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.
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.