2025 Proxy Season Review: Compensation-Related Matters
Summary
Say-on-pay and equity plan votes remained broadly supportive in H1 2025, with average shareholder backing near 90% for S&P 500 and roughly 91% for Russell 3000 companies. The number of failed say-on-pay votes rose only marginally from the ten-year low in H1 2024. ISS recommendations continued to move voting outcomes materially: proposals with negative ISS recommendations saw substantially lower support (about 26% lower for S&P 500 and 22% lower for Russell 3000 on average).
ISS’s pay-for-performance review combines quantitative screens (RDA, MOM, PTA, FPA) with a qualitative assessment. In H1 2025, qualitative concerns — especially limited or opaque performance goals, above-target payouts and one‑off awards — featured prominently among negative recommendations. ISS also flagged security-related perquisites and sizeable non-performance pay more often than in the prior year.
The SEC’s June 2025 roundtable signalled stakeholder agreement that executive compensation disclosure rules need reform, but participants disagreed on direction: issuers want simplification and lower cost, while investors pressed for more, clearer disclosure. The SEC has invited comments and may propose rule changes.
Key Points
- Say-on-pay support averaged c.90% (S&P 500) and 91% (Russell 3000) in H1 2025; 99% of proposals passed across both indices.
- Failed say-on-pay votes rose slightly (5 S&P 500; 27 Russell 3000), but most companies that failed in 2024 regained majority support in 2025 after changes.
- Negative ISS recommendations materially reduced shareholder support (about -26% S&P 500; -22% Russell 3000).
- ISS quantitative screens centre on RDA (CEO pay vs TSR), MOM, PTA and FPA; RDA remains the strongest predictor of negative recommendations.
- Qualitative issues—most notably opaque or undisclosed performance goals, above-target payouts and one-off awards—were the most-cited reasons for negative ISS recommendations in H1 2025.
- Security perquisites and corporate aircraft usage were cited more frequently as concerns in 2025, prompting debate on whether such costs are bona fide business expenses or personal benefits.
- Equity plan votes stayed strong (avg c.90% S&P 500; 88% Russell 3000) despite a modest increase in ISS negative recommendations under its equity scorecard.
- The SEC’s roundtable revealed a split between issuers (simplify) and investors (more disclosure); rule changes are expected to be considered following public comments.
Author take
Punchy summary: If you advise boards, sit on a compensation committee or run investor relations, take notice — high-level approval remains steady but scrutiny is sharpening. ISS is leaning harder on qualitative faults (opaque goals, one-offs, excessive perks) even where quantitative screens look benign.
Why should I read this?
Quick and useful: this saves you the time of parsing dense ISS and SEC material. The headline — say-on-pay still passes, but proxy advisers and investors are hunting for holes — matters if you’re crafting incentive metrics, disclosure or handling investor engagement. Expect more focus on transparent goal-setting, limits on one-off awards, and clear rationale for security spending. Also, the SEC is listening: disclosure rules could change, so now’s a good moment to review governance and reporting practices.
