What’s Next for CEO and Executive Compensation?

Steve Odland: Welcome to C-Suite Perspectives, a signature series by The Conference Board. I'm Steve Odland from The Conference Board and the host of this podcast series, and in today's conversation, we're going to discuss CEO and other executive compensation practices. What's going on now in companies? How might that change over the course of 2026?

Joining me today is Dana Etra, the managing director and head of the Boston office of FW Cook, which is a prominent consulting firm in the executive compensation field. Dana, welcome.

Dana Etra: Hi, Steve. Thank you for having me.

Steve Odland: So, Dana, we've talked about this in the past and some of the trends that have gone on, but why don't you catch us up here? What's new going into 2026?

Dana Etra: If we think about the landscape today versus a few years ago, I'd say in terms of pay levels, pay levels are higher again, with equity doing even more of the work. After pandemic-era volatility and some 2022 pullbacks, CEOs' pay has climbed to record or near-record [00:01:00] levels, with stock awards dominating the mix.

So, The Conference Board and FW Cook partnered on a study showing that CEO pay increased 7% year over year in the S&P 500, and 12% for the Russell 3000, with stock awards as the largest driver and, in particular, performance-based awards.

Steve Odland: It's important to point out to our listeners who are not CEOs of public companies that the structure of CEO compensation includes base pay. It includes usually an annual bonus, and then some composition of incentive options, whether they're stock options or stock units. And then, of course, you've got whatever pension thing. So the base pay, the fixed portion of it is usually what, Dana, around 10% and 90% variable?

Dana Etra: The bigger the company, the lower the percentage on base pay.

Steve Odland: So the percentage increases of base pay typically are pretty much in line with inflation, wouldn't you say?

Dana Etra: Yeah. Salary is not where we see the [00:02:00] material increases, especially aggregated in terms of summary statistics. Where we're seeing the biggest jump is in stock-based awards.

Steve Odland: OK. And then again, not everybody lives this every single day, but the stock-based pay is imputed. So in any given proxy, which is where this stuff is reported, you're forced to do an accounting assessment of what the stock options or units are going to be worth in the future, but that's done at a snapshot. It may or may not happen. And so, that's the conundrum in how to report and how to interpret these results.

Dana Etra: That's exactly right. And understanding that the reported pay in terms of the tabular disclosure in these proxy statements, as applies to equity, is largely a grant date accounting construct.

So equity is valued at grant fair value, not when it vests or is exercised. Special, or front-loaded, awards will inflate pay in the year of issuance, of grant, that is. And accounting [00:03:00] expense, which is what gets disclosed is disconnected from future stock price performance or against specific performance goals applied to any award. So that's what we might refer to as pay opportunity, rather than actual take-home.

Steve Odland: Yeah. And this isn't to criticize any accountant or legal input into any of this, because it's hard to value. So the question is, OK, you give somebody X amount, you know, a hundred shares, that will vest in the future and have some value, you have to put some sort of number on that if you're trying to impute the compensation value of that. But that number could be zero.

And what we saw through, obviously through the financial crisis, through COVID, a lot of different ups and downs in the markets, particularly if you're in a cyclical kind of company or industry, is these numbers may or may not come to fruition. So, even as we see 7% increases in the value, that really is reflective of the valuation at that point in time put on these stock [00:04:00] numbers. And also this is all before tax, so you lose half of it to taxes.

So anyway, I just think that background, maybe you don't think it's interesting, but I just think that background is helpful because you look at these numbers and you go, holy moly, these people are making a lot of money. Well, you know, what they actually take home is a fraction of that, typically.

Dana Etra: That's right. And it's an important distinction, that distinction of reported pay versus what I'll refer to as realized or realizable pay, is often viewed as central to how boards should think about compensation, not just how they disclose it.

So we talked about what disclosed pay, that pay opportunity, as I refer to it, comprises, but realized pay is often thought about as actual cash received, equity value at vesting, or based on current stock price, and performance outcomes. So the implication for boards there is that a year of high reported pay may represent risk transferred to the executive, not wealth delivered, especially when stock price performance lags.[00:05:00]

Steve Odland: Yeah, and there are some critics who say, well, compensation shouldn't include equity, but you just have to dial back to what, the late '70s or early '80s, when it was viewed as a governance imperative that you include. It used to be all cash-based, and, it was added really because investors wanted the executives to have skin in the game.

In other words, your pay should be variable, just like our return is variable. So we investors invest in the stock. Your compensation is based largely on the stock. And so if the stock goes up, we're aligned and we're happy, you're happy. If it doesn't go up, you don't get paid. And this whole thing came about because of demands from the investor community and the governance community, not that really long ago in the whole scheme of things.

Dana Etra: Right. And from a governance standpoint, today's equity-heavy executive pay packages are less about paying more in stock and more about [00:06:00] using equity to solve multiple governance problems at once. So knowing that equity is where the scrutiny is the most intense.

There are a few things boards are trying to accomplish with equity-heavy pay. First one is locking in long-term alignment, not just annual performance. So using equity to tie executive wealth to multi-year share price and financial outcomes. And also reinforcing that long-term owner mindset, especially in a volatile market. That's why performance-vesting equity now dominates pay for many CEOs.

The governance objective, Steve, as you said, is if shareholders don't win over time, executives shouldn't, either.

Steve Odland: Yeah, talk about performance-based shares, because this is relatively new, I would say, what that last half, a dozen years ago, that they've become more prominent in the mix.

Dana Etra: This is an area of continued evolution in terms of the level of scrutiny and the way companies are reacting to it. What boards are trying to accomplish with this type of equity firstly is making pay defensible under a pay-versus-performance scrutiny.

Making sure that the [00:07:00] equity programs actually hold up to alignment between the outcomes that shareholders are seeing, and the level of actual delivery of that opportunity to executives, is a real point of focus from the external community.

Steve Odland: Yeah, and there's a lot of objectives here that boards have to deal with. One, you're trying to deal with recruiting and having—let's just talk to CEO, but it's really the entire executive suite. But having the right people, the right skill sets in place, having them with the right longevity, right?

CEO turnover is high enough. What, every once every six years? They don't want to keep doing that, so there has to be some link to try to tie them into place so that the best ones aren't picked off with a higher pay package. And then to do it and remunerate them fairly. And that's where you get into the legal assessments, governance assessments, and also, what's fair to shareholders.

All of that is really, that's tough. And that's what you [00:08:00] advise boards on every day.

Dana Etra: Exactly. Equity is used heavily to retain leadership, particularly in an uncertain succession environment. So to address retention risk, to bridge leadership transitions, to compete for proven executives without locking in cash. But the emphasis has shifted toward deferred value delivery, longer vesting tails, and fewer guaranteed outcomes. So the goal is to support retention without undermining pay-for-performance credibility.

Boards are also using equity to reduce discretion and increase structural discipline, which is a different way of thinking about and different take. But compared to cash, equity forces boards to pre-commit to performance frameworks, limits year-to-year judgment calls, and creates clearer ex ante alignment. And that structural discipline matters when committees are under pressure to justify outcomes externally.

Steve Odland: There's a little bit of a backhanded advantage in doing it that way, as well, because investors can [00:09:00] parse through the share grants and figure out what the strategic plan is. In other words, in order to be fair, boards will often give equity based on what they think the value of the shares will be and what the plan says. So anyway, it's also helpful in gearing towards alignment with the shareholder community.

There's been a lot of governance changes over the years, and there have been some fads in governance. Where today are investors focused, and where do boards face the most scrutiny?

Dana Etra: I would say today, boards face the most scrutiny, one thing is performance conditions that don't feel performance based or that feel insufficiently rigorous. So big red flags are: goals that are too easy or reset frequently, wide payout curves with high minimum payouts, or high maximum payouts for that matter, and relative metrics that can provide for payouts regardless of absolute results.

Another area of significant scrutiny is special front-loaded or retention equity awards without [00:10:00] corresponding sufficient disclosure about the rationale. So the awards draw intense focus on why now, why this executive, why this size? And scrutiny is highest when the awards lack performance conditions, the rationale is generic—say, something about the competitive market—and the disclosure doesn't explain if and how ongoing pay was adjusted in response.

Steve Odland: You're raising a really interesting point, which is that it may be that the package is OK, and if the outside world understood what the boards were trying to accomplish, maybe they could align. So it's not necessarily the package alone, it's the disclosure of the intent, the objectives, and comparison points.

Dana Etra: That's exactly right. It's equity-heavy pay which is the thing that's most scrutinized here.

It's a governance strategy, not just a compensation strategy. Done well, it aligns executives with shareholders, and disciplines boards, strengthens pay for performance credibility. But done poorly, it concentrates risk—reputational, [00:11:00] investor, proxy advisor—into a single, highly visible place.

So it's not the action itself, in many cases, but the way in which investors are able to distill, interpret, and understand the action that's going to determine the reaction to any decisions.

Steve Odland: Yeah. And when you look at activist actions and certainly looking at filings, and people can read about this stuff in the paper, it's usually out of frustration more than anything else. Why are companies doing this? The stock's not doing well, and yet, they're giving these people big awards, what's going on?

Then, you go talk to the boards, and these are not stupid people. And they are really reasoned people, they spend a lot of time, they're independent. So it does come down to, I mean, we call it disclosure, but it's really communication. I mean, that's the human condition, right? You've got to be able to connect and communicate what you're trying to do. That would probably cure, certainly my opinion, [00:12:00] most of the friction. Certainly not all, but a lot, right?

Dana Etra: I fully agree. When decisions are made with thorough process, focus on governance and company-first objectives, the long-term alignment with shareholders. Investors understand that compensation is necessary to attract, retain, and motivate talented executives. And the degree to which you can adequately communicate the process of making those decisions and why those decisions were the right decisions is going to impact the investor sentiment on the topic.

One point of proof here, to what you just described, Steve, is if you look at the section of the proxy where pay decisions are disclosed, we just call it the compensation discussion and analysis, or CDNA. The CDNA today versus a CDNA, let's say, 15 years ago—so pre say-on-pay—it [00:13:00] used to be a legal document. It was heavy on legalese. It was light on disclosure and narrative and much, much shorter. And now it's a marketing document. It's a PR tool.

And that's important given the investor focus. It has colors, it has graphics, it has descriptions, narrative, and rationale about why decisions are made. Because that's being demanded by investors who are now given a regular ability to express their sentiments on compensation through that say-on-pay vote.

Steve Odland: Yeah. Really, really interesting changes. We're talking about executive compensation practices in 2026. We're going to take a short break and be right back.

Welcome back to C-Suite Perspectives. I'm your host, Steve Odland, from The Conference Board, and I'm joined today by Dana Etra, the managing director and head of the Boston office of FW Cook, a prominent executive compensation consulting firm.

So, Dana, before the break, we were talking about [00:14:00] the composition of executive compensation base, bonus, stock options, and so forth. Another area that has attracted a lot of attention recently are executive perks. And in the past, there were a lot more of these. There were clubs and all sorts of stuff. And that came out of the desire to pass through, pre-tax, some level of compensation.

But the perks that we're talking about today are things like private travel, security, and those kinds of things. And in wake of the United Healthcare shooting and other prominent executive attacks, NFL building and so forth, a lot of people are saying that these really aren't perks. They're business expenses and requirements. What are you seeing, and how are you advising boards today?

Dana Etra: Boards are right to treat perquisites as governance and trust issue, rather than a pay issue, in many cases. So in 2026, perquisites, especially security and travel-related benefits, are less about [00:15:00] dollars and more about judgment, consistency, and disclosure credibility.

So we advise boards to start from a risk and duty-of-care lens, not executive benefit. So the strongest reframing underway is that some perquisites exist to protect the company, not just reward the executive. This is most defensible for personal and residential security, secure transportation, cybersecurity and identity protection, travel protocols tied to duty of care, that sort of thing.

The governance implication there is that when a benefit mitigates enterprise risk—so think safety, continuity, reputational harm—boards are more comfortable providing it, even if it attracts attention, provided that the rationale is clear and consistently applied.

Now, iSS' latest compensation FAQs document indicated that security-related costs are unlikely to raise significant concerns on their own to the extent that the company provides reasonable and well-explained [00:16:00] disclosure around their decision-making process. So we expect a little more openness to board's judgment on which of these types of perquisites are genuinely risk-driven and company-friendly.

Now, coming down the pipeline, we also may very well see the SEC take a more practical view about when security benefits are considered a perquisite versus when it's a business expense.

Steve Odland: Yeah, and the focus in the past has been on CEOs, and it's been on physical security. There's also workplace security, which is not typically captured in compensation and so forth, but it's all wrapped together here in a package that boards and senior management really need to be thinking about going into the next couple of years.

Another thing we're seeing a shift in is say-on-pay. Now, this whole thing came about a few years ago, and it was expected that there would be a lot of challenges to [00:17:00] executive pay through these votes. Companies committed to submitting, through their proxy, a shareholder vote on whether their executive pay is appropriate or not. Most of the companies have gotten passes on their say-and-pay votes. What's going on now? Are you seeing any backtrack?

Dana Etra: We're not. We're seeing a slight softening on say-on-pay support, but most votes are still passing. And the passing rate has been in the 90s every year since say-on-pay started, which, goodness, I suppose was 15 years ago at this point.

Now the softening in that vote support seems to me to be less about widespread investor revolt and more about investors recalibrating how they're signaling concern. So from my perspective, the results are best read as early-warning indicators, not binary pass/fail outcomes.

Steve Odland: It's interesting because before say-on-pay was put into effect, the prediction was that there would be a lot more [00:18:00] failures. When you start to see the averages in the 90s, it means, "Hey, do we really have a problem here?" But that's been ameliorated because boards and senior management teams have done a better job, I think, and we're hearing this from our members, of interacting with the voting shareholders and explaining what's going on.

And to your point, the CDNA is not a legal document. It's more of an explanatory document. I think all of that has worked. And that's a real positive thing, don't you think? Because now there's not this confrontation and friction. This suggests there's greater alignment on pay.

Dana Etra: The level of collaboration between issuers and their investors has increased significantly with say-on-pay in terms of conversations around and governance stewardship in terms of compensation-related issues and investors' perspectives on that.

Now, even within the say-on-pay era, there's been evolution. So historically, boards treated support greater than 90% as strong and support less than 70% as [00:19:00] problematic. Today, many large investors are viewing the trend line as more important than the absolute result. So a drop from 95% to 85% over two years is noticed. Mid-80s support can trigger engagement even if the vote passes, and repeated modest declines are still treated as governance signals. So say-on-pay has become a graduated feedback mechanism, if not a yes/no referendum.

Steve Odland: Yeah. And you also have to look at where, if there are "no" votes, where are they coming from? Because increasingly, you see sovereign wealth funds, particularly Norway, UK, and also very large funds from international locations investing in US stocks and trying to move governance practices in the United States that are different than other parts of the world.

So if it's all concentrated in, Norway, for example, it's different than if some of the mainstream US investors say, "Hey, wait a minute, there's a problem here." So you really have to evaluate [00:20:00] what's going on. But it still comes back to your point, which is this discussion, and engagement is key.

Dana Etra: It's a really important point. And boards are paying much closer attention to which investors reduced support, whether concerns are recurring or episodic, and how say-on-pay results align with the engagement feedback from those conversations that we're having with those investors.

Steve Odland: That learning is pretty applicable to a lot of other governance issues. That's really not the subject of our conversation today, but, I think engagement on all of these issues, and I think this is a great case study, I think the engagement in the discussion of these issues is so important.

And before, people would hide behind lawyers, and it felt like an attack. Now that you're seeing these vehicles to discuss, I'm hopeful that a lot more friction can be alleviated between issuers and investors.

Dana Etra: We can all dream.

Steve Odland: Well, yeah. It's a good hint to boards and management teams. So as you know, we're [00:21:00] coming into proxy season again, yet again. It's typically in the spring here for issuers that are on a calendar basis. What are you seeing as the top issues?

Dana Etra: You know, looking in my crystal ball here, what I would expect boards and management teams to watch closely for the 2026 proxy season is, one of them is one-time or retention awards, and equity design are really in the crosshairs. So investors and proxy advisors are increasingly focused on the mix and type of awards given and the rigor behind goal set.

Additional areas of focus or responsiveness to softening say-on-pay support matters more. We suspect there will be continued focus on perquisites, or at least discussion on the topic, if not shifting mindset in how investors are regarding that. Continued focus on incentive metrics and non-GAAP foot faults and unclear adjustments.

We expect some, not quick, but evolution in the way [00:22:00] executive compensation will be designed and disclosed in the next few years. So we'd expect a continued focus on equity, but perhaps with simpler structures. So fewer metrics, clearer ranges, less engineering of equity programs, because complexity is increasingly penalized in disclosure and investor interpretation.

I imagine greater guardrails over discretion. So boards will keep discretion, but with more emphasis on preset guardrails and symmetry. So it needs to cut both ways, right? Credible downward adjustments, as well as upward. And perks and security, to our earlier discussion, likely to become more programmatic. So, increasingly governed like enterprise risk controls, with formal assessments, annual review, documented rationale, rather than the ad hoc benefits of yesteryear, cause it's a more defensible posture.

One potential big change forthcoming is the possible modernization of the disclosure [00:23:00] requirements. There are clear signals that the SEC is exploring ways to simplify and modernize the disclosure requirements around executive compensation, which could reshape how companies tell the compensation story over the next few years.

Steve Odland: Yeah, and given the equity outsized component of it, and the trend towards more performance-based awards, how do you see that balance shifting? We've got time-based—essentially, if I can lump it into, I mean, it's more complex than this—but if there's time-based awards, and then there's performance-based awards, how do you see that balance shifting over time?

Dana Etra: There is some discussion as ISS, the biggest of the proxy advisory companies, indicated some softening in its perspective on what has historically been a great deal of focus on emphasizing performance-based award. But we're not seeing companies debating performance-based versus time-based equity, so much as how [00:24:00] to use each deliberately in a governance environment that's more skeptical, data-driven, and disclosure-heavy than it was in recent years.

So performance equity continues to be the default for credibility. And for CEOs and most NEOs, performance vesting, equity remains the anchor of long-term incentives. But performance equity is harder to get right than it looks, and boards are increasingly aware of the pitfalls in the design. So, metrics that don't reflect strategy or value creation, relative measures that pay out in weak environments, performance cycles that create volatility and frustration or over-engineering that makes them hard to understand or defend.

Steve Odland: Yeah. And all of that's against the backdrop of trying to put everything but the kitchen sink into the metrics. There's been a lot of agitation over time about sustainability goals and diversity goals, DEI goals. And everybody says, oh, you ought to base your pay on that.

But at some point you start putting all that in, and it looks like alphabet soup versus clarity of what you're trying to achieve. [00:25:00] And so what I hear you describe is a little bit of the pendulum swinging back to clearer, more simple, less complex kinds of plans around that.

Dana Etra: Absolutely. The bottom line here is that performance-based equity provides credibility, time-based equity provides stability, and the governance challenge is knowing which problem you're solving and not pretending one award can solve both.

Steve Odland: Yeah, that's really, really well-put. Any final thoughts for us?

Dana Etra: Just stay tuned for upcoming changes to the SEC regulations and what we see from the proxies released this year. It should be an interesting proxy season.

Steve Odland: Yeah, those are the two big things still hanging in the wind. Dana Etra from FW Cook, thanks for joining us today.

Dana Etra: Thanks, Steve. Great to be with you.

Steve Odland: And thanks to all of you for listening into C-Suite Perspectives. I'm Steve Odland, and this series has been brought to you by The Conference Board.