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Executive Pay and Board Governance
Trends and Issues
| | Each month, one of our Partners or Principals shares a focused perspective on market movements, client trends, or industry developments—offering timely reflections to inform your thinking. | |
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Reanna Dorscher, Partner
rdorscher@hugessen.com
Key Takeaways from the Council of Institutional Investors Fall Conference
At Hugessen, one of the things that really sets us apart is our deep understanding of shareholder and proxy advisor perspectives. Thanks to strong relationships within this community, we’re able to give our clients timely insights into emerging trends – and what they mean for compensation programs, board composition, and governance practices.
Fresh from the Council of Institutional Investors Fall Conference, here are a few highlights to help guide year-end pay decisions and planning for 2026:
1. Executive Compensation
The spotlight on pay-for-performance alignment isn’t going anywhere. Investors and proxy advisors are still wary of overly complex incentive plans or those that lean too heavily on a single metric like TSR. The message? Keep incentive plans simple but rigorous, and make sure they emphasize long-term, sustainable performance – not just short-term financial wins. Adding more narrative around pay outcomes versus what’s in the summary compensation table (think realized vs. realizable pay) can help tell that story.
2. Board Accountability
Board composition, renewal, and accountability remain top of mind for shareholders. They want to understand how boards assess their own effectiveness – essentially, a peek behind the curtain without being in the boardroom. Transparency and proactive engagement are key, not just during proxy season or in times of crisis. While new regulations have made boards more cautious in one-on-one conversations, companies should pay close attention to the questions shareholders ask. These often hint at bigger concerns. For example, if investors ask about director renewal or what qualities you’re looking for in a future chair, that’s a signal of broader expectations – or potential red flags.
3. The Role of Proxy Advisors
According to a recent CII survey, over 90% of shareholders reference proxy advisors, but very few follow their recommendations blindly. A negative recommendation usually means closer scrutiny, but most investors rely on their own custom policies when voting. What they value most is the research and analysis proxy advisors provide. That said, transparent disclosure and direct, board-led engagement with shareholders remain far more influential in shaping outcomes.
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Incentive Primer - Total Variable Compensation (TVC) Frameworks
A Total Variable Compensation (“TVC”) incentive program offers a unique approach to incentive compensation, blending elements of traditional short- and long-term incentive structures (“STIP” and “LTIP”). In this briefing, we shed some light on what it is, how it works, and key considerations for its implementation...Read more
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Non-Financial Metrics: At-Risk or Lay-Up?
The use of non-financial metrics has become a common fixture in executive incentive programs as they are often seen as critical drivers of business performance. Metrics such as sustainability, employee engagement, and strategy commonly complement traditional financial and operational measures in the annual corporate scorecard, and at times in the long-term incentive program...Read more
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From Oversight to Influence: the Expanding Role of the HRCC Chair
The role of the Human Resources and Compensation Committee (HRCC) Chair continues to evolve at a rapid pace. With heightened attention on human capital, increased shareholder scrutiny, and a more complex operating environment, today’s HRCC Chairs face a broader and more demanding mandate than ever before...Read more
| | Major News and Other Insights | | |
Evaluating Board Evaluation Best Practices
(Directors & Boards)
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Strong board evaluations focus less on compliance and more on culture, trust, and alignment with long-term strategy. Directors highlight criteria such as strategic contribution, skills mix, committee effectiveness, culture of candor, and balanced oversight of management. Best practices include using multiple evaluation methods, ensuring confidentiality, and converting findings into a handful of actionable items tied to succession and board refreshment. When done well, evaluations become a continuous improvement tool that builds accountability and helps boards evolve with the business...Read more
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No vesting, no problem? Ontario Superior Court enforces RSU forfeiture on termination
(Torys)
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The Ontario Superior Court ruled in Wigdor v. Facebook Canada that unvested RSUs can be forfeited on termination, confirming they are not considered “wages” or “benefits” under Ontario's Employment standards Act (ESA). The Court upheld clear forfeiture language in Meta’s RSU agreements, even though the termination clause in the employment contract itself was unenforceable. Importantly, the RSU agreements were treated as standalone contracts, strengthening their enforceability. While the decision is under appeal, the case highlights the need for employers to draft unambiguous forfeiture provisions and ensure employment agreements remain ESA-compliant...Read more
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U.S. states are shedding shareholder protections. That’s an advantage for Canada
(G&M)
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The fallout from Delaware courts striking down Elon Musk’s $55.8B Tesla pay package has fueled a “Dexit” (Delaware exit) trend, with companies reincorporating in states like Texas and Nevada that are weakening shareholder protections to attract business. These legal changes make it harder for minority investors to hold boards and controlling shareholders accountable, raising concerns about governance erosion in the U.S. In contrast, Canada’s governance framework - anchored by fiduciary duties that cannot be waived, strong oppression remedies, and rigorous disclosure requirements - remains more protective of shareholders. This divergence positions Canada as a potential safe haven for investors seeking stronger accountability and long-term stability...Read more
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2025 Proxy Season Review: United States – Executive Compensation
(ISS Insights)
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Say-on-pay support dipped slightly in 2025, with median approval falling to 94.5% though failure rates stayed near record lows at 1.2%. CEO pay hit new highs, with S&P 500 median pay at $16.9M and Russell 3000 at $5.7M, while security-related perks - especially home protection - grew sharply in value and prevalence. Shareholders showed greater support for golden parachutes as payout levels declined, but equity plan approval fell to its lowest point in over a decade. Compensation-related shareholder proposals also decreased, with none winning majority backing for a second year in a row...Read more
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Effective Board Leadership Report
(PwC)
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Exceptional board leadership rests on chairs, lead directors, and committee heads who unite directors around strategy, challenge and coach the CEO, and refresh board talent with urgency. Strong leaders demonstrate eight key attributes, including strategic vision, emotional intelligence, trust-building, and calm in crises. When leadership falters - through groupthink, weak CEO relationships, or underperforming directors - top boards act quickly with evaluations, rotations, or leadership changes. By treating governance as a dynamic system, effective board leaders turn oversight into a driver of long-term value creation...Read more
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How the Best Compensation Committees Evolve
(Semler Brossy)
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Effective compensation committees adapt pay programs to align with shifting business strategies, macroeconomic changes, and investor expectations. Best practices include regularly reassessing incentive structures, investing in continued member education, and knowing when to adjust programs to support new leadership or strategic pivots. Many committees are also expanding their mandate into human capital management, addressing issues like succession planning, culture, and pay equity to better link pay with talent strategy. Staying ahead of trends requires leaning on independent advisors, engaging shareholders proactively, and periodically evaluating whether the committee has the right skills and processes to navigate change...Read more
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What drives board effectiveness amid uncertainty
(EY)
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Boards are uniquely positioned to provide long-term perspective while management focuses on near-term challenges. A recent EY survey found most directors agree their strategies must continually evolve, with many noting alignment with management on risks but also a desire for greater risk-taking. Barriers to resilience include industry disruption, economic volatility, and management’s short-term focus. To strengthen effectiveness, boards should foster constructive disagreement, refresh skills and perspectives, and embed year-round conversations on resilience, assumptions, and evolving strategy to help companies stay agile in unpredictable environments...Read more
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