Detailing board and management priorities for the year head
With the 2025 North American proxy season now officially closed, emerging trends in executive compensation are offering valuable insights and shaping important considerations for boards going forward. Here, we explore some of these issues and ways boards and management teams can start to incorporate these into planning for next year’s shareholder meeting.
Say-on-pay support stays steady
A review of voting results for say-on-pay (SOP) proposals at Russell 3000 companies reveals outcomes consistent with prior years. As of June, average support for the Russell 3000 was 90.6 percent and 23 companies (1.2 percent of total) have failed SOP so far this year.
In general, SOP proposals receive overwhelming support from shareholders with a relatively small number of companies actually failing the non-binding advisory vote. Issuers are reminded that SOP support below 80 percent generally requires some level of response from the board. Further, staying attuned to the specific practices that tend to trigger investor pushback is essential to head off any surprises. For example:
- Of the 23 companies that failed to receive majority support, seven had underlying pay-for-performance concerns that were compounded by special awards, poor design practices, questionable rigor of performance goals or insufficient shareholder engagement. This indicates that failed votes are driven from a cumulative set of shortcomings.
- Special awards and mega-grants: large one-time grants, often used for retention purposes or to bring on new hires, tend to draw criticism when lacking clear performance alignment. Proxy advisors and investors are expected to remain highly attentive to substantial one-time grants, closely examining both the justification behind them and the structural elements of their design.
- Non-performance-based equity: shareholders continue to have a preference for equity awards linked to performance goals. Proxy advisors, in policy guidance leading up to the 2025 season, hinted at taking a more holistic view of equity awards, balancing performance and time vesting elements.
Board and management considerations:
- Regularly evaluate compensation programs against shifting investor expectations, supported by ongoing engagement efforts.
- Provide robust disclosure around one-time or discretionary pay decisions, detailing the rationale, alternatives considered and alignment with shareholder interests.
DE&I metrics disappearing from incentive plans
When ESG metrics started making their way into executive compensation plans, DE&I measures quickly became among the most commonly used. According to data from Farient Advisors, at the peak in 2023, 57 percent of S&P500 companies incorporated DEI metrics into executive compensation. However, this fell to only 22 percent in 2025, demonstrating how political, legal and shareholder pressures have accelerated the removal of these metrics from executive compensation plans.
Board and management considerations:
- Some issuers are reframing their DE&I programs and disclosures to emphasize inclusion and employee engagement more broadly while downplaying diversity.
- Consider replacing quantitative metrics like representation targets, with more qualitative measures.
Perks under pressure
Perquisites account for only a small portion of total executive compensation but are on the rise and experiencing renewed interest from regulators and investors. Two perks in particular – airplane use and security services – are experiencing significant increases. Based on a recent analysis by Glass Lewis, CEO air travel costs at S&P 500 companies saw a median increase of nearly 46 percent between 2019 and 2023. Median personal security costs surged 119 percent over the same period. Such sharp increases in CEO perks not only raise cost concerns but draw scrutiny from regulators and shareholders alike.
While excessive perks as a sole issue rarely lead investors to oppose SOP, they can be an indicator of weak pay for performance design. At the same time, regulators are seeking more disclosure around these expenses. Disagreement over the classification of these benefits is often at the root of SEC challenges. For instance, the SEC considers executive security expenses a personal benefit, making them a disclosable perquisite, while many companies classify them as business expenses.
Board and management considerations:
- Benchmark your perks payments: outliers draw scrutiny, so reviewing how you compare to peers regularly is important.
- Review your internal classification framework to ensure it reflects SEC guidance.
Rules of investor disengagement
Mid-proxy season, the SEC updated its guidance on Schedule 13G and 13D filings for investors owning more than 5 percent of a company’s share capital. While the SEC indicates these adjustments were intended to enhance transparency, they have also had a chilling effect on investor engagements, discouraging some institutional investors from actively participating in governance discussions.
The result? Reduced visibility into institutional voting behavior and rationales. For companies that received low SOP support, gaining a clear understanding of which aspects of their pay programs are triggering concern, may be more challenging this year.
Board and management considerations:
- Keep discussions topic-specific as opposed to company-specific. Investors may be more willing to discuss their broad views on topics and what they consider best practice.
- The new guidance pertains to 5 percent holders, so consider expanding outreach to holders below this threshold for more candid conversations.
Next steps for 2025 and beyond
For those companies that are concerned about their executive compensation plan, the keys are to reach out to their shareholders to pressure test their current plan. Starting the dialogue now with a comprehensive shareholder engagement outreach program enables companies to course-correct for 2025 and lay the groundwork for a more defensible plan in 2026.
Etelvina Martinez is managing director at Alliance Advisors
