Early 2026 proxy filings show compensation committees navigating three simultaneous pressures: investor demands for structural rigor, evolving strategic imperatives from AI and general market volatility, and succession complexity. Five trends stand out, which we have highlighted for boards and leadership teams to consider as they finalize their proxies and prepare for annual meetings. Interestingly, much publicized policy changes don’t seem to have had much impact (yet).
At a Glance: Five Early Trends
| Trend | What We're Seeing |
|---|---|
| rTSR Modifiers | Large-caps are adding relative TSR modifiers to LTI plans — calibrating absolute payouts against peers to counteract rising/lowering tide impacts. |
| AI in Pay Design | At this stage, trends are industry-linked. Techs like Microsoft and IBM explicitly linked compensation program changes to AI strategy execution. For these companies, AI is now a structural rationale, not just narrative context. Side note, the number of “AI” references in 2026 Q1 was greater than “earnings” references. |
| PSUs are Standard | While proxy advisory firm policy changes weren’t announced until late in 2025, we note one of the key updates involved the “acceptance” of more time-vested awards in the mix. However, early filers are indicating 60% performance-weighted equity is consolidating as the standard for seasoned NEOs. Newly promoted executives typically receive transitional time-based grants. |
| Succession Planning in Focus | Speaking of newly promoted executives, succession planning is creating complexity in both plan designs (as noted above) and in disclosure burdens. Oracle and Celanese are two early filer examples of these points. |
| Engagement as Infrastructure | Year-round, committee-led engagement with named institutions — and documented program changes in response — is now a disclosure expectation, not a best practice. Expect this to continue as institutions lessen focus on proxy advisor firms and if SEC disclosure requirements change. |
1: RELATIVE TSR MODIFIERS: A STRUCTURAL SHIFT
Pressure for relative performance measurements has been increasing of late, thanks to market unpredictability. Large-cap companies are adding rTSR modifiers to long-term incentive plans as a result. IBM’s 2026 proxy is the clearest early example: rather than replacing its core operational metrics, the company introduced a modifier that adjusts payouts based on whether TSR outperformed or underperformed its performance peer group.
This is a meaningful design change. Modifiers allow committees to keep metrics that best capture business performance — free cash flow, operating EPS, ROIC — while meeting both the investor concern that strong absolute results during a broad market rally can produce outsized pay and the management concern that an over-reliance on absolute performance metrics can create “no win” scenarios if macro conditions are overly unfavorable.
The key design details boards should understand:
- Modifier ranges are typically ±10–20% of target; ranges outside this band attract scrutiny;
- Peer group definition matters as much as the modifier itself — vague peer groups undermine the mechanism;
- ISS and Glass Lewis view rTSR modifiers favorably; their absence is increasingly a talking point in SOP analyses, including scenarios where companies don’t have negative absolute TSR cutbacks.
2: AI IS BECOMING A PAY DESIGN RATIONALE
In the two tech examples noted, Microsoft and IBM both made explicit changes to their FY2025 compensation programs to align incentives with AI strategy execution. This is certainly not boilerplate, and we recognize the cadence of evolutions in this arena will vary based on industry and business strategy across the general market. Additionally, it’s anticipated that companies will take different approaches to how they adapt pay designs to account for AI strategic imperatives. Microsoft added a new cybersecurity performance category tied to its Secure Future Initiative — a direct response to regulatory scrutiny — alongside its AI alignment rationale. IBM frames its new rTSR modifier as part of its commitment to sustainable AI-focused growth.
These shifts show how companies are starting to view AI as justification for specific plan design choices. If a committee uses that framing, it should be prepared for the logical follow-on question: what specific metrics or milestones demonstrate whether AI strategy is being executed well?
One question to consider amongst your leadership:
Has your compensation committee considered whether any element of executive incentive design
should be explicitly connected to AI-related strategic milestones — and if not, is that a conscious decision or a gap?
3: THE PSU STANDARD
Performance stock units now represent 60% or more of long-term equity awards for seasoned NEOs across the early filers. UiPath added PSUs for the first time in FY2025 explicitly citing shareholder feedback. Korn Ferry’s standard allocation is 60% PSUs / 40% time-based RSUs for all NEOs except newly promoted executives, who receive 100% time-based awards in their first year before transitioning to the standard mix.
Oracle’s co-CEO grants — $250M in options, 80% time-based — were a notable outlier. The committee’s rationale centered on succession needs that required a balance of shareholder alignment and lower risk of forfeiture. Given the growing interest in the market on transition-related incentives, it will be an interesting data point to see how the SOP vote from investors plays out.
These observations are interesting to market participants like us, as such a trend seems to contrast considerably with the much discussed changes in proxy advisory firm policies around what an acceptable LTI award mix might be going forward.
4: SUCCESSION PLANNING IS A DISCLOSURE EVENT, NOT JUST AN HR EVENT
Investors are ever more interested in the valuation risks/opportunities that come from governance evolutions, particularly as it pertains to CEO and senior leadership transitions. Amongst the early filers reviewed, we noted that those companies with leadership changes had the most complex CD&A sections. Companies had to generally address two things simultaneously in their CD&A disclosures: severance for a departing executive, for example when a CEO becomes Executive Vice Chair, and new-hire incentives that are generally substantial in value relative to executive pay norms — all requiring real estate in the CD&A.
All of this means the disclosure standard in succession contexts has risen.
Proxy advisors have made their expectations known: a clear connection between transition awards and long-term retention; competitive market context for the specific roles; and a stated timeline for returning to standard program structure. Committees that cannot articulate these elements may face shareholder support challenges regardless of the intrinsic reasonableness of the compensation decisions made.
5: ENGAGEMENT IS NOW A FORMAL PROGRAM, NOT A REACTIVE TOOL
The early filings we reviewed disclose shareholder engagement as a structured, year-round activity — with named institutions, specific topics discussed, and documented program changes made in response. In some cases, companies even tie positive SOP results directly to a chain: engagement → program adjustment → investor acknowledgment → vote support.
The quality of engagement disclosure is itself becoming a signal. Committees that cannot articulate who they met with, what was discussed, and what changed as a result are at a disadvantage — even if their compensation programs are sound.
LOOKING AHEAD:
The bulk of calendar-year company filings arrive in April and May. Several outcomes may shape compensation committee decision-making going forward:
- We will be monitoring proxy advisory firm vote recommendations to see how changes in policies (timeframes for quantitative analyses, views on LTI design, etc.) are showing up in vote recommendations and corresponding SOP vote results.
- SOP vote results will signal how much “evolution” to expect in executive pay design going forward.
- Trends in changes around incentive plan designs – particularly with respect to any prospective program (i.e. FY2026) adjustments.
- How AI initiatives across different segments of the market impact incentive plan design.
The above was based on review of DEF 14A filings submitted to the SEC between January 1 and March 18, 2026. Companies reviewed include IBM, Broadcom, Oracle, Microsoft, Korn Ferry, UiPath, Celanese, Cabot Corporation, and others. This briefing is for informational purposes only and does not constitute legal, financial, or compensation consulting advice.