On Friday, Corp Fin issued a slew of new Compliance & Disclosure Interpretations, most of which relate to Rule 701, which exempts offers and sales of compensatory awards issued pursuant to a compensatory benefit plan by a private company to employees, directors, officers, consultants, advisers, and other individuals providing bona fide services to the company. Here are the updates to the Securities Act Rules CDIs:
New Question 271.26 clarifies when companies must provide disclosure under Rule 701(e)(1)–(6) if the aggregate sales price of securities sold under this exemption during a consecutive 12-month period exceeds $10 million.
New Question 271.27 states that the Rule 701 exemption is lost for the entire offering during the 12-month period in which the $10 million threshold is exceeded if the issuer fails to provide the required Rule 701(e) disclosure within a reasonable period before the date of sale.
The other updated CDI addresses the definition of “ineligible issuer” (Securities Act Rules CDI 203.03 (redline)). A new CDI confirms a new CIK is not required following a reorganization (Securities Act Forms CDI 101.06), and another states that the failure to check the SRC status box does not result in loss of SRC status or the ability to use SRC accommodations (Regulation S-K CDI 102.06).
This is an exciting time of year for anyone who geeks out over proxy disclosures and executive compensation – and if you’re reading this blog, you likely fall into that bucket, whether or not you want to admit it! This year it’s even better, because Mark Borges is sharing noteworthy proxy examples on his “Borges’ Proxy Disclosure Blog.” Here are a few of Mark’s recent updates:
Mark doesn’t simply flag the disclosure – although even that is helpful! He also adds context and commentary from his years of experience. Members of this site can visit the blog – and can sign up to get that blog pushed out to them via email whenever there is a new entry. All you need to do is click the link on the left side of the blog and enter your email address.
If you aren’t yet a member with access to the Borges’ Proxy Disclosure Blog and all of the other resources on this site – such as our checklists, resource libraries, and the essential Lynn & Borges’s “Executive Compensation Disclosure Treatise” – email info@ccrcorp.com, call 1.800.737.1271, or sign up online.
AI-related goals are making their way into executive compensation plans – which isn’t too surprising since many companies are aiming to use new technology to transform their business in one way or another. This Equilar blog looks at how companies are incorporating these metrics, based on 2025 disclosure examples. Here are a few takeaways:
1. Most companies that have incorporated AI metrics have done so within their annual incentive plans. Example metrics include capturing opportunities for revenue growth, driving AI literacy, and AI development and advancement.
2. In one example of putting an AI-focused performance objective into a long-term plan, the company still uses an annual measurement to assess the objective of deploying AI tools to enhance productivity. Equilar notes this approach reflects how the fast-moving nature of AI makes it difficult for companies to set multi-year targets.
3. At least one company is planning to take a scorecard approach in 2026, where AI serves as the strategic goal modifier.
The blog notes that at one company, the AI performance metric is replacing “citizenship and sustainability measures.” It’s not too hard to tell what’s hot and what’s not right now – “ESG” is out, “AI” is in – but hopefully we can use lessons learned from ESG to deploy novel AI-focused metrics in an even more effective way.
If you are disclosing transition pay arrangements in your proxy this year, there’s good news and bad news. ISS Governance recently published these predictions for the 2026 annual meeting season:
Transition pay arrangements are expected to be a focus in the 2026 proxy season. Following an unprecedented number of U.S. CEO changes in 2025, severance packages, sign-on bonuses, make-whole awards, and other transition pay issues are expected to play a prominent role in many executive compensation disclosures.
The good news is that you won’t be alone in making these disclosures, the bad news is that they’re probably going to be scrutinized as part of larger trends.
These predictions were part of a larger report that ISS Governance published on forecasts for the 2026 annual meeting season (available for download), which also says we shouldn’t be surprised if spending on executive security increased last year:
Investors may continue to see increases in security-related perquisites in 2026. Over the last three years, the prevalence of security-related perks increased at a much larger rate than other common perks for S&P 500 CEOs, as many companies reevaluated the need for new or enhanced security protections for their top executives.
The report predicts that economic and geopolitical headwinds will also play a role in the 2026 proxy season.
Recently, the NYSE published annual compliance reminders for companies whose shares trade on the exchange. The letter reminds listed companies of the need to submit supplemental listing applications at least two weeks in advance of any issuances of a listed security, listing a new security, and certain other corporate events.
This requirement tends to catch some folks by surprise in the context of equity plans – and maybe that’s why the exchange has highlighted it for at least two years running on the letter’s front page. Here’s more detail:
A listed company is required to file a SLAP to seek authorization from the Exchange for a variety of corporate events, including:
• Issuance (or reserve for issuance) of additional shares of a listed security;
• Issuance (or reserve for issuance) of additional shares of a listed security that are issuable upon conversion or exercise of another security, whether or not the convertible security is listed on the Exchange;
• Change in corporate name, state of incorporation, or par value; and/or
• Listing a new security (e.g., new preferred stock, second class of stock, or bond).
No additional shares of a listed security, or any security convertible into the listed security, may be issued until the Exchange has authorized a SLAP. Such authorization is required prior to issuance, regardless of whether the security is to be registered with the SEC, including if conversion is not possible until a future date. The Exchange requests at least two weeks to review and authorize all SLAPs. It is recommended that a SLAP be submitted electronically through Listing Manager as soon as a listed company’s board approves a transaction.
Section 703 of the Listed Company Manual provides additional information on the timing and content of
SLAPs. Domestic companies should also give particular attention to Sections 303A.08, 312.03 and 313 of the Listed Company Manual (see Shareholder Approval and Voting Rights Requirements below). Generally, FPIs may follow home country practice in lieu of these requirements. Please consult the Exchange if you have any questions.
Check out the letter for additional proxy season reminders – including for shareholder approval requirements and voting standards.
In addition to the usual topics addressed in PayScale’s latest annual Compensation Best Practices Report (available for download), it also includes the results of its survey on how HR professionals are using AI. Survey respondents said they’ve personally used AI tools in the last 6 months for a number of tasks. Not surprisingly, many of the current uses are clearly not executive compensation-related, but a few might be. (The survey doesn’t distinguish.) Some of the use cases include:
– Market pricing and benchmarking (19%)
– Writing a compensation philosophy (12%)
– Analyzing for pay equity (9%)
– Recommending pay increases (8%)
When it comes to AI tools for compensation benchmarking, the most common (current) position was “I am cautious or hesitant about using any AI for compensation decisions, regardless of type” (28%). That said, 22% of respondents said “I trust general-purpose AI tools (e.g., ChatGPT) to support compensation benchmarking,” and 21% indicated that they only trust “compensation-specific AI tools that have methodologies and controls.” (16% were unsure.) Only 17% of the survey respondents were from public companies. It would be interesting to see similar questions asked to a group of primarily public company HR professionals.
A recent HLS post by The Conference Board reviews 2025 board director compensation practices at U.S. public companies. These top takeaways use several similar terms to describe how the various approaches to director compensation (and even quantums), at least in the Russell 3000 and S&P 500, have continued to “converge.”
– Director pay has largely leveled off, rising just 2% in the Russell 3000 and remaining flat in the S&P 500, reflecting a mature and disciplined compensation model with medians clustered near $250,000.
– Shareholder-approved limits have become a core governance safeguard, now adopted by roughly three-quarters of companies in both indexes, with a typical $750,000 cap that signals tighter oversight and growing investor scrutiny.
– Director core pay elements have largely settled into a stable pattern, with cash retainers flat at $75,000 (Russell 3000) and $105,000 (S&P 500), stock awards holding at $150,000 and $190,000, and only minor variation in option values.
– Companies have converged on a streamlined retainer-only structure, used by about 90% of firms as meeting fees continue to decline in prevalence and value, reinforcing a shift toward simpler and more predictable pay designs even as director responsibilities expand.
– Director perquisites remain modest and highly concentrated, with travel reimbursement still the only widespread benefit (above 50% in both indexes) and most other perks—such as education support or charitable-match programs—concentrated among larger S&P 500 companies.
There may be many good reasons to take a different approach to director compensation, but keep in mind that you won’t get the benefit of “strength in numbers” and may want to ensure a mini CD&A on director pay clearly explains why your board strays from the pack. (Read the full blog for info on some outlying industries.) It’ll be interesting to see whether this convergence trend continues as proxy advisor and investor perspectives start to do the opposite.
A recent memo from ClearBridge Compensation Group commendably takes on the task of helping corporate secretaries, CHROs and compensation committees make their lives a little easier — identifying five practical steps to improve efficiency. Take a look at all five tasks to see if your compensation committee could implement any this year:
1. Establish a Compensation Committee Calendar
2. Set Standard Grant and Vesting Timing Policies
3. Define New Hire Equity and Bonus Participation Policies
4. Delegate Equity Pool Administration to the CEO (Within Limits)
5. Adopt a Pre-Determined Adjustment Policy for Equity and Incentive Awards
I suspect tips 3 and 5 above are the least commonly adopted. To that end, here’s what the alert suggests on participation policies for new hires:
– Standardizing equity grant and bonus eligibility guidelines (e.g., a cutoff date for new hires to participate in annual bonus or equity programs) ensures consistency in treatment of new hires / promotions
For example, guidelines may determine eligibility and proration approach (e.g., if joining in Q1, receive full grant and full bonus eligibility, but for each quarter thereafter prorate opportunity by 25%)
– Establishing a fixed approach can reduce negotiation of treatment with potential new hires
In a speech delivered last week at the Texas A&M Corporate Law Symposium, SEC Chairman Paul Atkins provided some details about the kind of disclosure reforms he wants the agency to pursue. A significant portion of the speech addressed executive compensation disclosure reform. Here’s what John shared on that point on TheCorporateCounsel.net last week:
Chairman Atkins said that the three principles driving the SEC’s efforts to reform executive comp disclosures were rationalizing, simplifying and modernizing the rules governing those disclosure requirements. In terms of rationalizing the rules, he said that materiality should be the SEC’s “north star,” and stated that the current requirement to provide detailed compensation information for up to seven people isn’t consistent with that objective. He said that he agreed with commenters who said that the number of executives for whom compensation info is required should be reconsidered, and that the level of disclosure should be calibrated with its cost.
Chairman Atkins singled out the PvP disclosure rules when discussing the need to simplify compensation disclosures. He said that SEC disclosure requirements should be “intelligible by a reasonable investor and practical for a company to comply [with], without the need for a cottage industry of ultra specialized consultants,” and that the current PvP disclosure rules flunked this test.
With respect to the need to modernize comp disclosures, the Chairman called out the current treatment of executive security arrangements as a “perk.” He pointed out that we live in a different world than the one 20 years ago when the SEC decided that executive security arrangements were not “integrally and directly related to job requirements,” and that the SEC’s rules needed to keep up with modern business realities.
Some of his commentary on Regulation S-K more generally is also relevant to this audience. John continues:
Chairman Atkins called out “disclose or comply” line items that indirectly compel companies to toe the line on specific governance practices by forcing them into awkward disclosures if they don’t. He cited some of Item 407’s requirements, such as the need for a company without a nominating or compensation committee to explain why that structure is appropriate, as examples of this kind of “shaming disclosure.”
Chairman Atkins characterized these requirements as an “attempt to indirectly regulate, or set expectations for, matters of corporate governance.” He said that absent a Congressional mandate, it wasn’t the SEC’s role to enforce evolving “best practice” governance standards through disclosure requirements.
Chairman Atkins also cited provisions of Reg S-K that forced companies to comply with impractical disclosure requirements, such as the need to track down beneficial ownership information for NEOs who departed during the prior year in order to complete the current year’s beneficial ownership table in the proxy statement required by Item 403. He also cited the broad definition of “immediate family members” used in Item 404’s related party transactions disclosure requirements as imposing potentially impractical obligations on public companies.
We’ve posted the transcript for our annual webcast “The Latest: Your Upcoming Proxy Disclosures” with Mark Borges from Compensia and CompensationStandards.com, Dave Lynn of Goodwin Procter, TheCorporateCounsel.net and CompensationStandards.com, Alan Dye from Hogan Lovells and Section16.net and Ron Mueller from Gibson Dunn. They broke down all you need to know for the upcoming proxy season. The webcast covered the following topics:
– Status of SEC Executive Compensation Disclosure Requirements
– Other Possible Topics for SEC Review
– Incentive Compensation – Disclosure Considerations for Tariff Challenges and Discretionary Adjustments
– Executive Security and Other Key “Perks” Disclosures
– Investor Perspectives: “Homogenization” and Performance Equity
– Proxy Advisors – Impact of the Executive Order
– Proxy Advisors – Voting Policy Updates for 2026
– Proxy Advisors – Impact of Announced Move Towards “Customization” of Voting Policies
– Proxy Advisors – Status of Legal Challenges in Texas and Florida
– New Challenges with Shareholder Engagement
– Clawback Policies – Lessons from 2025
– Compensation-Related Shareholder Proposals in 2026
– ESG and DEI Goals: Impact of Shifting and Conflicting Perspectives
– Managing Stock Price Volatility When Granting Equity
This program covered a lot of ground on how to anticipate and handle difficult proxy season issues. 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. If you are not a member of CompensationStandards.com, email info@ccrcorp.com to sign up today and get access to the replay and full transcript. It’s a great way to get up to speed!