Below are key takeaways from ISS’ recently released 2025 United States Governance & Compensation Proxy Season Preview. The full report is available to institutional subscribers by logging into ProxyExchange then selecting the Knowledge Center and its Library tab and to corporate subscribers by logging into Compass then selecting Governance and the Governance Library or Governance Exchange tab.
- Expected focus on management proposals to eliminate existing supermajority vote requirements. Requests for the elimination of existing supermajority vote requirements were the most prevalent governance related shareholder proposal in 2024, with 31 receiving majority support at companies in the Russell 3000. In response, these companies can be expected to submit binding charter or bylaw amendment proposals to eliminate their supermajority vote requirements.
- Delaware proposes corporate law amendments to nip “DExit” in the bud. Impact of the changes would make it harder to challenge a transaction between a company and its controlling shareholder – including a compensation package. Legislation is being advanced on a compressed timetable and could be adopted as soon as March 2025.
- Fewer boards are tasked with demonstrating robust say-on-pay responsiveness. Last year’s higher say-on-pay support levels overall means that fewer boards are tasked with demonstrating robust responsiveness to low vote results. Core pay-for-performance areas are expected to remain in focus, such as the proportion of performance-conditioned pay, goal rigor, clarity of disclosure, and one-time awards.
- Performance equity disclosure and design deficiencies will be subject to greater scrutiny going forward. Beginning with the 2025 proxy season, ISS will place a greater focus on performance-vesting equity disclosure and design aspects, particularly for companies that exhibit a quantitative pay-for-performance misalignment. Multiple concerns identified with respect to performance equity programs will be more likely to result in an adverse vote recommendation in the context of a quantitative pay-for-performance misalignment.
- Investors may see increases in security-related perquisites in 2025. As many companies reevaluate the need for new or enhanced security protections for their top executives in the wake of recent events, security-related perquisites are likely to come to the forefront for many companies. It remains to be seen what impact this will have for 2025 proxy disclosures or how investors will evaluate potential increases in such perquisites, which often include executives’ personal use of company aircraft.
- Investors should be on the lookout for new clawback disclosures. Most listed companies have now implemented clawback policies that comply with the final Dodd-Frank rule and corresponding listing standards. Many investors will be on the lookout for additional disclosures for companies conducting clawback analyses, particularly given that the 2025 proxy season marks the first year in which end-of-year pay decisions are expressly subject to potential clawback under the listing standards.
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By: Marc Goldstein, Abby Bucklin, Jolene Dugan, Kevin Kim, David Kokell, Kevan Marvasti, Chris Scoular, Galen Spielman
