This memo from Compensation Advisory Partners examines CFO pay – as compared to CEOs – at 155 companies that have reported 2024 compensation. Here are a few highlights:
• Total Direct Compensation was up 6% for CFOs and 4% for CEOs (at median)
o CFO base salary was up 4.0% and CEOs were flat (same as 2023)
o More than half of CFOs (56%) had same or higher bonuses than 2023
o Long-Term Incentive awards increased 7% for CFOs and 5% for CEOs (vs. 11% and 9% last year, respectively)
• Over a 10-year period, CFO total compensation as a percentage of CEO total compensation has been approximately 1/3, ranging from 30% to 34% over this time frame.
The memo concludes:
Our study continues to support that paying for performance remains a focus for Compensation Committees and senior management. 2024 revenue and operating profit performance improved 3% and 5%, respectively, and bonus awards were directionally aligned.
The CFO role continues to serve as a key leadership role and strategic partner, which partially contributed to the higher movement in pay compared to CEOs. In terms of the target program, though pay mix stays relatively consistent over time, Compensation Committees are delivering the biggest increases in long-term incentives.
Looking forward to 2025, economic uncertainty prevails, so we expect no major changes in target programs. Compensation Committees will continue to spend a significant amount of time balancing compensation outcomes with performance, calibrating goal setting in an increasingly volatile political environment, and ensuring talent retention and attraction.
If your family is anything like mine, everyone is starting to panic that summer is going so quickly! Luckily, there’s a lot to look forward to this fall – specifically, our “Proxy Disclosure & Executive Compensation Conferences” – October 21st – 22nd at The Virgin Hotels in Las Vegas! Register now to get a 20% discount on the single in-person attendee fee. This rate expires July 25th – less than three weeks away!
The Conferences will equip you with action items to handle changes to executive compensation practices and disclosure rules, investor expectations, and more. If you aren’t able to join us in Vegas, you can also attend virtually. Either way, you’ll be able to prepare your compensation committee and executives with key developments, so they aren’t caught off-guard when it comes time to make year-end decisions and disclosures. Plus, you’ll have access to on-demand replays throughout the 2026 proxy season!
Our “early bird” rate for the Conferences expires Friday, July 25th – which will be here before you know it! Reach out to our team to register by emailing info@ccrcorp.com or calling 1.800.737.1271.
Check out the latest 21-minute episode of “The Pay & Proxy Podcast” – Meredith interviewed Cooley’s
Michael Bergmann and Ali Murata about navigating compensation challenges during uncertain times. This certainly has been a timely topic this year in light of geopolitical issues and more. They covered:
– Why 2025 program design and target setting generally did not factor in tariff impacts
– How companies are using their equity programs and managing dilution in 2025
– 409A traps for the unwary
– Considerations for 2025 payouts, particularly when discretionary adjustments are being considered
– “Options” for dealing with underwater options
As always, if you have a compensation-related topic you’d like to discuss on a podcast, feel free to ping Meredith at mervine@ccrcorp.com! And if you aren’t already a member of CompensationStandards.com, email info@ccrcorp.com to sign up and access this podcast and all of our archives!
Last week, Glass Lewis sent a client communication previewing changes to its quantitative pay-for-performance model that will be effective for the 2026 proxy season. This Cooley alert summarizes what we know so far:
The announcement signals significant revisions to the structure and scope of the Glass Lewis P4P assessments for US and Canadian companies. Most notably, Glass Lewis will replace its historical A – F letter grade system for US and Canadian companies with a new 0 – 100 numerical scorecard system, with an associated concern level. In addition, its evaluation period for key P4P tests will be lengthened from three to five years. The announcement also hinted at the introduction of new P4P assessment tools that will cover additional facets of compensation.
A brief video accompanying the announcement includes a chart illustrating the relationship between short-term incentive payouts and a company’s total shareholder return ranking over a five-year period, suggesting a potential shift toward more targeted evaluations of the link between short-term incentive outcomes and long-term value creation. However, the announcement and video otherwise provide essentially no other information about the new methodology.
The alert notes that this preview comes months before annual policy updates are typically published — which may reflect the scope of the changes. Importantly, Cooley notes that no immediate action is needed — or even possible — until further guidance, which we should see in the coming weeks.
This will undoubtedly be a big topic of conversation at our “2025 Proxy Disclosure and 22nd Annual Executive Compensation Conferences.” We’re very thankful for the continued participation of the proxy advisors at our conferences in the always popular panel “Navigating ISS & Glass Lewis,” which features a conversation moderated by Davis Polk’s Ning Chiu with representatives from both firms.
This year, our conferences are taking place on October 21 & 22 at Virgin Hotels Las Vegas with a virtual option if you are unable to attend in person. If you do plan to attend in person, be sure to arrive early enough on Monday to attend the Welcome Party Celebrating CCRcorp’s 50th Anniversary, which will take place from 4:00 pm to 7:00 pm PT on October 20.
Register today so you don’t miss out on our Early Bird Rate — it expires July 25! Email info@ccrcorp.com or call 1.800.737.1271.
In the meantime, have a safe, happy, healthy Fourth! Our blogs will be back on Monday.
Yesterday, I shared that the ISS peer group submission window for off-season meetings is opening next week. For folks not involved in this process — and often the lawyers are not — I thought I would share this Pearl Meyer blog about how these groups are constructed and why they might change year-over-year.
First, the blog says to start with basic screens using this criteria to guide initial selection.
Primary Criteria:
– Industry Alignment: Start by selecting companies within your industry or closely related sectors. Comparable market conditions and business dynamics ensure relevant comparisons.
– Company Size: Appropriate relative size is critical, but the types of measures used for comparison can vary by industry. The most common focus is revenue, but other metrics such as assets, market capitalization, enterprise value, and employee count may be just as important (and in some cases more so). Once the key metric(s) are established, an appropriate size range should be set, typically 0.5x to 3.0x depending on the metric. Striking this balance ensures meaningful comparisons without skewing results.
Secondary Criteria:
– Geographic Scope: While geography matters less for executive roles than lower-level positions, local market comparisons may still be a relevant consideration.
– Competition for Talent: Include companies that directly compete for your executive talent. In some cases, this may include companies that do not compete in the same industry.
– Business Complexity and Stage: Consider the complexity of operations and the company’s life-cycle stage—whether they’re startups, mature entities, or undergoing rapid growth or restructuring.
– Performance Stability: It’s important to look at the financial stability and performance. Otherwise, reliable benchmarks can be distorted by underperforming organizations.
– Peers of Peers: Most public companies disclose their peer groups, and reviewing them can provide valuable insights into industry practices. Looking at disclosures of direct competitors can uncover commonly referenced peers and identify companies that list your own as a peer.
But the process shouldn’t end with analytical screens. It says “personal insight and experience” needs to be the next layer to ensure that all business or talent competitors are considered for the peer group, even where they may not pass these analytical screens. Size-wise, it says to generally aim for 12 to 20 companies.
Why would a company’s peer group change in future years? The blog emphasizes that this is an ongoing process, and the group will require regular review and discussion, with changes being necessary from time to time due to M&A and shifts in the company’s market position.
As part of ISS’ peer group construction process, on a semi-annual basis, corporations are requested to submit changes they have made to their self-selected peer groups for their next proxy disclosure. ISS considers companies’ self-selected peer groups as an important input as part of its own peer group construction methodology . . . Submissions should reflect peer companies used (or to be used) by the submitting company for pay-setting for the fiscal year ending prior to the company’s next upcoming annual meeting . . .
Companies that have made no changes to their previous proxy-disclosed executive compensation benchmarking peers, or companies that do not wish to provide this information in advance, are under no obligation to participate. For companies that do not submit any information, the proxy-disclosed peers from the company’s last proxy filing will automatically be factored into ISS’ peer group construction process.
Additional information on the ISS peer submission process, including links to ISS’ current recent peer selection methodology for the U.S. and Canada is available on the ISS website here.
Last Thursday, the SEC held its roundtable on executive compensation disclosure requirements. Our own Dave Lynn (who spoke on a panel) noted on TheCorporateCounsel.net blog on Friday that the event was well-attended. If you missed it — either in person or virtually — the SEC posted a replay of each panel on the SEC’s YouTube channel. And if listening to 4+ hours of discussion about the SEC’s executive compensation disclosure requirements is just not in the cards for you right now (or ever), we’ve got you covered!
In blogs on TheCorporateCounsel.net on Friday, Dave shared his thoughts and excerpts from the remarks by Chairman Atkins and Commissioners Crenshaw, Peirce and Uyeda. On the Proxy Disclosure Blog, Mark Borges (who also spoke on a panel) shared a few thoughts about revisiting the current disclosure requirements that occurred to him as he listened to the various panelists. Today, I thought I’d share high-level topics, ideas and themes that I heard throughout the three panels, many of which were teed up in advance by Chairman Atkins, and whether there was consensus or some disagreement among the panelists. Here are a few:
– How or whether executive compensation disclosure requirements drive or distort compensation decision making
Panelists cited the requirement to hold a say-on-pay vote and compensation committees taking into account investor and proxy advisor policies
Panelists also noted that including executive security spend in the Summary Compensation Table’s calculation of “Total Compensation” can distort investor and proxy advisor perception and analysis of pay (although corporate representatives stressed that the board will make decisions in the best interest of the company regardless)
– Whether the executive compensation disclosure requirements effectively convey how the board and compensation committee consider compensation
A number of panelists supported the suggestion that the disclosure requirements more closely reflect the presentation of pay in board materials — including the “target” and “outcome” tables that compensation committees use
– Whether “more is better”
Investor representatives generally made suggestions for additional disclosures, and issuer or advisor representatives generally suggested that the rules could be shortened and streamlined
Repeated “asks” by investor representatives included that quantitative disclosures be machine-readable and that the disclosures more clearly present the life-cycle of an equity award
– Whether the executive compensation disclosure rules are too granular and attempt to elicit disclosure of ALL the information ANY investor might want to know, instead of focusing on materiality and the reasonable investor standard
If you’re wondering about the title of this blog, CII’s Bob McCormick shared a story about his high school job making ice cream. He once asked the owner why they make some unusual flavors that weren’t very popular. The owner explained that one customer — who drove 30 minutes each way — really liked them. From there on out, “rum raisin ice cream” was a favorite call back, but panelists disagreed whether the rules should require companies to keep making rum raisin ice cream — i.e., keep disclosing information that is very valuable only to a small subset of investors. Now you know!
– Whether simplifying the Item 402 disclosure requirements would actually result in shorter disclosures
As Dave noted, while say-on-pay required very little disclosure, companies significantly expanded their voluntary disclosures after these votes were legislatively mandated
– The complexity and homogenization of pay and the factors driving these developments
There was generally consensus that companies feeling like they have to follow a “one-size-fits-all” approach to pay programs — with most pay in the form of PSUs — is a bad thing for both companies and shareholders, and that flexibility — including to simplify equity programs to largely time-vested with a long holding period — would be beneficial
– Consensus that the prescriptive, tabular requirements generally provide overly complicated and difficult to use disclosures, while some voluntary disclosures are particularly useful (including presentations of realized and realizable pay)
A few investor representatives described the complicated process they follow to understand executive equity awards, which involves flipping between numerous tables and referencing Form 4s
– Consensus among the issuer and advisor representatives that compensation disclosures are too costly to prepare
Corporate representatives stressed that “every dollar matters” for companies both large and small, while also noting the outsized burden on less-resourced small- and mid-cap companies
Our 2025 Conferences will be taking place Tuesday & Wednesday, October 21 & 22, at the Virgin Hotels in Las Vegas, with a virtual option for those who can’t attend in person. The early bird rate is ending soon! You can sign up by emailing info@ccrcorp.com or calling 800-737-1271.
Despite a sharp decline in shareholder proposals, the number of proposals on executive compensation topics dropped by only a handful this year. That’s according to recent stats from The Conference Board and ESGAUGE, which look at stats from Russell 3000 companies.
In further contrast to environmental & social, as well as governance proposals, these stats show that average support for executive compensation topics increased by 3% this year. It’s the only category besides “other” where average support increased. Here’s more detail (data is through June 13th):
Number of shareholder proposals voted in the Russell 3000: 443 (vs. 576 in 2024)
Governance: 165 (155)
Environmental: 60 (76)
Social: 102 (172)
HCM proposals: 38 (84)
Executive compensation: 51 (56)
Other (e.g., elect dissident’s director): 27 (33)
Average support: 23% of votes cast (vs. 22% in 2024)
Governance: 39% (39%)
Environmental: 10% (18%)
Social: 13% (16%)
HCM proposals: 9% (16%)
Executive compensation: 17% (14%)
Other: 38% (19%)
Number of shareholder proposals omitted/withdrawn: 313 (vs. 330 in 2024)
Omitted: 180 (136)
Withdrawn: 133 (194)
When you look closer, the story isn’t super clear-cut. We’ve been discussing factors that have been contributing to the overall drop in proposals over on The Proxy Season Blog – and many of those same factors are at play in the compensation category. One of those is the opposing forces of “traditional” proposals versus “anti-ESG.” For example:
– Meredith shared a few weeks ago that support for severance agreement-related proposals has been down this year (through May 1st).
– At the same time, anti-DEI proponents have submitted proposals relating to incentive compensation milestones – so those may account for some of the numbers this year.
Another variety of executive compensation related proposal that I’ve seen recently was a request to include CEO pay ratio in the company’s consideration of executive compensation, which to my knowledge hasn’t passed. Reach out if you know of any other proposals that we should watch for!
I don’t know about you, but I’m on the edge of my seat for tomorrow’s roundtable at the SEC, especially because so many of the participants are friends of our sites and also speaking at our upcoming “Proxy Disclosure & Executive Compensation Conferences.” (I’m always proud that we have so many members in our community who are giants in the field!)
1. Center on Executive Compensation – Reflecting the input of H.R. and exec comp professionals in response to questions posed in SEC Chair Paul Atkins’ May 16th statement about the roundtable – in particular, explaining the benefits to companies and investors of a more streamlined and principles-based disclosure model.
2. Farient Advisors – Supporting certain aspects of the current rules, including the concept and current definition of “Compensation Actually Paid,” but suggesting elimination of aspects of PvP, elimination of pay ratio, furnishing (rather than filing) the CD&A, and other changes intended to simplify presentations.
3. Cravath – Suggesting an alternative approach to equity award reporting that could simplify tabular disclosures, elimination of the requirement to disclose hypothetical termination scenarios for NEOs that have departed prior to filing Item 402(j) information, streamlining disclosure requirements for IPO and spin-off companies, revisions to Instruction 4 to Item 402(b) to require disclosure of performance metrics only at the time an award is earned, and revising the definition of “Compensation Actually Paid” and other aspects of PvP disclosures.
I know that a number of trade organizations, law firms, and consulting firms also have letters in process, so we’ll continue to see submissions after the roundtable. I have heard through the grapevine that comments will be most impactful if they’re submitted by late July / early August.
Did you know that CCRcorp is turning 50?! That’s right, we’ve been providing essential guidance on disclosures, governance, and executive compensation for half a century – beginning as a “must have” print newsletter and growing into the reliable online resources and events that everyone loves today.
We’re celebrating this milestone on Monday, October 20th in Vegas – and everyone’s invited! The anniversary party will be part of our welcome reception for our “Proxy Disclosure & Executive Compensation Conferences” at The Virgin Hotels, which are October 21st – 22nd. The Conferences will cover what you need to do in light of all the changes that are happening with the SEC, the broader regulatory and business environment, and the investor stewardship landscape. Here’s the agenda – 14 essential sessions over 2 days – and the speaker lineup.
The welcome reception and anniversary party is a casual drop-in event that runs from 4-7 p.m. on October 20th and is open to all attendees of the Proxy Disclosure & Executive Compensation Conferences – there’s no need to RSVP. But if you haven’t made your travel arrangements for the conferences, now’s the time, because the hotel block is going fast! Make sure to factor in the Monday evening reception when you book your tickets! We can’t wait to celebrate.
Of course, now’s also the time to register to attend the Conferences, if you haven’t done that yet. Our “early bird” registration deal is still available for in-person registrations! Our Conferences will be held Tuesday & Wednesday, October 21-22, at Virgin Hotels Las Vegas, with a virtual option for those who can’t attend in person. Reach out to our team to register by emailing info@ccrcorp.com or calling 1.800.737.1271.