2026 Proxy Season: A Look Ahead to Executive Compensation Issues and Considerations

As the 2026 proxy season approaches, public companies and their boards are navigating a rapidly evolving executive compensation landscape. Amidst new regulatory scrutiny, shifting investor expectations, and ongoing debate over performance metrics and disclosure practices, early preparation is crucial to mitigate potential challenges and proactively manage compensation matters through effective proxy disclosures, well-executed shareholder engagement, and informed compensation committee actions.

This alert outlines key considerations for public companies and their compensation committees as they prepare for the 2026 proxy season and related compensation decisions. Emerging growth companies (EGCs) and smaller reporting companies (SRCs) should note that some of the rules and issues discussed here may not apply, and we encourage them to contact their Winston & Strawn team members for additional guidance.

2025 Say-on-Pay Results and Shareholder Engagement 

Companies generally had positive say-on-pay results, with 99% of proposals passing for companies in both the S&P 500 and the Russell 3000 in early 2025. Nonetheless, while failed say-on-pay results have remained infrequent, certain actions by compensation committees contributed to negative recommendations from Institutional Shareholder Services (ISS) and lower voting results for some proposals. A subset of companies fell below the key 70% threshold for ISS, which typically triggers heightened scrutiny of company responsiveness in the following year’s proxy statement. (Glass Lewis applies an 80% threshold for similar purposes.)

Companies that received lower say-on-pay voting results in 2025 should consider steps that can be taken now to address relevant issues for the upcoming proxy season, including a game plan for shareholder engagement as well as advance planning for clear and effective Compensation Discussion and Analysis (CD&A) disclosure of any changes made to address concerns raised by proxy advisors and investors.  

• Shareholder Engagement. It is generally a best practice to meet with and solicit feedback from key stakeholders in advance of proxy season, and this is even more important for companies dealing with low say-on-pay results from the prior year. This usually requires coordination among the company’s investor relations team, proxy solicitors, legal department, the board (and compensation committee), and senior management. A well-executed action plan for shareholder outreach and engagement should include:
  • • reviewing proxy advisors’ reports from the prior year’s proxy to identify key issues flagged as concerns;
    • evaluating how the company’s peer group is addressing executive compensation matters;
    • assessing the company’s shareholder base to determine which investors should be engaged;
    • planning shareholder meetings with clear talking points addressing key issues; and
    • coordinating a response with both the engagement team and the compensation committee following shareholder meetings. 

• Upcoming Disclosure. It will also be important for companies with lower say-on-pay results to clearly and effectively disclose in this year’s CD&A the rationale for 2025 compensation decisions, as well as any changes the compensation committee made to address shareholder concerns, including through shareholder outreach and engagement. In addition, companies and compensation committees should engage with advisors early to anticipate proxy advisor say-on-pay voting recommendations for the upcoming proxy season, considering both the quantitative assessments and qualitative evaluations that these firms will conduct.

Proxy Advisor Developments

Looking ahead to the 2026 proxy season, annual benchmarking surveys by proxy advisory firms ISS and Glass Lewis offer a preview of disclosure issues that may attract greater attention in public filings in the coming year. Below we provide an overview of the most relevant takeaways from each firm’s annual policy surveys for 2025.

ISS Survey – Key Themes for 2026

In September 2025, ISS published the results of its Annual Benchmark Policy Survey, which gathered input from various key stakeholders, including investors and issuers. The survey results summarize feedback on a range of policy issues and provide insight into policy trends that are likely to shape the 2026 proxy season and executive compensation practices.

• Non-Executive Director (NED) Compensation: ISS generally issues cautionary vote recommendations only after two consecutive years of problematic NED pay practices. However, a significant portion of survey respondents indicated that inadequate disclosure or an unclear rationale for unusual payments may warrant concern after only a single year. Investors also flagged excessive perquisites, unusually large performance awards, stock options, retirement benefits, or NED pay exceeding executive pay as areas of concern.
• Time-Based Equity Awards in LTI Programs: The survey examined whether purely time-based equity awards are acceptable in executive long-term incentive (LTI) programs. Pluralities of both investors and non-investors agreed that such awards can be appropriate but only as part of a broader award mix. However, there does not appear to be broad consensus, as substantial minorities of investors said it depends on industry or company specifics, or that performance conditions should remain mandatory across the board. Notably, investors and issuers split over whether performance conditions are necessary at all, with only a small fraction of investors agreeing with this view, and non-investors being much more likely to endorse it. There was also divergence on vesting expectations: investors generally favor longer combined vesting and post-vesting holding periods (around five years), while most issuers find a three-year vesting period sufficient.
• Say-on-Pay Responsiveness: ISS explored how the absence of shareholder feedback should be treated. In light of recent SEC guidance that may discourage investor engagement, survey respondents largely agreed that a lack of feedback alone should not trigger negative scrutiny. Moreover, a strong majority indicated that genuine improvements in pay programs can demonstrate responsiveness, even absent disclosed shareholder input.
• ESG/DEI Metrics in Incentive Awards: Investors continued to express concern about mid-cycle adjustments to environmental, social & governance (ESG) or diversity, equity and inclusion (DEI) metrics absent a compelling rationale, while issuers were more permissive and believe that adjustments alone should not trigger adverse vote recommendations. This divide underscores ongoing investor sensitivity to retroactive changes to non-financial incentive metrics.

Companies and compensation committees should closely monitor ISS’s proposed policy updates and the forthcoming final release. ISS has issued draft changes and completed its public comment period, with final policies expected by the end of November 2025. These updates will apply to shareholder meetings held on or after February 1, 2026. Understanding these trends is critical for anticipating investor scrutiny, refining disclosure practices, and structuring compensation programs that align with evolving expectations.

Glass Lewis Survey – Key Themes for 2026

In October 2025, Glass Lewis, another proxy advisory firm, released the results of its 2026 Policy Survey, which gathered feedback from investors and issuers on a range of governance and executive compensation topics. The findings highlight several areas of focus for executive pay practices and disclosure.

Time-Based Equity Awards in LTI Programs: Investor support for time-based equity awards remained limited, with fewer than one-third viewing them as reasonable under the scenarios presented. Investors were most receptive where such awards are common among peers, where vesting terms are meaningfully extended, or where challenging macroeconomic conditions hinder long-term goal setting. They were least receptive in the context of newly public companies or significant strategic pivots. Issuers were generally more accepting across all scenarios.

• Disclosure of “Make-Whole” New Hire Grants: Respondents were split on whether make-whole new-hire grants should be evaluated like other sign-on awards. Most issuers favored separate treatment, often citing competitive considerations, while investors were evenly divided. Investors who opposed equal treatment generally emphasized the need for clear disclosure and guardrails to ensure such grants are proportionate to forfeited compensation.
• Impact of Tariffs on Executive Pay: Both investors and issuers supported a context-specific approach to situations in which tariffs negatively affect incentive outcomes. Investors, however, were more likely to recommend no board action, while a notable minority of issuers favored adjustments to avoid demoralizing executives, an approach that investors broadly rejected.

The topics included in the Glass Lewis survey suggest that Glass Lewis continues to emphasize the importance of balancing performance-based and time-based incentives, integrating relevant non-financial metrics, and maintaining transparent disclosure practices. Companies and compensation committees should monitor any Glass Lewis policy updates following the survey results to inform their executive compensation design and disclosures for the 2026 proxy season. 

Key Disclosure and Regulatory Developments

Pay vs. Performance

The 2025 proxy season marked the third year that companies provided pay versus performance (PVP) disclosures under Item 402(v) of Regulation S-K. Large accelerated filers, which first became subject to the rule at its effective date, have now completed the phase-in period and, for the first time, are providing a full five years of PVP disclosure.

Between 2024 and 2025, the SEC issued numerous comment letters on PVP disclosures. Comments primarily focused on issues of technical compliance, such as use of correct table headings and inclusion of proper inline machine-readable extensible business reporting language (XBRL) tagging. The SEC also emphasized that companies must include a graph or narrative illustrating the relationship between “compensation actually paid” and the relevant performance metrics, with most companies continuing to rely on graphical representations.

In March 2025, the House Financial Services Committee sent a letter to the SEC identifying the PVP rule as one of several rules that should be withdrawn. The perceived shortcomings of the current PVP disclosure were also discussed at the SEC Roundtable on Executive Compensation Disclosure Requirements in June 2025 (the SEC Roundtable), and several comment letters submitted after the SEC Roundtable supported scaling back the required disclosures significantly. With new SEC leadership under the current administration, substantial changes to the PVP rules may be forthcoming.

In the meantime, companies should be prepared to include the usual disclosure in their 2026 proxy statements and take note of any phased-in requirements to which they are newly subject. The SEC continues to require inline XBRL tagging for PVP disclosures, but SRCs are exempt from this requirement until their third filing of PVP disclosures. Therefore, some SRCs may still be exempt for the 2026 proxy season, depending on their individual filing history.

Option Awards and Material Non-Public Information (MNPI)

Item 402(x) of Regulation S-K took effect for the first time for the 2025 proxy season. Item 402(x) requires disclosure of (i) the company’s policies on the timing of option awards in relation to disclosure of MNPI, (ii) whether and how the board or compensation committee took MNPI into account when determining the timing of such awards, (iii) whether the company has timed the disclosure to affect the value of executive compensation, and (iv) tabular information on any options awarded to a named executive officer within four business days before or one business day after the filing of a Form 10-Q, 10-K, or 8-K containing MNPI (other than a Form 8-K disclosing a material new option award grant).

Relatively few companies have made tabular disclosures under Item 402(x). However, companies’ approaches to the disclosure of policies and practices have varied. Companies with established policies often disclosed the policy and its material terms, while others described their practices for the past year at a high level, often avoiding sweeping generalizations.

Other Proxy Disclosure Considerations 

Perquisite Disclosure. Companies must fully and accurately disclose in their proxy statements perquisites (which can include items like personal travel using company aircraft and club memberships) granted to their named executives and required to be included as part of “all other compensation.” This requirement remains an SEC enforcement priority, and companies should assume that perquisite disclosures will be carefully scrutinized.

Personal security for executives has also been in the spotlight this year, as companies increased their spending in this area in response to recent events. ISS cited excessive security perquisites as contributing to several of its negative say-on-pay recommendations. On the other hand, there is increasing public discussion, including during the SEC Roundtable, around the idea that executive security should be categorized as a necessary business expense, rather than a perquisite. For now, however, executive security remains a “perquisite” under the rules, and companies should take inventory of all executive perquisite programs and take extra care to ensure that executive perquisites are properly identified and accurately disclosed, including through effective internal controls.

CEO Pay Ratio Disclosure. Companies are likely familiar with the requirement to disclose in their proxy statements a ratio comparing their CEO’s total compensation (which covers all the components of total compensation disclosed in proxy statements, including base salary, bonus, and equity and non-equity incentives) to the total compensation of a median employee. Although companies may refer to the same median employee for up to three years, those that have undergone significant changes to their workforces or their employees’ compensation may need to redetermine a median employee sooner. Companies making significant workforce adjustments in 2025 should prepare for any required adjustments to their pay ratio disclosures as early as possible.

Pay Adjustments. In addition to companies dealing with low say-on-pay vote results from last year, any company that has made adjustments to 2025 compensation will need to address these matters in this year’s CD&A. Clear and effective narrative explanation of the rationale for such adjustments, including how they align with company goals, performance outcomes, and board oversight, will be increasingly important to demonstrate responsiveness to shareholder feedback and governance best practices in the 2026 proxy season.

GAAP Reconciliation. Companies are not required to provide a GAAP reconciliation when disclosing non-GAAP performance targets or results compared to performance targets in the CD&A, provided that they explain how these figures were calculated from their financial statements. However, for all other purposes, companies must include a GAAP reconciliation when disclosing non-GAAP financial measures. Companies may provide this reconciliation in an annex to the proxy statement with a conspicuous cross-reference or by conspicuous cross-reference to a reconciliation in their Form 10-K.

Prospective Disclosure. While 2026 proxy statements will primarily focus on disclosing and explaining named executive officer compensation for 2025, companies should also consider whether to prospectively disclose compensation determinations for 2026. Disclosing key updates to executive compensation programs for 2026 can better demonstrate the nexus between company performance and executive compensation in proxy statements. This proactive approach may also help demonstrate responsiveness to feedback from proxy advisory firms and shareholders, particularly for companies anticipating further modifications in 2026 performance plans, allowing them to foreshadow those changes in the 2026 proxy rather than introducing them for the first time in the 2027 proxy.

Human Capital Management (HCM) Disclosure. HCM disclosure continues to be an area of focus for public companies. Such disclosures typically address topics such as workforce composition, talent development, training, retention, and workplace culture. As we noted in a prior alert, there had been a growing trend toward companies disclosing DEI initiatives in annual reports, registration statements, and proxy statements.

However, DEI disclosures, and particularly DEI-linked pay incentives, saw a decline in 2025 in response to the changing legal landscape around such programs. This recalibration began in 2024 and has become more firmly established as companies adjust their incentive equity programs in response to the changing risk environment. In revisiting their executive compensation goals, companies have shifted focus from targets like demographic outcomes towards broader human capital goals, such as talent development and employee engagement. To the extent companies have kept HCM metrics in their incentive plans, these are often included either as part of an individual performance assessment or as one of a bundle of multiple metrics in a “scorecard” approach. Companies have also changed language around “DEI,” instead referring to “inclusion” or “belonging.” Despite the headwinds for DEI in incentive compensation, we have also seen several so-called “anti-anti-DEI” shareholder proposals demanding that DEI or ESG metrics be included in compensation programs. When considering changes to their programs and how they disclose them, companies should assess the legal risk with their counsel and monitor the attitude of their shareholder population on these issues.

Potential Executive Compensation Disclosure Revisions. The SEC Roundtable signaled that the SEC is conducting a formal review of whether the current regime under Item 402 of Regulation S-K continues to meet investor needs and governance objectives. That said, market commentary indicates that revised rules are unlikely to apply for the 2026 proxy season, and any new or revised disclosure requirements may not be in place until the 2027 or even the 2028 proxy season. Accordingly, companies should prepare their 2026 proxies under the current disclosure framework while monitoring closely for any forthcoming regulatory proposals or interpretive guidance.

Compensation Program Design and Governance Trends

Executive Compensation Framework for 2026 

A challenging economic environment has caused companies to reassess the design of performance-based executive compensation programs. This includes delays in setting, or adjustments to, performance goals or an inability to set goals, particularly for annual incentive plans. Some companies are increasingly relying on discretionary bonuses or favoring time-vesting grants such as restricted stock units (RSUs) over performance-based stock grants. However, as previously explained, ISS has generally favored performance-based awards and disfavored time-vesting awards.

Companies and their compensation committees must also understand how their peer group companies are addressing executive compensation issues. We expect that companies will be paying closer attention not only to peer group companies but also to competitors for high-performing executives and employees, given the constant demand for such talent.

While there has not been a broad increase in the use of nonfinancial metrics, some companies are exploring their use selectively. For example, incorporating measures related to safety, customer outcomes, or talent development can be particularly relevant where financial goals are difficult to set or less predictive of performance.

Additionally, as artificial intelligence (AI) becomes a strategic priority for an increasing number of businesses, companies have begun to expand the responsibilities of their executives or even added new executive-level roles focused exclusively on AI. Expanding the responsibilities of existing executives may justify increased compensation, while new hires may command high sign-on bonuses in the current competitive talent market. Companies should be ready to justify these compensation decisions, especially while benchmarking data is limited. Since companies will vary greatly in how critical AI is to their business, an individualized assessment and explanation is key. If companies choose to use performance awards with metrics based on the successful adoption of AI, they should also consider how they will measure and disclose performance achievement of those metrics.

Equity Compensation Plan Approval 

Companies that plan to propose new equity compensation plans or to amend existing equity plans, including to increase shares available for grant, should start the process for plan drafting and proxy disclosure early. As a reminder, when determining whether to recommend “for” or “against” an equity compensation plan proposal, ISS applies its own “equity plan scorecard.” Specifically, the ISS scorecard evaluates three key pillars: (i) plan cost, (ii) plan features, and (iii) the company’s historical grant practices.

Companies should review their equity compensation plan proposals with their independent compensation consultants and assess whether such proposals are likely to receive a positive scorecard result and favorable ISS recommendation when considering issues like the size of the plan’s share pool and the company’s overhang and burn rate. Given increasing investor focus on dilution and overhang, companies should engage with compensation consultants early to model share utilization scenarios under different plan proposals. While a negative ISS recommendation will not necessarily lead to a negative vote result (shareholders generally vote in favor of these proposals by a large margin and continued to do so in 2025), a negative recommendation can influence investor perception, and companies should plan accordingly. 

Compensation Committee Oversight and Compliance

Compensation Committee Charters

As part of the annual review of charters and corporate governance policies, every compensation committee (in coordination with the board and the legal department) should consider whether any revisions or additional responsibilities in the committee’s charter are appropriate. In recent years, we have seen committees update their charters—including, in many cases, a change to the name of the compensation committee to reflect a broader focus on human capital management (beyond senior executive compensation)—and we would expect this trend to continue. Compensation committees should also review their charters to ensure that they appropriately set forth the committee’s responsibilities (and that the committee is appropriately addressing these responsibilities) and consider whether any changes are warranted. Thoughtful updates can help demonstrate proactive governance and responsiveness to investor expectations in the upcoming proxy cycle.

Clawback Policies 

Clawback policies remain a key area of focus for public companies following the SEC’s adoption of final rules on October 26, 2022 implementing the Dodd–Frank Act’s clawback provisions. With most listed companies now having adopted compliant policies, attention has shifted from policy implementation to the practical application and administration of these rules. In the upcoming proxy season, compensation committees should ensure that clawback frameworks are operationally effective and that procedures governing recovery determinations, documentation, and disclosure are well established.

Companies should maintain clear protocols for identifying and analyzing accounting restatements (both big R and little r) that may trigger recovery obligations, as well as processes for calculating recovery amounts and evaluating whether pursuit of recovery would be impracticable under the rule’s limited exceptions. Compensation committees should also continue to exercise appropriate oversight over these determinations and ensure that any discretion applied is properly documented and disclosed in accordance with SEC requirements.

In addition to compliance with the SEC’s clawback rules, companies should continue to monitor evolving governance and proxy advisory expectations. ISS guidance, in particular, has indicated that clawback policies extending beyond the Dodd–Frank requirements to include, for example, time-based equity awards are viewed as more robust and aligned with best practices. Companies should confirm that their clawback policies, internal controls, and disclosure practices collectively support effective administration and accurate reporting of recoveries.

When completing Form 10-K filings, companies should also carefully consider which boxes related to clawbacks they should check. A company should check the first box if “securities are registered pursuant to Section 12(b) of the Act” and “the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.” If the financial statements do not contain such an error, the company should not check the box. The company should check the second box only if it checked the first box, and if “any of those error corrections are restatements that required a recovery analysis of incentive-based compensation” to executives. Thus, checking the second box is not required if the first box is unchecked, but it is required if the first box is checked and the company had to perform a clawback analysis.

Action Items

• Companies should proactively review their executive compensation programs, coordinating with internal teams and engaging external advisors to ensure readiness for evolving disclosure requirements and market expectations in the 2026 proxy season.
• Companies should ensure that their perquisite disclosures are updated and provide an appropriate level of detail.
• Companies experiencing workforce shifts, or that are entering the third year since they last identified their median employee, should prepare as soon as possible to calculate and disclose their CEO pay ratio.
• Companies should continue to consult with legal counsel on the PVP disclosure requirements.
• If a company checks the box related to performing a clawback analysis on its Form 10-K, it must explain how much compensation it declined to recover, if any, and from whom. Companies should be proactive in seeking recovery or explaining why they meet one of the narrow exceptions to the clawback rules.

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With proxy season fast approaching, now is the ideal time for companies and compensation committees to take a proactive approach by reviewing executive compensation programs, coordinating with internal teams, and engaging external advisors to ensure readiness for evolving disclosure requirements and market expectations. The Winston & Strawn Employee Benefits and Executive Compensation Practice Group is committed to providing strategic guidance and practical solutions to help you navigate the complexities of this year’s proxy landscape. For tailored advice or support, please reach out to your Winston relationship attorney or any member of our team.