Earlier this week, in Ayers v. Foley, the Delaware Chancery Court relied on the new heightened presumption of disinterestedness for independent directors of listed companies in granting in part a motion to dismiss derivative claims challenging a special equity award to a listed company’s chairman. At the same time, the court denied the motion to dismiss the claims challenging a board committee’s approval of non-employee director compensation since the approving directors are “inherently interested.” Here’s a brief summary of the facts:
The company’s compensation committee approved increases to non-employee director compensation — cash and equity — three times between November 2022 and October 2024, totaling $40,000 in cash compensation and $30,000 in equity compensation plus a one-time special equity grant of $100,000 for each NED, vesting over three years. The committee cited “FNF’s superior financial performance, including the success of the F&G acquisition in 2020” as its rationale for the special grant.
After a media report suggested that the board chair might be looking to leave the company, the compensation committee members discussed an retentive equity award for the chairman. He requested a $60 million grant, but the committee determined a $44 million grant was more appropriate based on market data from its compensation consultant. After negotiations, they landed on a $50 million equity grant vesting over three years, with the chairman to receive no further equity during that period. The compensation committee determined that the board’s related person transaction committee should also approve the grant, given its significance.
The plaintiff argued that the two transactions should be analyzed as one (presumably to apply an entire fairness review to both), but Vice Chancellor Will declined to do that, noting that they were separate transactions and would be analyzed separately. And, in fact, she analyzed these two challenged transactions very differently, for good reason. One (the chairman’s grant) was approved by two independent committees, while the other (the NED compensation) involved an inherently conflicted transaction that must meet the entire fairness standard, absent a stockholder vote.
With respect to the chairman’s grant, VC Will found that the plaintiff failed to plead demand futility because he failed to show that a majority of the board was conflicted:
The plaintiff [. . .] questions the independence of the other five directors (Ammerman, Hagerty, Rood, Thompson, and Quirk). If he were to succeed in impugning these directors’ impartiality, then—combined with Foley—he would have adequately pleaded demand futility under Rule 23.1. But he falls short of the high bar set by Section 144(d)(2) to plead that three of the five challenged directors [. . .] have a material relationship with Foley.
Section 144(d)(2) of the General Corporation Law of the State of Delaware includes the recently adopted heightened presumption of disinterestedness for directors of listed companies found by the board to be independent under exchange rules. Vice Chancellor Will said that presumption “may only be rebutted by substantial and particularized facts” showing a material interest or relationship and determined that the business ties of the three directors whose disinterestedness was challenged — including overlapping service on boards of other companies affiliated with the chairman and coinvestments in sports teams — weren’t enough to rebut the presumed independence. Because the plaintiff failed to present any particularized allegations supporting an inference of bad faith, the board did not face a substantial likelihood of liability, and the demand was not excused. The outcome was different for the non-employee director compensation claims, which VC Will allowed to proceed past the pleading stage, at least against the approving directors.
[T]his case concerns directors awarding compensation to themselves [. . .] Delaware courts generally view the unfair dealing component to be effectively satisfied at the pleading stage for self-compensation claims [. . .] As for unfair price, the plaintiff’s allegations also meet his burden. He alleges that the directors’ compensation consistently and significantly outpaced FNF’s peer group while FNF underperformed.
Plaintiff cited data showing that the company’s NED compensation was above the median, while its market cap, income and revenue were comparably lower. Defendants countered that above peer average compensation is not necessarily excessive and that the company had outperformed its peers on operating margin. VC Will noted that defendants’ points are “persuasive points [and] may well pose a formidable barrier to the plaintiff’s ultimate success and dampen expectations for a significant recovery,” but that they present a “factual dispute inappropriate for resolution on a motion to dismiss.”
At present, I cannot adopt the defendants’ preferred performance metric (title operating margin) and ignore the plaintiff’s identified metrics (market capitalization, revenue, and net income). By pleading that the directors’ compensation rose to a large premium over the peer median while FNF lagged in key financial metrics, the plaintiff has pointed to “‘some facts’ implying lack of entire fairness.”
In our latest episode of “The Pay & Proxy Podcast,” I was joined by Shaun Bisman of Compensation Advisory Partners to hear Shaun’s top takeaways from CAP’s early review of 2026 proxy disclosures by companies with significant tariff exposure due to their overseas manufacturing, global supply chain or reliance on imported goods. In this 20-minute episode, Shaun covered:
How commonly tariffs were addressed in compensation disclosures
The prevalence of adjustments for the impact of tariffs
Adjustments in annual incentives versus LTI
How companies implemented adjustments
Commonly disclosed rationale for adjustments
Commonly disclosed rationale for no or partial adjustments
How compensation committees should distinguish “external shocks” from normal business costs
How compensation committees should approach tariff refunds and adjustments
The top takeaway for compensation committees evaluating the impact of tariffs and incentive pay
If you have insights on compensation and proxy disclosures you’d like to share in a podcast, I’d love to hear from you. Email me at mervine@ccrcorp.com.
We’ve posted the transcript for our webcast “The Top Compensation Consultants Speak.” During this program, Blair Jones of Semler Brossy, Ira Kay of Pay Governance and Jan Koors of Pearl Meyer discussed what compensation committees should be learning about – and considering – today. They covered:
– The Compensation Committee Landscape in 2026
– 2026 Say-on-Pay Outcomes and Challenges
– Aligning and Disclosing Pay and Performance
– Special Awards Under the Microscope: Retention, Sign-On, Make-Whole and “Moon Shot”
– 2026 Equity Plan Approval Outcomes and Challenges
– Time-Based vs. Performance-Based Equity: Rethinking Vehicle Mix and Award Design
– Shifting Proxy Advisor Power: Be Careful What You Wish For?
– Competitive Strengths of the US Executive Pay Model
– Compensation Committees and AI
– Compensation Consultants’ View of Potential Disclosure Rulemaking
Here’s something Blair shared on “Time-Based vs. Performance-Based Equity: Rethinking Vehicle Mix and Award Design.”
There will be some companies that choose to adopt long-vested RSUs. I think there are going to be companies in highly cyclical or volatile industries with long business cycles and long-tenured employee populations that are willing to try it out. None of this comes without trade-offs, so the trade-offs to think about are: you lose the upside that PSUs provide, and when the upside happens, it’s really good. You don’t want to take that lightly. I do agree with Ira, you lose a lot of strategic messaging potential, and that’s an important thing to take into account.
Equity vehicles have historically been important messengers about what we’re trying to do and what’s important. When all of us see executive compensation programs work, they’re aligned with the strategy, and they hum along, and it’s perfect. If you have only time-based equity, and you don’t have the performance measures from PSUs, or you diminish them, then it puts a lot more pressure on your annual plan for those goals to be rigorous and for you to show a good pattern of improvement year over year. Aside from that, there are all sorts of administrative things to figure out about how you’re going to handle people coming and going in the organization, since you’re now dealing with five-year cycles. There’s a lot to figure out. Some companies will adopt it, and I do think it will be right for some companies.
As we all know, Exxon has had a similar design to this for a very long period of time. Boeing has now put in a hybrid version using long-vested equity for 2026, and we’ll see how that plays out. They pre-disclosed the design. We’ll have some good discussions around which companies end up adopting long-vested RSUs. The majority of companies are still likely to keep PSUs because they do have a lot of value to them, and we can work around some of the challenges of the goal setting and measurement to make them as effective as possible.
Members of this site can access the transcript of this program for free – and for the lawyers out there, you can also get on-demand CLE credit for watching the replay. If you are not a member of CompensationStandards.com, contact our team at info@ccrcorp.com or at 800-737-1271 to sign up today and get access to the replay and full transcript.
Over on The Proxy Season Blog on TheCorporateCounsel.net, I recently shared some nuggets from Vanguard’s latest Investment Stewardship Report, which covers the asset manager’s voting and engagement activities during the 2025 calendar year.
In addition to the corporate governance matters that I highlighted in that blog, the stewardship report addresses how Vanguard handles executive compensation proposals. Here’s an excerpt:
In evaluating executive compensation proposals, we assessed how a company’s executive pay program aligned pay outcomes with shareholder returns relative to a relevant set of industry peers. We looked to disclosures of the board’s oversight and explanation of the plan structure to provide context for how the board believed pay decisions and plan design would lead to alignment between executive rewards and shareholder returns.
As in previous years, we observed the use of one-time retention equity grants by certain U.S. companies in highly competitive industries, such as technology, biotechnology, pharmaceuticals, and financials. To explain their rationale for granting such awards, boards relayed the need to reengage employees, prevent attrition to competitors or startups, and supplement or replace equity-based compensation that had lost motivational value following stock price declines.
We noted that opportunities existed for companies to provide enhanced contextual disclosure of their board’s decision-making process and rationale in instances where they chose to issue retention equity grants. When engaging with portfolio company leaders, we encourage companies to provide clarity on the specific facts and circumstances underlying their decisions to make one-time awards.
The report provides case studies for say-on-pay and other matters. Overall, Vanguard supported 98% of say-on-pay proposals in the US in 2025 and voted with management on 79% of other pay-related proposals. Vanguard didn’t support any of the 21 pay-related shareholder proposals that hit ballots last year.
The SEC’s proposed changes to “filer status” rules could spell the end of mandatory pay ratio disclosures for many companies, along with many other executive compensation disclosures. As Meredith blogged last week, there are steps companies can begin taking now to evaluate whether and how they would adjust their disclosures if the proposed amendments are adopted.
Several of the factors that Meredith flagged in her blog boil down to “how will our investors react?” You probably won’t be surprised to hear that there are some vocal groups who want to retain the current disclosures. For example, the Interfaith Center on Corporate Responsibility (ICCR) recently published a report titled “Excessive Executive Compensation: Investor Guidance” – and an accompanying “Investor Statement on Excessive Executive Compensation.”
The statement is signed by a coalition of investors with more than $113 billion in AUM. It calls on investors to strengthen oversight, transparency and alignment in executive pay, including by reviewing their proxy voting records and guidelines on executive compensation, and engaging with companies and across the investment ecosystem to support improved practices.
Among other things, the report argues that a company’s pay ratio is decision-useful information for investors. The announcement about the report says:
– Need for Clearer Voting Thresholds: The report also showcases investors who have adopted quantitative cutoffs, such as voting against any pay package where the CEO-to-median-worker ratio exceeds 100-to-1, or where total executive compensation exceeds $10 million.
The report predates the SEC’s proposal to simplify the filer status framework, and ICCR has not yet submitted a public comment on the rule. There are only about 15 comments on file so far – we will continue to track them as they roll in. The comment deadline is July 20th.
Tune in at 2:00 pm Eastern tomorrow — Wednesday, June 10 — for our annual webcast “Proxy Season Post-Mortem: The Latest Compensation Disclosures” to hear Mark Borges of Compensia, Dave Lynn of CompensationStandards.com & Goodwin and Ron Mueller of Gibson Dunn discuss “lessons learned” that companies can start carrying forward into the next proxy season. It’s time to analyze what was disclosed and what was not in the 2026 proxy season.
This webcast is scheduled for 90-minutes so that Ron, Mark and Dave have time to cover the many hot topics that everyone is dealing with right now, including:
– Today’s Incentive Compensation Challenges
– The State of Say-on-Pay During the 2026 Season
– Experience with Proxy Advisors’ New Pay-for-Performance Analyses
– 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 (Time Permitting)
– What’s To Come: Musings on Potential Executive Compensation Disclosure Rulemaking (Time Permitting)
– What’s To Come: Musings on the Potential Overhaul of Regulation S-K (Time Permitting)
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 90-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.
Sometimes you just need to step back and consider what you’d do if you had a blank slate. This FW Cook memo observes that at some companies, it’s worth using the summer comp committee to discuss whether the current LTI program still matches the company’s current strategy – even if you don’t end up making any changes. Here’s why it’s worth the time:
LTI is the largest piece of executive pay, the piece most visible to shareholders, and the piece that most directly translates board intent into management behavior. It is also the piece that tends to evolve through small, defensible adjustments year over year — a metric swap here, a weighting tweak there — until the cumulative shape of the program reflects historical accommodations more than current strategy.
Specifically, the memo recommends considering whether the following plan elements still align with the company’s current compensation philosophy, goals, and strategy:
– Vehicle mis: Longstanding assumptions that drove many companies to use a mix of PSUs, restricted stock and/or options have been tested in recent years. Committees that haven’t recently asked whether the current mix is still the best expression of their pay philosophy may find the answer has drifted from where they thought it would be.
– Performance period: The assumption that three years is the right answer because three years has always been the answer deserves at least one honest conversation per cycle.
– Vesting and post-vest holding: Cliff versus ratable vesting, post-vest holding requirements, mandatory deferral, and stock ownership guidelines all interact in ways that are easy to specify individually and harder to evaluate as a system. One mechanism that has largely faded from current practice but could be revisited is the management stock purchase program — an arrangement under which executives can elect to receive a portion of their bonus, or other earned compensation, in restricted stock rather than cash, typically with a premium or matching component that compensates for the lockup.
As always, members who are navigating these issues can access a library of resources in our “LTIPs” Practice Area. You can sign up for 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.
Tune in 2:00 pm Eastern today on TheCorporateCounsel.net for our webcast – “The SEC’s Semiannual Reporting Proposal: Considering the Alternatives” – to hear from the all-star line-up of Brian Breheny of Skadden, Meredith Cross of WilmerHale, Tom Kim of Gibson Dunn and our own Dave Lynn, also of Goodwin, on the topic of the SEC’s proposed amendments that would allow public companies to elect to file semiannual reports on new Form 10-S, rather than filing quarterly reports on Form 10-Q. They will discuss the SEC’s proposed rule changes and explore the practical implications of a shift to semiannual reporting for issuers, auditors, underwriters and the markets. Topics include:
– The SEC’s proposed rule changes to the periodic reporting system
– The SEC’s proposed changes to financial statement requirements
– Potential areas for changes to the proposed rules
– The experience of public companies in other jurisdictions with optional semiannual reporting
– Considerations for companies when deciding to elect semiannual reporting
– Potential challenges of semiannual reporting for areas such as insider trading compliance, share repurchase activity, capital-raising and investor communications
– The ways in which earnings releases and earnings calls may change for companies opting into semiannual reporting
– The relationship of the semiannual reporting proposal to other SEC initiatives
Current members of TheCorporateCounsel.net automatically have access to this webcast. Not yet a member? We’re giving non-members special access to this important program. Register for free access today.
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.
Last week, Liz shared how the SEC’s proposed overhaul of filer status thresholds – if adopted – could make approximately 80% of public companies eligible for scaled disclosure accommodations. But she warned that companies should avoid the “Jurassic Park problem” and carefully consider before deciding whether to provide fewer disclosures and scrap say-on-pay if the proposals are adopted. To that end, this CAP memo lists these practical steps companies should consider taking early on to evaluate the impact on their proxy disclosures and compensation governance. They suggest that companies should begin:
– Assessing whether they would likely qualify as a proposed NAF or LAF
– Modeling how the proposed rules would change the content and timing of annual proxy preparation
– Identifying which current disclosures would no longer be required but may still be useful to investors
– Considering whether to retain a streamlined compensation narrative even if CD&A is no longer required
– Evaluating how the elimination of say-on-pay could affect the company’s shareholder engagement strategy
– Assessing whether reduced peer company disclosure could affect peer group benchmarking analyses, especially for companies that rely heavily on proxy statement disclosure as a market data source
– Monitoring institutional investor and proxy advisor reactions to the proposal
– Following the SEC comment process and any changes made before final rule adoption
It says a company’s approach might depend on company size, ownership profile, compensation history, governance posture, and investor expectations and that market practice is likely to evolve over time – as may the advisability of using scaled disclosure accommodations.
Russell Reynolds recently reported on updated Q1 2026 data from its Global CHRO Turnover Index, generally finding that CHRO succession is becoming “more deliberate.” Specifically, “Organizations are making slightly fewer moves overall, but when they do make a change, they are widening the search, weighing experience carefully, and holding leaders in role for longer.” Here are the key takeaways:
Experienced CHRO hires gained traction in major markets
First-time CHROs remained the majority of global appointments, rising to 60% from 54% in Q1 2025. But in the S&P 500, 60% of incoming CHROs had already held a public company CHRO role, up from 39% a year earlier. In the FTSE 100, that figure reached 75%, up from 50% in Q1 2025.
Organizations widened the aperture on succession
Globally, 56% of incoming CHROs were external hires, up from 46% in Q1 2025 and above the seven-year average of 52%. The shift was especially pronounced in the S&P 500, where 67% of CHRO appointments were external, up from 30% a year earlier.
CHRO tenure continued to edge higher
Average outgoing CHRO tenure rose to 5.4 years globally, up from 5.2 years in Q1 2025 and above the seven-year average of 4.7 years—the highest level in the period tracked.
On the rise in tenure, the summary says this may be attributed to boards’ preference for continuity in people leadership, especially given the volatile operating environment and the expansive remit of the CHRO.