Rethinking Compensation Disclosure

A number of changes to executive compensation disclosure may occur in 2026, reflecting potential Securities and Exchange Commission (SEC) rulemaking previewed during a July 2025 roundtable discussion as well as separate updates to guidance from ISS and Glass Lewis.

Executive Compensation Roundtable: SEC Signals Potential Future Changes to Compensation Disclosure Rules

On June 26, 2025, the SEC hosted an Executive Compensation Roundtable[1] (the Roundtable) to conduct a retrospective review of its executive compensation disclosure rules. Roundtable panelists included representatives from public companies, investors, compensation advisors and other experts in the field. The discussion focused on the question of whether the current disclosure regime accomplishes its intended goal of providing investors with material information related to executive compensation.

The SEC has stated that the Roundtable is an initial step in its review of the existing executive compensation disclosure framework, and the Staff has solicited public comment on the disclosure requirements.[2]

Roundtable Discussion Highlights

The Roundtable discussion primarily examined the impact of the current executive compensation disclosure rules and suggested several potential areas for improvement. While some panelists emphasized the importance of these disclosures, the majority expressed the opinion that much of the required compensation disclosure is overly complex, expensive and burdensome, especially in light of the minimal benefit it provides investors. Relatedly, panelists expressed an overarching concern that the disclosure rules are dictating and distorting company decisions on executive compensation and most indicated that some level of reform would be welcome. The SEC Chair and Commissioners generally agreed that the existing executive compensation disclosure rules are ripe for review, acknowledging that the current regime is complex and financially burdensome for public companies.[3]

• Say-on-Pay. Panelists acknowledged say-on-pay as a useful tool in promoting shareholder engagement.

• Compensation Discussion & Analysis (CD&A). Panelists noted that disclosure reforms have resulted in increasingly lengthy CD&A disclosure and indicated that it is unclear whether these additional disclosures actually provide investors a more comprehensive understanding of a company’s compensation practices.

• Summary Compensation Table. Panelists generally expressed the view that the Summary Compensation Table (SCT) could benefit from simplification to address only what a company is targeting to pay their executives and what they actually paid their executives, particularly with respect to the disclosure of equity awards. Some panelists suggested limiting disclosure to the CEO and CFO, on the basis that existing disclosure rules tend to impact compensation decisions and strategy as companies try to avoid certain individuals’ inclusion in the SCT and vice versa.

• Perquisites. Panelists generally agreed that SEC guidance on what qualifies as a perquisite should be updated. While executive security was widely considered to be improperly classified as a perquisite, the panelists also acknowledged that companies are unlikely to be making decisions as to whether to provide security benefits to their executives based on the need to disclose these benefits, and investor representatives suggested they would not penalize a company for providing and disclosing such security benefits.

• Pay vs. Performance. Panelists agreed that providing disclosure that maps a company’s performance against CEO pay is appropriate, but raised issues with the burden of preparing this disclosure, the excess measures the rule requires and the inclusion of NEOs other than the CEO in the table.

• Clawbacks. While panelists did not object to the clawback rules in principle, there was a general consensus that it remains too early to assess the full scope of issues arising from their implementation. Panelists expressed particular concern regarding the unexpected extension of the rules to “little r” restatements, noting that these restatements often involve judgment-based, non-material accounting corrections and may trigger mandatory clawbacks even in the absence of misconduct. As a result, panelists cautioned that the rules could lead to unnecessary compliance costs, more complex disclosure judgments and a significant chilling effect on executives and executive compensation programs, given the uncertainty and long-term personal exposure associated with the potential recovery of incentive compensation years after it is awarded.

• Pay Ratio. Panelists noted that comparing pay ratios across companies is not a useful data point for investors. Instead, it is more meaningful to have this data over time for one company or to limit the employee population to workers in the United States. Company representatives also indicated that this disclosure is burdensome to prepare.

Additional Consequences of the Current Disclosure Framework

The discussion as to unintended consequences of the compensation disclosure rules has been ongoing even prior to the SEC’s Roundtable. These conversations and supporting evidence have focused on how the rules have impacted decisions on executive compensation.

• Rate of Executive Pay. Median CEO pay, as measured by actual total direct compensation, increased year over year from 2012 to 2019; though median pay remained flat in 2020 during the COVID-19 pandemic, there were significant increases in 2021, no increase for 2022, and another significant increase in 2023.[4] Even more notable is the fact that, in the years since outsized CEO pay compensation packages have come to light, the number of CEOs of S&P 500 companies who received pay packages valued at $50 million or more increased from nine to thirty-six.[5] This may suggest that publicity around large CEO pay packages, driven in part by the disclosure rules, has impacted and, somewhat paradoxically, increased executive pay more generally.

• Harmonization of Executive Pay Programs. Since 2006 (which marked a shift in disclosure requirements), CEO compensation has become more similar across public firms, regardless of company size, strategy or sector, by 24%, according to a measure that tracks pay structure, including salary, bonus, stock awards and other incentives.[6] Analysis of this data points to pressure on boards from institutional investors and proxy advisors to standardize their compensation programs rather than to design a strategy that aligns with their business goals.[7] This trend is also one that was raised at the Roundtable by public company representatives, who pointed to the pressure to standardize as a factor in compensation decisions.

• Shift Toward Equity Compensation and Resulting Dilution. Stock awards accounted for 71.6% of the median pay package for CEOs in 2024 and the median value of stock awards rose 14.7%.[8] CEO pay growth is largely being driven by increases in the value of stock and option awards—as median base salaries saw a modest increase of 2.7% from the prior filing period, the median stock award and median option award saw increases of 6.9% and 6.0%, respectively, from award values in the previous year.[9] This topic was also raised at the Roundtable, specifically by investor representatives who noted the current difficulties in determining target pay from existing disclosures and in tracing an equity award through its entire lifecycle.

• Prevalence of “Status Symbol” Perquisites. Perquisites have also increased in recent years, both in value and in terms of public scrutiny. The exclusivity offered by perquisites, like the use of private planes, can result in these benefits serving as status symbols for executives. Particularly as the COVID-19 pandemic realigned norms regarding remote working and travel, and as companies focus more on security measures for their executives, the value of benefits granted under this category has continued to balloon.[10]

• “Noise” in the Proxy. As companies attempt to explain how their executive compensation programs align with their corporate strategy through the mandatory disclosures, the average word count of the CD&A of a sample of 100 companies increased every year from 2013 to 2017 for a total of a 3.7% increase.[11] This data echoes the opinions voiced among many of the Roundtable panelists, who noted that it has become difficult for investors to glean material information from often lengthy, repetitive disclosures.

An Opportunity for Change

While the SEC has not yet taken action in the wake of the Roundtable, its willingness to reflect on the existing executive compensation disclosure regime, together with the consensus among panelists that there is room for improvement in the rules, suggests that a rulemaking proposal or additional SEC guidance may be forthcoming, though the timing and substance of any such proposal remains unclear. 

ISS and Glass Lewis Benchmark Policy Updates – What Boards and Compensation Committees Need to Know

On November 25, 2025, ISS Governance (ISS) announced updates to its 2026 benchmark proxy voting policies, effective for shareholder meetings that take place on or after February 1, 2026.[12] This update included key changes to guidelines for certain compensation items described below, which boards and compensation committees should be aware of moving into 2026.

Glass Lewis also made updates to its guidelines, effective beginning with shareholder meetings in 2026, with the most significant changes for compensation coming in the form of changes to its quantitative pay-for-performance methodology, which serves as one part of its say-on-pay analysis.[13] Whereas Glass Lewis previously conducted this evaluation using letter grades, their updated format uses a 0-100 numerical scorecard with each company being evaluated by up to six weighted tests, the intent of the change being to eliminate confusion created by the prior scoring system.[14] While the weighting of the tests is not disclosed, Glass Lewis has provided information on what each of these tests are intended to measure, as summarized below.

ISS Policy Updates

Say-on-Pay Responsiveness.

ISS amended their guidelines on say-on-pay responsiveness to remove certain disclosure requirements, such as specific documentation of engagement efforts or itemized shareholder concerns.[15] The updated guidelines take a more nuanced approach, adding that “if the company discloses meaningful engagement efforts, but in addition states that it was unable to obtain specific feedback, ISS will assess company actions taken in response to the say-on-pay vote as well as the company’s explanation as to why such actions are beneficial for shareholders.” This update acknowledges the reality that, despite best efforts, companies may be unable to obtain detailed feedback from shareholders.

The updated guidelines also expand the factors to be considered when evaluating compensation committee actions, including recent mergers, proxy contests and other compensation developments.

Non-Employee Director Compensation.

ISS will generally recommend against responsible directors where there is a pattern of excessive or otherwise problematic non-employee director compensation and the company fails to disclose a compelling rationale or other mitigating factors. Problematic compensation includes performance awards, retirement benefits or certain perquisites, though the type of perquisites that would be considered problematic is not specified. The updated guidelines specify that adverse recommendations may be made in response to a pattern, even if the pattern does not appear in consecutive years, to address issues in which problematic pay is granted non-consecutive years. The update also clarifies that adverse recommendations may be made in the first year of occurrence if a pay practice is considered especially problematic.

Pay-for-Performance Evaluation.

The updated guidelines extend the time period over which pay-for-performance is evaluated. The measurement periods for evaluating (1) the degree of alignment between a company’s annualized total shareholder return rank and the CEO’s annualized total pay rank within their peer group and (2) the ranking of CEO total pay and company financial performance within a peer group are both extended from three to five years. Additionally, the multiple of CEO total pay relative to the peer group median will now be measured over one and three years, rather than only the most recent year.

Time-Based Equity with Extended Vesting.

ISS maintains a list of qualitative factors relevant to the analysis of how various pay elements may support or undermine long-term value creation and alignment with shareholder interests. ISS updated its policy to include the addition of a factor for vesting and/or retention requirements for equity awards that demonstrate a long-term focus.

Equity Plan Scorecard.

ISS maintains a scorecard against which it evaluates equity plan proposals in order to make case- by-case voting recommendations. ISS has modified the scorecard by (1) adding consideration of whether there are cash-denominated award limits for non-employee directors within the Plan Features pillar and (2) providing that plans should generally receive an against vote if the plan lacks sufficient positive features under the Plan Features pillar. ISS indicated that it considers award limits to be best practice, and noted that the second change was driven by the fact that historically, plans could receive an overall passing score despite receiving a poor or zero Plan Features pillar score.

ISS Governance – Frequently Asked Question Updates

In addition to its benchmark policy updates, ISS also updated its U.S.-specific Frequently Asked Questions (FAQs) for Executive Compensation Policies on December 9, 2025.[16] A few key takeaways include:

Company Responsiveness to Say-on-Pay.

Corresponding to the ISS Benchmark Policy Updates described above, the updated ISS FAQs address how ISS will assess board actions taken in response to a say-on-pay vote that receives low support (less than 70% or less than 50%, respectively). For companies whose say-on-pay proposal receives less than 70% support, ISS will conduct a qualitative review, considering factors such as: the disclosure of details on the breadth of engagement, disclosure of specific feedback received, actions taken to address issues that contributed to low support, whether the issues are recurring, the company’s ownership structure, significant corporate activity, and any other recent compensation action or factor that could be relevant. In situations where the proposal receives less than 50% support, ISS notes that this would warrant the highest degree of responsiveness, using the same determining factors. If a company discloses meaningful engagement efforts but also discloses that it was unable to obtain specific negative feedback, ISS will still assess the company actions taken in response to the vote. ISS will generally recommend a vote against the say-on-pay proposal and against the compensation committee members of companies who demonstrate poor responsiveness. In the event of multiple years of poor responsiveness, ISS may recommend a vote against the full board.

These updates demonstrate ISS’s focus on say-on-pay responsiveness and, more specifically, how they evaluate responsiveness and related disclosure. While this guidance acknowledges that companies may be unable to garner specific negative or constructive feedback, it maintains that they have the obligation to disclose their specific efforts and continue to meaningfully engage with investors on this issue.

Time-Based Equity Awards.

ISS has updated its approach to evaluating equity pay mix for regular long-term incentive programs, such that a mix consisting primarily or entirely of time-based awards will not in itself raise significant concerns, so long as the time-based award design uses a sufficiently long time horizon (at least five years). A five year time horizon can be demonstrated several ways, including a five-year vesting period, a four-year vesting period with at least a one-year post-vesting share retention requirement covering at least 75% of net shares, or a three-year vesting period with at least a two-year post-vesting share retention requirement covering at least 75% of net shares. ISS continues to consider well-designed and clearly disclosed performance-based equity awards as a positive factor.

Security-Related Perquisites.

Given the increased focus on security-related perquisites in the past year, ISS has indicated that it is unlikely that high value security-related perquisites will raise significant concerns, as long as a reasonable rationale for such costs is disclosed. ISS notes an internal or third-party assessment or a broad description of the security program and its connection to shareholder interests as examples of a reasonable rationale. However, ISS confirms that extreme outliers in security-related perquisite costs could still raise concerns, particularly if there is inadequate disclosure in the proxy.

Glass Lewis New Pay-for-Performance Methodology.

Glass Lewis introduced an updated series of tests that will be used in its pay-for-performance methodology, summarized below.

Granted CEO Pay vs. Total Shareholder Return (TSR).

This test is intended to evaluate the difference between granted pay and TSR performance by comparing against a company’s Glass Lewis peers, using the percentile rank of five-year weighted average granted CEO pay to percentile rank of five-year weighted average of annualized TSR growth.[17] The intent is to evaluate whether a company’s CEO pay aligns with the company’s relative TSR performance. A low score on this test would result if a company’s performance ranking was significantly lower than their ranking for pay—meaning companies will score poorly here if they pay more than their peers but do not perform better.

CEO Granted Pay vs. Financial Performance.

This test measures the gap between granted pay and financial performance, comparing against Glass Lewis peers using the percentile rank of five-year weighted average granted CEO pay to the percentile rank of five-year weighted average of several financial metrics. Similar to the first test, the intent is to determine whether a company’s CEO pay aligns with the company’s relative financial performance. The financial metrics Glass Lewis uses include: all sector metrics (revenue growth, return on equity and return on assets) and certain sector-specific metrics.

CEO Short-Term Incentive (STI) Payouts vs. TSR.

This test compares CEO STI payout percentage with TSR over five one-year periods measured against broad market benchmarks. Unlike the two tests described above, this test is not mandatory to receive a pay-for-performance score, and excluding the test, whether due to non-disclosure of target or actual STI payout for the CEO or the CEO’s non-participation in a STI plan, does not negatively impact a company’s overall score.

Total Granted Named Executive Officer (NEO) Pay vs. Financial Performance.

This test evaluates the gap between total pay granted to NEOs and financial performance relative to Glass Lewis peers by comparing the percentile rank of the five-year weighted average of granted NEO pay to the percentile rank of the five-year weighted average of several financial metrics. The intent of this test is to confirm whether executive pay aligns with the company’s financial performance.

CEO Compensation Actually Paid (CAP) vs. Reported Cumulative TSR.

Applicable only to companies in the United States, this test compares the five-year aggregate CEO CAP-to-TSR ratio against a company’s market capitalization peers, as determined using Glass Lewis bands. The peer group for this test is based on market capitalization. The calculation takes into account CAP from the past five years, as disclosed in the company’s proxy statement. A poor score on this test results when a company’s ratio is above median of its peers, with penalties implemented, increasing the likelihood of a negative recommendation from Glass Lewis, when a company is more than 50% above median. Like the CEO STI Payouts vs. TSR test, this test is not mandatory to receive a pay-for-performance score, and excluding the test does not negatively impact a company’s overall score.

Realized CEO Pay vs. TSR.

Applicable only to companies in Canada, this test evaluates the gap between realized CEO pay and TSR performance, using a comparison to a company’s Glass Lewis peers. The intent of this test is to determine whether a CEO pay is aligned with the company’s TSR performance relative to its peers. As with the above test, this is not a mandatory test, and its exclusion does not negatively impact a company’s overall score.

Qualitative Factors.

Functioning only as a downward modifier, meaning it can only serve to reduce a company’s score, this test includes a series of questions, answering yes to which results in penalties to varying degrees for the company. This list includes questions such as “were there any one-time awards granted?” and “was upward discretion exercised?” and “is fixed pay greater than variable pay?”, each of which are intended to evaluate various factors Glass Lewis deems significant to evaluating whether company pay practices are aligned with long-term shareholder interest.

Next Steps for Boards and Compensation Committees.

In light of these developments, boards and compensation committees should begin evaluating how the updated ISS and Glass Lewis policies may affect their executive compensation programs and related proxy disclosures for the 2026 proxy season. In particular, companies should assess pay-for-performance alignment under the revised methodologies, review the use and disclosure of perquisites—especially those that may draw heightened scrutiny—and consider whether existing CD&A disclosures clearly and concisely communicate the rationale for compensation decisions. Given the increased emphasis on responsiveness to say-on-pay outcomes and the evolving expectations around disclosure quality, early engagement with advisors and a proactive review of compensation practices and proxy narratives may help mitigate adverse voting recommendations and enhance investor understanding.

[1] SEC Press Release, “SEC Announces Roundtable on Executive Compensation Disclosure Requirements” (May 16, 2025), available here.

[2] SEC, “Submit Comments on 4-855” (May 15, 2025), available here.

[3] See Paul S. Atkins “Remarks at the Executive Compensation Roundtable” (June 26, 2025), available here; Hester M. Peirce, “Spare the Trees So Investors Can See the Forest: Remarks before the Executive Compensation Roundtable” (June 26, 2025), available here; Caroline A. Crenshaw “Statement at the Executive Compensation Roundtable” (June 26, 2025), available here; Mark T. Uyeda “Remarks at the Executive Compensation Roundtable”  (June 26, 2025), available here.

[4] Aubrey Bout, Perla Cuevas, and Brian Wilby, Pay Governance LLC “S&P 500 CEO Compensation Trends” (January 28, 2025), available here.

[5] The Wall Street Journal, “Musk Effect Drives Spread of Supersize CEO Pay Packages” (May 20, 2024), available here.

[6] Whitney Slightham, “Executive Pay is Starting to Look the Same Everywhere: That Could Hurt Performance, Study Suggests” (May 16, 2025), available here.  

[7] Id.

[8] Amit Batish, “S&P 500 CEO Compensation Saw a Near 10% Rise in 2024” (May 29, 2025), available here. 

[9] Subodh Mishra, “2025 Filings Show Robust CEO Pay Increases at U.S. Large Cap Companies” (May 8, 2025), available here.  

[10] Krishna Shah, “The Resurgence of Executive Perquisites”(May 7, 2025), available here.  

[11] Equilar, “Executive Compensation Filings Grow to Nearly 10,000 Words on Average” (February 7, 2018), available here.

[12] ISS Governance, “ISS Governance Announces 2026 Benchmark Policy Updates” (November 25, 2025), available here.

[13] See Glass Lewis, “Pay-for-Performance Methodology Overview” (2025), available here.

[14] See Compensation Advisory Partners, “Glass Lewis Releases Updates to 2026 Pay-for-Performance Model & Methodology” (July 16, 2025), available here.

[15] See ISS Governance, “Americas: Proxy Voting Guidelines” (November 25, 2025), available here.

[16] ISS Governance, “Executive Compensation Policies – Frequently Asked Questions” (December 9, 2025), available here.

[17] See Glass Lewis “Pay-for-Performance Methodology Overview” (2025), available here.