Zayla Partners recently took an early look at 2026 proxy disclosures to glean insights into pay design trends. Here are the five key early-season trends that they identified:
rTSR Modifiers: Large-caps are adding relative TSR modifiers to LTI plans — calibrating absolute payouts against peers to counteract rising/lowering tide impacts.
AI in Pay Design: At this stage, trends are industry-linked. Techs like Microsoft and IBM explicitly linked compensation program changes to AI strategy execution. For these companies, AI is now a structural rationale, not just narrative context. Side note, the number of “AI” references in 2026 Q1 was greater than “earnings” references.
PSUs are Standard: While proxy advisory firm policy changes weren’t announced until late in 2025, we note one of the key updates involved the “acceptance” of more time-vested awards in the mix. However, early filers are indicating 60% performance-weighted equity is consolidating as the standard for seasoned NEOs. Newly promoted executives typically receive transitional time-based grants.
Succession Planning in Focus: Speaking of newly promoted executives, succession planning is creating complexity in both plan designs (as noted above) and in disclosure burdens. Oracle and Celanese are two early filer examples of these points.
Engagement as Infrastructure: Year-round, committee-led engagement with named institutions — and documented program changes in response — is now a disclosure expectation, not a best practice. Expect this to continue as institutions lessen focus on proxy advisor firms and if SEC disclosure requirements change.
They dive deeper into these five trends in the blog. Here’s what they say about the rTSR modifiers:
Pressure for relative performance measurements has been increasing of late, thanks to market unpredictability. Large-cap companies are adding rTSR modifiers to long-term incentive plans as a result. IBM’s 2026 proxy is the clearest early example: rather than replacing its core operational metrics, the company introduced a modifier that adjusts payouts based on whether TSR outperformed or underperformed its performance peer group.
This is a meaningful design change. Modifiers allow committees to keep metrics that best capture business performance — free cash flow, operating EPS, ROIC — while meeting both the investor concern that strong absolute results during a broad market rally can produce outsized pay and the management concern that an over-reliance on absolute performance metrics can create “no win” scenarios if macro conditions are overly unfavorable.
The key design details boards should understand:
– Modifier ranges are typically ±10–20% of target; ranges outside this band attract scrutiny;
– Peer group definition matters as much as the modifier itself — vague peer groups undermine the mechanism;
– ISS and Glass Lewis view rTSR modifiers favorably; their absence is increasingly a talking point in SOP analyses, including scenarios where companies don’t have negative absolute TSR cutbacks.
Speaking of 2026 proxy disclosures, I’m excited to hear more insights during our upcoming webcast, “Proxy Season Post-Mortem: The Latest Compensation Disclosures 2026.” Go to the webcast landing page and add it to your calendar (it’s Wednesday, June 10, at 2 pm ET) so you don’t miss out on hearing all about interesting compensation disclosures this proxy season from Mark Borges of Compensia, Dave Lynn of CompensationStandards.com & Goodwin and Ron Mueller of Gibson Dunn.
A recent review by FCLT Global of 2,100+ global public companies suggests that companies have stronger long-term performance when independent directors have “skin in the game.” Here are a few key takeaways:
Across our analysis, companies with increasing and durable board ownership significantly outperformed over a five-year period. A sustained rise in director equity ownership over that timeframe is associated with:
– 35–40 percentage points higher total shareholder return.
– Approximately 50 percentage points higher risk-adjusted returns.
The data also highlights what happens when ownership declines. Companies where independent directors reduced their holdings saw materially weaker outcomes, including:
– An average decline of 9.7 percent in TSR.
– 11 percent reduction in risk-adjusted returns.
Beyond returns, the research shows that board ownership is linked to how companies make decisions. Higher director ownership is associated with greater investment in innovation, with roughly 3 percent higher R&D intensity relative to revenue. At the same time, companies where directors hold more equity than executives exhibit significantly lower volatility — reduced by more than 50 percent over five years.
However, the report calls out that the positive results hinge on appropriate design of equity ownership plans and holding periods – and those structures aren’t all that common. Here’s another excerpt:
Despite these implications, structured and durable board ownership remains uncommon across public markets. As the next section explores, a combination of short-term pressure, governance norms, incentive design, and investor dynamics has limited the extent to which the evidence on board ownership has translated into practice.
To avoid these pitfalls, the report offers these tips:
The same evidence and practitioner insights that highlight the risks of symbolic or short-lived ownership also point to concrete design features that appear more consistent with long-term alignment.
– Meaningful and sustained equity ownership, typically reflected in holding periods of 5 years or more
– Ownership aligned with the full arc of board service, including expectations that extend through tenure and, in some cases, beyond departure
– Meaningful ownership held by independent directors, supporting effective oversight and long-term perspective relative to executive ownership
– Ownership that is broadly understood and accepted by long-term investors, reinforcing good judgment without undermining independence
Tune in tomorrow for our webcast – “The Top Compensation Consultants Speak” – to hear Blair Jones of Semler Brossy, Ira Kay of Pay Governance and Jan Koors of Pearl Meyer discuss what compensation committees should be learning about – and considering – today. Among other topics, this program will cover:
– 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
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.
As we enter the height of annual meeting season, you may be getting questions about say-on-pay trends across the market. Here are Semler Brossy’s observations from say-on-pay votes as of late April:
• The current Russell 3000 average vote result of 92.1% is 150 basis points higher than the index’s 2025 full-year average
• The current S&P 500 average vote result of 91.6% is 220 basis points higher than the index’s 2025 full-year average
• The current Russell 3000 average vote result is 50 basis points higher than the current S&P 500 average vote result
• These initial summary vote results continue a multiyear trend of positive early-season vote support; it is still a small sample and summary results are likely to change over the course of the year
• 6.9% of Russell 3000 companies and 5.0% of S&P 500 companies have received an ISS “Against” recommendation thus far in 2026
• It is still early in the proxy season; the Russell 3000 ISS “Against” recommendation rate started lower (5.0%) at this time last year and increased over the course of the proxy season
Here’s what the write-up says about equity plan support so far:
• Average vote support for equity proposals thus far in 2026 (87.3%) is 220 basis points below the average vote support observed at this time last year (89.5%)
• No companies have received vote support below 50% in 2026
• ISS has recommended “Against” 29.7% of equity proposals, which is 240 basis points below the 2025 full-year rate (32.1%)
• Average support for equity proposals that received an ISS “Against” recommendation thus far in 2026 (76%) is aligned with average vote support observed for companies that received an ISS “Against” in the past decade (75%)
In April, the SEC’s Office of Mergers and Acquisitions issued an exemptive order providing issuers and, in some cases, third party bidders with the flexibility to shorten the time period during which tender offers for equity securities must be open from 20 to 10 business days. In order to take advantage of the shorter tender offer period, the tender offer must satisfy several conditions, which vary depending on whether the target is a reporting or a non-reporting company.
The exemptive order isn’t just relevant to M&A. This Cooley alert explains how the new guidance can also help companies with equity award tenders in some circumstances. Here’s an excerpt:
Because of the conditions attached to the reduced 10-day tender period, the SEC relief should generally work in favor of companies, but it is limited. For both private and public company equity award tender offers, the 10-day window is effectively limited to company self-tenders for cash. Notably, it does not apply to tender offers in connection with repricings, modifications or option exchanges – areas where incentive equity compensation often implicates the tender offer requirements.
In the right circumstances – for instance, an option award buyback – a company will now be able to launch and close a cash tender offer more quickly than has been the case in the past, and can do so without inadvertently disqualifying options intended to qualify as incentive stock options.
Two caveats to note:
– First, because of the procedure used to grant the relief, it may be revoked by the SEC at any time.
– Second, and more importantly, the tender offer rules remain a highly technical and complicated thicket requiring great care to successfully navigate.
If you’re wondering about the impact of the SEC’s tender offer rules on option repricings, check out Meredith’s blog from last year as a starting point.
Here’s something Dave shared yesterday on TheCorporateCounsel.net about an announcement by the Division of Investment Management:
The SEC’s Division of Investment Management and Division of Corporation Finance recently provided guidance regarding the federal securities implications of pooled employer plans (also known as “PEPs”), which are defined contribution retirement plans that permit multiple, unrelated employers to join together in a single plan. These types of plans can be particularly attractive for small businesses seeking to provide retirement plan benefits to employees.
In its Staff Statement Regarding Pooled Employer Plans, the Division of Investment Management provided its views regarding the applicability of the “single trust exclusion” in Section 3(c)(11) of the Investment Company Act to pooled employer plans, as well as the applicability of Securities Act Rule 180 to interests in collective investment trusts maintained by a bank and issued to those pooled employer plans that cover self-employed individuals.
In parallel, the Division of Corporation Finance updated its Corporation Finance Interpretations (CFIs) to address two interpretive issues relating to pooled employer plans. In new Securities Act Sections CFI Question 118.01, the Staff states:
Question: Are pooled employer plans (“PEPs”) eligible to claim the Section 3(a)(2) exemption for any interest or participation in a “single trust fund”?
Answer: The staff will not object if a PEP that meets the qualification requirements of ERISA and Section 401 of the Internal Revenue Code and otherwise meets the conditions of Section 3(a)(2) claims the Section 3(a)(2) exemption for any interest or participation in a “single trust fund” even though multiple, unrelated employers participate in the PEP. As with any plan that meets the exemption in Section 3(a)(2), the offers and sales of any securities in connection with the PEP are subject to the anti-fraud provisions of the Securities Act. See Section 17(c). In addition, the exclusion in Section 3(a)(2) for investments in employer securities would apply. Therefore, if a participating employer offers its own securities to its employees as an investment option in a PEP, the Section 3(a)(2) exemption would not be available for the plan interests offered to the employees of that employer. Please refer to Securities Act Forms CFI [126.45] regarding the availability of Form S-8 to register the offer and sale of an employer’s own securities and the plan interests in connection with a PEP at https://www.sec.gov/rules-regulations/staff-guidance/compliance-disclosure-interpretations/securities-act-forms. For the views of the staff of the Division of Investment Management regarding the application of section 3(c)(11) of the Investment Company Act of 1940 and rule 180 under the Securities Act to PEPs, see here.
Question: An employer participant in a pooled employer plan (“PEP”) offers its own securities to its employees as an investment option in the PEP, such as by offering an employer securities fund in which employee contributions may be invested. May the employer use Form S-8 to register the offers and sales of those securities? If so, must the PEP also register the offer and sale of plan interests on that form?
Answer: An employer participant in a PEP may register on Form S-8 offers and sales of its own securities to eligible employees. In addition, the PEP must register the offer and sale of plan interests to the employees of that employer on the same Form S-8. Along with the employer registrant’s signatories, the PEP’s trustees or other persons who administer the PEP must sign the Form S-8 for the plan. See Instruction 1 as to Signatures on Form S-8.
Alternatively, the staff will not object if the employer files a Form S-8 to register the offering of its securities to its employees and the PEP separately files its own Form S-8 to register plan interests offered and sold by the PEP to the employer’s employees, as long as the employer, in addition to incorporating its own periodic reports, incorporates the PEP’s periodic reports by reference into its Form S-8. If filing a separate Form S-8:
• The PEP should register an indeterminate amount of plan interests in accordance with Rule 416(c).
• The staff will not object if the PEP applies Rule 457(h)(2) by analogy and does not pay a fee for the registration of the offer and sale of the plan interests as long as the PEP includes a reference to the employer’s related Form S-8 by name and file number and provides a hyperlink to the filing.
• The PEP’s Form S-8 need only incorporate the documents related to the plan in order to comply with Item 3.
• The employer and the PEP must ensure that investors receive all of the information constituting a Section 10(a) prospectus pursuant to Rule 428 and that such information is updated in accordance with General Instruction G of Form S-8.
• The staff will not object if a PEP registers plan interests offered and sold to employees of multiple employers on a single Form S-8 as long as each employer’s separate Form S-8 is referenced and hyperlinked. [May 4, 2026]
We now have more data on CEO pay trends from 2026 proxy disclosures — this time from ISS-Corporate. They reviewed 2026 proxy disclosures by 318 companies in the S&P 500 with no CEO turnover in the last two years. Here’s what they found:
– Median CEO pay […] stood at $17.7 million. More than 74 percent of S&P 500 CEOs in the study received a pay increase while compensation fell for the remaining 26 percent.
– For the segment of companies that increased pay for their chief executives, the median change was 15.6 percent, while compensation decreased by a median of 9.5 percent among those companies where pay dropped.
– Notably, pay increased by more than $10 million for 27 CEOs, and 21 CEOs saw their pay more than double in 2025.
– Median CEO pay increased for these large cap companies by 10.6 percent from the 2025 to 2026 filing periods, the analysis found, representing an acceleration from the 7.5 percent rise observed between the 2024 and 2025 filing periods.
While increases in base salary were modest, as is often the case, growth was primarily driven by an increase in the value of new equity awards.
Compensation Advisory Partners recently analyzed how 2026 proxy disclosures on goal-setting and earned compensation addressed the impact of tariffs. They specifically surveyed 22 companies that had filed proxies by April 17 and depend on imported goods, manufacture overseas or source key materials from countries impacted by tariffs. Here are their key findings:
– Of the 22 companies reviewed, 11 (50 percent) did not reference tariffs impact on incentive plan metrics in their proxy statements.
– Of the remaining 11 companies (50 percent), 8 disclosed an impact on their annual incentive (AI) plan, while 3 disclosed impacts on both annual and long-term incentive (LTI) plan payouts.
– Therefore, 8 out of 22 companies (36 percent) made adjustments to annual and/or long-term incentive payouts.
They found that the disclosures had a consistent theme:
[P]erformance goals for both AI and LTI plans had been established prior to the implementation of tariffs. Once tariffs were introduced, companies experienced a period of volatility during ongoing negotiations between the Trump Administration and the impacted countries. As a result, many companies characterized the negative financial impact as an unforeseen, extraordinary event and applied upward adjustments to incentive plan payouts.
Not surprisingly, that was the cited rationale when adjustments were made:
[T]ariffs are external, unpredictable shocks that were not included in the original target setting process, so adjusting helps isolate true operational performance and ensures executives are evaluated and compensated based on factors within their control. Adjustments also prevent key financial metrics such as EBIT, EBITDA, Free Cash Flow, and EPS from being distorted and help maintain a consistent pay-for-performance framework.
When companies made adjustments, here’s what they observed about their disclosures:
The impacts on payouts were disclosed as adjustments to their plan payouts in percentage points. In comparing annual versus long-term incentive plan adjustments, ICU Medical was the only company to disclose a quantitative adjustment to its long-term incentive plan, applying an upward adjustment of +50% to the payout percentage. Adjustments were more common for annual incentive plans, with reported increases ranging from +6% to +43% of the actual payout. Among the seven companies that disclosed a specific adjustment, the median increase was +13%, and the average was +12% to the actual payout.
Finally, companies adjusted annual and long-term incentive plans in different ways. Of the eleven companies that made adjustments, 5 companies modified adjusted EBITDA to exclude all or a portion of the tariff expense to increase incentive plan payouts. In addition, three companies adjusted multiple performance metrics rather than a single measure.
Companies that discussed tariffs but declined to make adjustments explained that they did so for purposes of:
– Ensuring performance metrics do not fully exclude real economic impacts of tariffs on profitability
– Maintaining accountability for management’s response to tariff pressures
– Avoiding overstatement of performance by fully removing a real cost
– Preserving credibility with shareholders and consistency in reporting
CAP goes on to make some future predictions:
Companies are likely to continue adopting hybrid approaches to tariff treatment, with a growing emphasis on partial and rule-based adjustments rather than fully excluding or fully including tariff impacts. The evidence suggests companies will increasingly distinguish between anticipated tariffs, which are treated as normal economic costs, and unforeseen or newly imposed tariffs, which may be adjusted out using predefined mechanisms such as cutoff dates or specific cost factors.
This reflects an effort to balance fairness in performance evaluation with accountability for real business outcomes, while also enhancing transparency and consistency in incentive design. As tariff volatility persists, companies are expected to formalize these practices further, embedding clearer guidelines into incentive plans to ensure that performance metrics remain both economically meaningful and aligned with shareholder value creation.
Speaking of balancing fairness and accountability, they also note that companies “will need to evaluate whether and how to adjust performance metrics to exclude or normalize the impact of refunds, ensuring that executive compensation reflects underlying operating performance rather than a one-time boost.”
Here’s something Mark Borges shared on his Proxy Disclosure Blog here on CompensationStandards.com on Friday:
[I]f you’re like me, you may not have noticed a pair of bills introduced in Congress in March that would empower the Federal Deposit Insurance Corporation to claw back certain compensation paid to executives and directors of financial corporations subject to the FDIC’s jurisdiction. Generally, the House bill, the “Failed Bank Executives Accountability and Consequences Act” (H.R. 7886) and the Senate bill, the “Failed Bank Executives Clawback Act of 2026” (S. 4050), would require the executives and directors of large banks (as well as certain other persons) to disgorge the compensation they received over a multi-year period (two years for the House and three years for the Senate) preceding their bank’s failure. Citing the failure of Silicon Valley Bank as an example, the measures would hold these individuals financially responsible for some of the costs those failures impose on the rest of the banking system and the U.S. economy.
The applicability of this clawback is limited, and Mark notes that, like many bills introduced, the measures’ prospects are unclear. But clawback requirements remain top of mind for some in Congress (on both sides of the aisle), and even when proposals don’t get any short-term traction, some keep coming back up again and again.
As this FW Cook memo explains, sometimes there are good reasons for boards to approve special awards. But the fact remains: Investors don’t like them. The memo points out that some companies are able to recover quickly from investor concerns associated with these awards, while others suffer fallout for years. Here’s an excerpt:
The difference tends to come down to a combination of factors: underlying company performance, the quality of engagement with key shareholders, demonstrated responsiveness to the concerns raised, as well as the overall design and disclosure of the award itself. There is no single formula that guarantees a smooth recovery, and boards that approach the aftermath as a routine engagement exercise sometimes find it is anything but.
The memo walks through factors that tend to contribute to a quick recovery. Not surprisingly, a lot of it comes down to thinking ahead. Here’s an excerpt:
Boards that navigate this well also tend to think ahead — specifically, about what the story looks like if circumstances don’t resolve cleanly. When the board does not yet have a viable successor in place, a retention grant has a straightforward logic at the time of grant. The board needed time, and the award bought it. That story is easier to tell if a transition happens eighteen months later. It gets harder if two or three proxy seasons pass, the CEO is still in place, succession is still unresolved, and shareholders are left wondering what the award actually accomplished beyond extending the status quo. The question worth asking in advance is not whether the rationale works today — it usually does — but how it ages if the underlying situation moves slowly or not at all.
Related to that is a consideration that often gets underestimated: what the grant closes off. No board grants a special award knowing exactly what the next two or three years will bring. Business circumstances shift, and some of those shifts — an acquisition, an unexpected performance shortfall, a leadership change — may call for compensation responses that are themselves outside the ordinary. When that happens, a board that has recently granted a special award faces a harder conversation. Shareholders have limited appetite for repeated departures from normal practice, even when each one is justified on its own. The cost of a special award is not only the grant itself — it is the flexibility it may take away from the board later, when a more consequential decision requires shareholder patience.