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!
As Meredith and I noted when ISS published its 2026 benchmark voting policies and compensation FAQs, this year’s analysis of equity plan proposals will include a new negative overriding factor for plans found to be lacking sufficient positive features under the “Plan Features” pillar. In other words, an equity plan proposal could receive an “against” recommendation even if it would otherwise have a passing score.
The new factor builds on a handful of overriding factors that already existed – e.g., an evergreen share reserve. Some of those factors are more “black & white” than others. With the new factor, the policies and FAQs don’t parse out exactly how the calculation will shake out. This Cooley memo shares more detail:
It is important to note that, in December 2025, ISS added an additional negative overriding factor, where a plan has an “insufficient” score under the Plan Features pillar (i.e., if the plan “lacks sufficient positive features,” as ISS puts it). As a result, ISS may recommend a vote against an equity plan proposal where the EPSC evaluation results in a Plan Features pillar score of less than seven points.
Because ISS does not specify how many points are available under each of the various design aspects evaluated under the Plan Features pillar, it is not immediately clear what combination of features will avoid a potential negative override, but legal practitioners and consultants familiar with the EPSC model should be able to offer helpful guidance in that regard.
In light of this new factor, it’s extra important this year to understand whether ISS recommendations tend to affect your voting outcomes – and if so, to model how much breathing room you’ll have under the Equity Plan Scorecard. See the FAQs starting with #35 to understand which factors can help or hurt your score.
I always appreciate getting the “lay of the land” when we’re navigating so many ins, outs, and what-have-yous – which is definitely the case this year. In this 36-minute episode of “The Pay & Proxy Podcast,” Skadden’s Erica Schohn and Page Griffin joined Meredith to catalog what’s top of mind right now. They discussed:
1. The status of the SEC’s retrospective review of the executive compensation disclosure rules
2. Feedback received in comment letters and during the June roundtable
3. Next steps for executive compensation disclosure rulemaking
4. Considerations for executive security spending and other perks disclosures for 2026 proxy statements
5. The evolution of equity grant timing practices in recent years
6. Proxy statement disclosures regarding the timing of equity grants
7. Changes to ISS’s policies regarding the treatment of time-based versus performance-conditioned equity
8. Which companies are considering changes to their 2026 compensation plans in light of this policy shift and what changes they’re considering
Now’s the time to register for our 2026 Proxy Disclosure & 23rd Annual Executive Compensation Conferences to lock in the best rates! We’re offering super early bird pricing until April 3. Our conferences will be held on Monday, October 12th, and Tuesday, October 13th, at the Hilton Orlando this year, with our kickoff welcome event on Sunday, October 11th. By October, we might even be digesting new compensation disclosure rules! Wouldn’t that be magical!
Speaking of magic, if you’re looking to make the most of a trip to Orlando, the Hilton Orlando is a Universal Orlando Resort Partner and is located just one mile from the new Epic Universe theme park. So you could pair proxy disclosure, executive compensation, networking and professional development with exploring the Ministry of Magic, sipping a butterbeer (or three — it comes cold, hot and frozen), playing Super Mario Bros IRL and soaring with dragons on the Isle of Berk. (But we all know the real magic is going into a transitional proxy season with all the wisdom and practical guidance our speakers will share, amirite?!)
If you can’t make it in person, it may be (slightly) less thrilling, but you won’t need to miss out on all the tips for complying with whatever disclosure changes will be effective for the next proxy season. We will continue to offer a virtual option plus an on-demand replay and transcripts for all attendees (including in-person attendees in case you play hooky to get in some thrill rides or, more likely, have to miss sessions to take some client calls). I’d go so far as to say that our course materials alone are worth registering for! Anyway, register by April 3 for the best rate, and look out for future announcements about the agenda, speakers, and the hotel block!
We’ve posted the transcript for our recent webcast, “The Secret of My Success: Best Practices for Management Succession Planning.” Our outstanding panel — Derek Chien, VP & AGC of Synopsys, Richard Fields, Head of the Board Effectiveness Practice at Russell Reynolds, Tracey Heaton, CLO and Corporate Secretary of Heidrick & Struggles, J.T. Ho, Partner at Cleary Gottlieb and Jennifer Kraft, Former EVP & GC of Foot Locker — shared succession planning best practices from their personal experience. They discussed:
Long-term succession planning
Emergency succession planning
The role of the board and management in succession planning
When an executive chair role may be appropriate
Shareholder perspectives and communications
Disclosure considerations and requirements
Executive compensation considerations
Some of my favorite thoughts from the program include:
– Management succession is a top risk for any organization in terms of shareholder value creation or destruction, so it should be treated like any other area of enterprise risk management.
– It’s important to include objective assessment tools in any succession planning process. “One dinner does not a CEO successor make” & “so-and-so was a really good bourbon partner is not necessarily the reason you want someone getting a Fortune 100 CEO role.”
– Rich Fields encouraged everyone to refer to an “emergency” succession as an “unplanned” succession, to avoid implying that the leadership transition is an emergency; an unexpected succession should not be an emergency when a company has a playbook and executes on it.
– Expectations regarding the duration and scope of any transitional executive chair arrangement should be clarified upfront so there’s no stepping on toes between the executive chair and the CEO or it could make the transition more difficult instead of easier.
Members of this site can access the transcript of this program for free. It’s also available on-demand and eligible for CLE credit. Instructions for qualifying for on-demand CLE credit will be posted on the archive page. If you are not a member of CompensationStandards.com, email info@ccrcorp.com to sign up today and get access to the full transcript and webcast replay.
SCOTUS may rule the Liberation Day tariffs illegal sometime in the next few weeks. That means tariffs present another (and different) uncertainty for compensation programs this year. This Pay Governance alert is all about tariffs, the potential for refunds and what they might mean for compensation programs.
Based on accounting literature, if the Supreme Court rules that the tariffs were illegal and must be refunded, they will be reported as income (reduction in expense) in 2026 when a refund is probable, provided they were fully expensed in 2025. If the tariffs were capitalized in inventory in 2025, the portion of the inventory sold in 2025/2026 before the Supreme Court decision—when a refund becomes probable—will result in a reduction in Cost of Goods Sold in 2026. Any remaining tariffs capitalized in unsold inventory will be deducted from the cost of inventory as a balance sheet adjustment and will not impact earnings.
Similar to last year’s timing of Liberation Day when tariffs were first implemented, many companies may have already established their 2026 annual and long‑term incentive plan targets at the time the potential tariff refund was announced and were unlikely to have considered such an impact when setting these targets. In light of this, how should companies think about the impact of a potential tariff refund on 2026 incentive plan payouts?
The alert says you may want to look to last year:
A simple answer might be consistency: if you did not adjust 2025 incentive plan payouts for the impact of tariffs, do not adjust 2026 incentive plan payouts for the refund. Likewise, if you did adjust 2025 incentive plan payouts for the impact of tariffs, adjust 2026 incentive plan payouts for the impact of the refund.
Separate from refunds, there’s also the issue of the tariffs themselves, which may have been included in 2026 incentive plan targets.
Another unclear issue is how IEEPA tariffs that were included in 2026 incentive plan targets should be addressed if the Supreme Court declares them illegal. A simple approach might be to reset the targets by removing the planned tariffs; however, given the uncertainty of new tariffs (or fees) that could be imposed under other rules, it may make sense for companies to take a wait‑and‑see approach until year‑end when the legal landscape is clearer.
In some instances, it may be relatively easy to resolve tariff and refund issues — for example, where immaterial or handled through established plan protocols for unexpected events. But there may be complications:
For example, what if the company uses a cash flow measure and the refund—while probable for accounting purposes—may not be received until 2027 or an even later year? What about companies that altered their performance curves between years, where the impact of the tariffs on 2025 incentive plan payouts was much different from the impact of the refund on 2026 incentive plan payouts?
In any event, monitor for now, but know that this might be another year with some tricky decisions, in which case, “management should prepare a thorough analysis of the impact of tariffs and tariff refunds across years to allow the compensation committee to determine a fair outcome.”
I must admit I haven’t given enough thought to the August executive order that aims to facilitate the inclusion of alternative assets in 401(k) plans. This Cleary alert addresses what boards of companies that sponsor 401(k) plans need to know. First, the alert says the order doesn’t “usher in any immediate regulatory changes,” but it did direct “the DOL to reexamine its guidance regarding the investment of 401(k) plans in alternative assets and, to the extent deemed appropriate by the DOL, to issue clarifying guidance by early February 2026.” That’s now, and it sounds like that guidance may be imminent. Troutman Pepper reports that the DOL submitted that rule to the Office of Management and Budget on January 13, so we should see that soon. In the meantime, the Cleary alert suggests the following actions:
Determining the Board’s Role: Consider what role (if any) the board will play in determining next steps (if any) relating to alternative assets and the 401(k) plan.
Assessing Current Plan: Encourage management to review the current governing documents, investment policy statement and investment line-up for the company’s 401(k) plan to determine whether investment options with exposure to alternative assets are permitted and/or currently held by the plan.
Evaluating Fiduciary Capabilities: Consider evaluating whether the 401(k) plan’s current fiduciaries (e.g., retirement committee or third-party investment advisor/manager) have the requisite expertise to select, evaluate and monitor investment options with exposure to private equity.
Changes to CEO and employee pay get a lot of attention during the runup to an IPO. But with board composition being an important factor in public company success, it’s also important to understand how (and when) to add qualified independent directors.
This Semler Brossy article gives a helpful overview of how director compensation changes as a company approaches its public debut – based on awards granted by high-profile tech companies to independent directors in the 12 months prior to their IPO. Here’s an excerpt:
Compensation packages for incoming directors at private companies generally consist of Restricted Stock Units (RSUs), stock options, or some combination of the two. They are frequently front-loaded equity grants meant to cover multiple years, as opposed to the annual grants common in public companies.
In general, we found that these grants are usually coupled with a 3–4-year vesting period, and more than half of them also require an actual IPO for vesting (known as an “IPO Trigger”). Compensation is almost entirely equity based — of the 20 pre-IPO companies studied, only two offered any direct cash pay — which is typical for pre-IPO companies.
Here’s more detail about how pay structures tend to shift as the IPO approaches:
– When the IPO is 36+ months away, pay is typically in the form of RSUs or stock options, intended to cover multiple years, 3-4 year vesting schedule, no cash compensation, and shares are granted as a percentage of the company. An example median grant is 20-50bps stake in the company with a 4-year vesting period.
– When the IPO is 18-36 months away, the compensation shifts towards RSUs, still with 3-4 year vesting schedules and intended to cover multiple years. The equity portion of awards frequently matches employee awards, compensation may include a cash component, and awards are often expressed as a dollar value instead of a percentage of the company. An example median grant is an up-front grant valued at $300k-$750k, in the form of RSUs, options, or a mix.
– When the IPO is less than 18 months away, director compensation mimics a traditional public company model – mostly in the form of RSUs with annual awards and 1-year vesting periods. Cash compensation is more likely, and awards are expressed as a dollar value. An example median grant is $250k–$350k in annual total compensation, comprised of a mix of cash and equity.
Last fall, over on the Proxy Season Blog on TheCorporateCounsel.net, I shared observations on how US and European investors (and asset managers) are diverging in terms of what they expect from their portfolio companies. This also holds true with say-on-pay, but I didn’t realize how large the delta is in support levels of US asset managers compared to their European counterparts:
2025 proxy voting research reveals that Vanguard, State Street, Fidelity and BlackRock are among the most likely to vote in favor of Say-on-Pay proposals, with Vanguard topping the list by voting in support more than any other asset manager in the report — 97.6% of the time. State Street came in second, with Fidelity and BlackRock following close behind.
The voting results of American asset managers studied contrast sharply with two European managers, Legal & General (LGIM) and UBS. LGIM America, the U.S. arm of London-based LGIM, reported $1.53 trillion in assets under management (AUM) and only voted in favor of executive compensation packages 9% of the time. UBS — based in Geneva, Switzerland, and reporting $6.6 trillion of AUM —only supported these packages 29% of the time.
That’s according to a recent report from United Church Funds, based on NP-X filings made in August 2025. The report identifies a few areas that European asset managers deem problematic. Paraphrasing:
– Setting vesting or holding periods of less than 3-5 years, and/or having too few metrics, may be viewed as too short-term and lead to against votes. The US asset managers apply a more case-by-case analysis and don’t apply specific yardsticks.
– Increasing compensation purely based on peer benchmarking is not acceptable, and heavy reliance on peer groups as a pay-matching mechanism is discouraged.
– High pay ratios may lead to an against vote, especially when companies are underperforming.
As I mentioned yesterday, the fragmented voting landscape means it’s more important than ever to know your investors and their expectations. If you have international institutions as stockholders, don’t be surprised if they take a different approach than the big US asset managers.
It’s wild to think this year will be the 15th year of say-on-pay votes. In that time, the ecosystem of frameworks and modeling has grown into something advisors track each year – because many compensation committees want to understand how their company’s programs will fare under the models. In some cases, it even seems like the goal of truly motivating executives to perform takes a back seat to designing and disclosing pay in a way that will get the blessing of proxy advisors, whose recommendations many institutions follow.
Or at least, that was the case for 10+ years! Now, we may be entering a new era with institutions moving towards their own customized voting policies – and we’re in the early stages of seeing AI models that will apply those policies, instead of an army of proxy advisor and/or stewardship employees. While some companies are happy about that, the fragmentation actually means that votes could get harder to predict. This Pay Governance memo summarizes the state of play – and offers a few predictions for 2026:
The above said, it is likely that mid-size and smaller institutional investors will continue to rely on the proxy advisor firms for voting recommendations in the near-term due to the extensive amount of time and resources necessary to review and responsibly vote on a multitude of proxy voting decisions across a wide range of holdings. Regardless, we also expect institutional investors of all sizes to harness the power of AI for data collection and the development of preliminary voting recommendations, which could further erode proxy advisor influence barring meaningful evolutions in proxy advisor offerings.
Finally, we note that proxy advisory firms have shown tremendous resilience over the years to adapt their business models to changing governance landscapes. For example, the current proxy advisor pivot toward voting recommendations that are more customized/customizable is likely to ensure a degree of relevance and help to respond to regulatory scrutiny in the face of multiple challenges. Although the decline in proxy advisor influence among the largest investors may not fully extend to smaller and mid-size investors, the Say on Pay and governance landscapes are increasing in complexity, thereby creating a more uncertain (but potentially less adverse) U.S. Say on Pay environment.
Even though we’re in a time of change, it sounds like age-old advice of understanding who your investors are – and what they want – is still the best way to predict how your say-on-pay resolution will land. Of course, delivering strong company performance usually helps too.