interview – to Crux, a Catholic-focused newspaper. He had this to say when discussing why the world is so polarized:
Add on top of that a couple of other factors, one which I think is very significant is the continuously wider gap between the income levels of the working class and the money that the wealthiest receive. For example, CEOs that 60 years ago might have been making four to six times more than what the workers are receiving, the last figure I saw, it’s 600 times more than what average workers are receiving. Yesterday the news that Elon Musk is going to be the first trillionaire in the world. What does that mean and what’s that about? If that is the only thing that has value anymore, then we’re in big trouble…
Will the Pope’s remarks affect upcoming faith-based voting policies? Here’s what ISS’s Catholic US Voting Guidelines currently say for shareholder proposals on limiting executive compensation:
▪ Vote for proposals to prepare reports seeking to compare the wages of a company’s lowest paid worker to the highest paid workers.
▪ Vote case-by-case on proposals that seek to establish a fixed ratio between the company’s lowest paid workers and the highest paid workers.
The say-on-pay sections are not much (or any?) different from the regular benchmark policy – they focus on alignment of pay & performance, excessive risk taking, etc.
I sorta doubt the Pope’s remarks are going to make a dent in executive pay practices and voting outcomes, but like his predecessor, Pope Leo is a member of the Jesuit order – and as John has pointed out, you can never underestimate the Jesuits.
The Pope will not be speaking at our upcoming “2025 Proxy Disclosure & 22nd Annual Executive Compensation Conferences” – but plenty of folks who are steeped in compensation practices, SEC disclosure rules, and corporate governance will be there. Check out the full agenda – two days of great info on the many regulatory and practical updates we expect going into the 2026 proxy season – and here are the fabulous speakers. The Conferences are happening in Vegas on Tuesday & Wednesday, October 21st & 22nd. Fly in on Monday, October 20th, to join us at our 50th anniversary celebration!
Register now to attend in person or virtually. You can also reach out to our team by emailing info@ccrcorp.com or calling 1.800.737.1271.
We’ve noted a couple of times on this blog that Glass Lewis is updating its say-on-pay methodology for the upcoming proxy season. The proxy advisor has now launched a new pay for performance modeling tool that is built on the updated assessment methodology – which companies can use to forecast scores and analysis that investors will see in 2026. Companies can download the modeler on the Glass Lewis website.