Thought Leadership Archives - GECN Group

The World of Executive Compensation Governance Has Shifted. What’s Next?

Mahmud Isaacs — Tue, 15 Sep 2026 08:54:24 +0000

To shape their pay strategy, internationally active companies cannot only look to practices in their home country. They need to monitor cross-border and global trends.

Around the world, executive compensation programs and related governance frameworks for publicly traded issuers are shaped by a wide range of stakeholder interests, including regulators, proxy advisors, and investors.

In this report, we explore recent trends and best practices in compensation governance across major markets, leveraging the expertise of the GECN Group subject matter experts. The GECN Group is composed of leading independent firms across six continents known for their strategic, analytical, and business-aligned approach to pay and governance. The report also provides perspectives on how governance practices have evolved since the GECN Group’s initial 2017 study of global executive compensation governance trends.

Looking ahead, executive pay governance appears to be moving in a broadly similar direction across most markets, with greater scrutiny of outcomes, disclosure, investor engagement, risk alignment, and board judgment. The United States (US), however, stands apart, as regulators and investors under the current administration are pursuing an agenda to make the public market more attractive to companies. Similarly, the United Kingdom (UK), historically a leader in governance practices, has become more open to reducing regulatory burdens to improve the UK market’s global competitiveness. Despite this broad convergence, the mechanisms and degree of scrutiny continue to differ by jurisdiction, reflecting local regulation, ownership structures, proxy advisor influence, and stewardship maturity.

Key Themes

Pay Governance Influencers Extend Beyond Regulators

Across markets, executive compensation governance is not driven by regulation alone. Proxy advisors act as important intermediaries between companies and investors, although their role is changing and the balance of influence among regulators, investors, and other stakeholders differs by jurisdiction.

Pay-Related Shareholder Accountability Differs by Market

Shareholder accountability for executive pay exists across all markets, but the form it takes varies. It ranges from binding votes and remuneration caps to advisory say-on-pay votes and indirect governance mechanisms. The practical consequences of shareholder opposition vary considerably, from enhanced disclosure and engagement expectations to formal board or compensation outcomes.

The Pay Governance Landscape Is Shifting in a Similar Direction, but Mechanisms and Adoption Differ by Jurisdiction

Despite important regional differences, including some backtracking in the US, executive compensation governance is generally advancing toward comparable goals: better disclosure, stronger pay-for-performance alignment, enhanced risk oversight, and more structured use of board discretion.

Lessons Learned From Repeated Controversies

Markets differ in how they govern executive pay, but the causes of governance failures – for example, one-time egregious awards, pay and performance misalignment, and unwarranted board discretion – are remarkably consistent. The recurring lesson is that board discretion is most effective when it is principled, consistent, transparent, and supported by a clear link to long-term value creation.

Forecasting Future State

The next phase of governance will likely be defined by less standardized and potentially less intensive proxy advisor influence, greater focus on realized and realizable pay outcomes, and earlier investor scrutiny enabled by data analytics and AI. As investor expectations become more sophisticated and company-specific, boards may need to exercise more discretion but will also need to justify their decisions. This will include providing more compelling explanations and demonstrating that pay outcomes align with long-term value creation.

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Five Step-Ups for Boosting Board Performance Self Awareness

kimbeard — Tue, 12 Aug 2025 09:34:34 +0000

When making investment decisions, investors tend to give primacy to who the CEO is and who may be the successor, not to who sits on the company’s Board of Directors (the «Board»). Typically, the CEO is perceived as more determinative for company success than the Board or any of its members.

At the same time, who serves on the Board is far from inconsequential. First, in many jurisdictions the Boardplays a final or at least a critical role in selecting and dismissing the CEO. Wrong decisions here could lead to a low-achieving or even value-destroying CEO being chosen or tolerated.

Second, with the duty to provide oversight, the Board has to perform a daunting ongoing balancing act, often under shifting business conditions.

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The Urgency of CEO Succession Planning

kimbeard — Wed, 18 Jun 2025 11:02:50 +0000

The development of high-potential internal candidates for C-suite jobs takes years to expose them to more expansive and challenging opportunities writes Farient’s Angela Moe and Brian Bueno in a Directorship magazine article. CEO departures are occurring at record-high levels, adding new urgency to get succession planning right.

In the United States, 622 CEOs announced their departures in the first quarter of 2024, representing a 48 percent increase from the first quarter of 2023 and the highest number of single-quarter departures ever, according to Challenger, Gray & Christmas’s CEO Turnover Report.

The reasons for the increased departures are varied. Still, economic uncertainty, the pace of technological advancements, and
shareholders’ rising performance expectations are likely contributing to the current level of CEO churn. Some argue that the current election year also contributes to an environment where transitions may seem well-timed as markets prepare for a potentially different regulatory regime. Identifying, developing, and engaging the next generation of leaders in this increasingly complicated environment is critical to ensuring organizational success through leadership transitions.

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Turnover at the Top: Are Boards Ready?

kimbeard — Wed, 18 Jun 2025 05:48:36 +0000

That was the finding of a recentsurvey of nearly 200 US public company board members conducted by Corporate Board Member and Farient Advisors.

Shifting Markets: Adoption of Hybrid LTIPs on the Rise
In recent years, a growing shift among companies, shareholders, and proxy advisors toward more flexible and tailored approaches to executive remuneration has occurred. One of the emerging themes coming out of this AGM season is the increased consideration and adoption of hybrid incentive plans. A hybrid plan combines performance shares.

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Setting and Assessing Remuneration in Uncertain Times

kimbeard — Wed, 18 Jun 2025 05:44:45 +0000

Sweeping US tariffs and other protectionist policies are rippling through global markets, crippling business investment, delaying business initiatives, and increasing the difficulty of setting valid executive performance targets.

Chairs of remuneration committees (RemCos) could be forgiven for a sense of déjà vu. Have we not been here before? What do we do about the company’s incentive plans given the upheaval? How does a board set strategy and performance requirements for 1 year, much less 3 years?

Many will be reaching once more for the playbooks adopted in March and April of 2020, when the implications of the COVID-19 pandemic were emerging, see HERE. RemCo chairs had to work through their company’s incentive frameworks to ensure they continue to make sense, were re-aligned with strategy and remain effective in attracting, retaining and motivating management.

With this in mind, here is an executive remuneration checklist for the upcoming May and June board meetings.

1. Fixed pay

There is no reason to expect at this stage that there will need to be downwards adjustments to fixed pay. This was a common occurrence, at least temporarily, at the start of the pandemic.

According to the IMF’s recent forecasts a recession in the US is 40% probable. Other countries, including Australia, will not be immune. While Australia’s zero tariffs and possibly cheaper imports will not stoke inflation and interest rates, an economic slowdown will see some redundancies, higher unemployment, and lower fixed remuneration increases.

2. FY26 STI structure

Many June FYE companies will have been well advanced in setting their FY26 budgets and 3-year strategy before President Trump’s 2 April “liberation day”. Thoughtfully, President Trump left time for Australian companies to make changes.

Action now to adjust FY26 budgets and targets will obviate any need to exercise STI upwards discretion later.

RemCo actions include:

Adjusting vesting scales to ensure they have regard for the volatility that can be expected throughout FY26. The threshold level of vesting may be lower than would otherwise be the case.
Reconsidering performance measures – The board may want to consider the key factors that will help the company survive these turbulent times. These include cash flow, cost containment, operational efficiencies and reviewing capex.
Consider setting H1 and H2 performance requirements for FY26 rather than one 12-month performance period. This approach was adopted during the pandemic and generally supported by investors and proxy advisers. The vesting scales could be tighter to reflect the greater certainty from the shorter performance period.
Including a provision in the FY26 STI offer letter that puts executives on notice for the possibility of:

a) Board discretion to negatively adjust the STI outcome to align with shareholder experience; and

b) Delivering some or all of the STI outcome in deferred equity to better align with shareholders.

Setting STI targets that flex based on external inputs (for example targets that vary based on an ABS statistic indicative of industry activity). The STI could also be split into targets that mirror the shareholder experience and targets that flex with the price of commodity inputs such as energy and raw materials.
If it is impossible to forecast for the year, suspend the STI and provide service-contingent share rights (RSUs). The value would be discounted (for the higher probability of vesting) with a longer vesting period.

3. Unvested LTIs on foot

Given the gyrations of the ASX indices since April 2 and the potential for further volatility, some LTIs due to vest may not.

ASX Listing Rule 6.23 precludes an upwards discretion for LTI grants on foot (see article HERE).

4. FY26 LTI grants

As the new US administration will be in government for the period of the FY26 LTI performance period, with expected continuing volatility, actions may include:

Considering whether retention grants are required. Since most other executives are in the “same boat”, turnover risks are minimal unless executives can find employment in industries that are differently impacted by the changes.
An increase in the weighting of relative TSR measures. Despite most executive teams disliking the measure, this type of environment is suited to it. The caveat being that the comparator group companies have been well selected and are likely to be similarly impacted by the uncertainty and volatility.
Reconsidering performance metrics based on ESG or DEI scorecards might not be well received in the current environment by US investors.
Deferring the FY26 grant and making a larger grant in FY27 when volatility has settled is a consideration, but will create flight risk and criticisms from executives or investors (or both) on allocation prices for the later grant.
Discounting the LTI value and granting service-contingent RSUs. The rationale includes:
- Setting valid and reasonable LTI targets may simply be unrealistic.
- Setting any target with a 3-year performance period is counter intuitive to agility and responsiveness.
- 3-year LTIs may be too short for long term strategies to bear fruit in any event. FY26 and 27 capex may be based on returns over 10 years for example.
- Aligns executive interest with investors who generally are long-term shareholders.
- The shorter tenure of executives and 3 year performance periods encourage executive behaviour that contributes to volatility.
Using a longer VWAP period to allocate the LTI value to reduce the exposure to volatility.
Checking the number of equity instruments granted if the share price is unusually low because of external factors.
Ensuring disclosures state discretion will be considered to ensure there are no windfall gains or unwarranted losses for executives for reasons outside their control.
Consider the potential impacts of volatility on mandatory shareholding requirements (MSRs), potentially:
- Extending the time to attain holding requirements.
- Reducing the MSR.
- Pausing MSR policy.
Considering whether retention grants are required. Since most other executives are in the “same boat”, turnover risks are minimal unless executives can find employment in industries that are differently impacted by the changes.

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Embedding “Skin in the Game” in Executive Pay Strategy

kimbeard — Mon, 16 Jun 2025 12:24:54 +0000

Corporate efforts to address environmental and climate impacts using executive incentives are the focus of 2025 Global Trends in Stakeholder Incentives: Climate Strategies and Incentives for Corporate Sustainability. 
As the first multi-national group to collate and analyze executive ESG incentives globally, the GECN Group is uniquely positioned to assess ESG-based incentive trends. We have witnessed how these measures have evolved to reflect greater rigor and specificity. As climate action has become a global priority, we ask: What specific choices are large companies making on environmental incentive measures and goals? How do size, industry, and geography affect decision-making?

This report details environmental incentive trends across regions and industries, and provides timely insights and data useful for corporate decision-makers to align their environmental strategies with executive compensation.

Study Methodology

Globally, this research covers large companies in Australia, Canada, Europe, Singapore, South Africa, the UK, and the US. The GECN Group analyzed data on
environmental incentives from the 2024 public disclosures of all 500+ companies listed in the following stock indexes:

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What is Success?

kimbeard — Mon, 16 Jun 2025 11:15:02 +0000

Success in performance assessments is often measured with financial drivers, but is that enough? In our Viewpoint, we explore how qualitative topics such as employee satisfaction, customer loyalty, and sustainability, can complement financial drivers to create a more holistic performance assessment. The Quality Scorecard, introduced in the publication, offers a framework to systematically integrate these qualitative elements into performance discussions. By intentionally avoiding mechanistic interdependence of measured values, targets, deviations from targets and the associated consequences, the approach fosters an entrepreneurial dialogue between management and the board while avoiding overly rigid, mechanistic evaluations.

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