As the 2025 proxy season ends, public companies have had to navigate a more nuanced and demanding disclosure environment. New disclosure requirements, such as Item 402(x) of Regulation S-K, and increased scrutiny of—and changing views on—diversity, equity, and inclusion (DEI) presented new disclosure challenges in 2025. At the same time, executive compensation strategies faced increasing pressure to balance incentive alignment with transparency and governance accountability.
The 2025 proxy season was the first year that calendar-year filers were required to include Item 402(x) disclosure in their proxy statements. Item 402(x) includes both (1) narrative disclosure of a company’s policies and practices as to the timing of option and stock appreciation rights (SARs) awards in relation to the disclosure of material non-public information (MNPI) and (2) tabular disclosure if the company awarded options or SARs to a named executive officer within the period starting four business days before filing a periodic or current report that discloses MNPI and ending one business day thereafter.
While most companies did not need to include the tabular disclosure component of Item 402(x), we saw varying approaches with respect to the narrative disclosure requirement. Specifically, a company’s approach to the narrative disclosure depended on whether such company grants options and whether such company has a formal grant policy. While companies that grant options and have a formal policy simply described the material terms of their policies, companies that grant options and do not have formal policies used the disclosure to describe consistent grant practices and the typical cadence of grants.
For companies that do not grant options, companies either opted to include a “negative” disclosure simply stating that they do not grant options and therefore do not have a policy or used Item 402(x) to describe their grant policies and practices as they relate to other forms of equity (such as restricted stock units).
Following the US Court of Appeals for the Fifth Circuit’s vacating of the Nasdaq board diversity rules and the current US administration’s DEI executive orders, ISS updated its previously published 2025 voting guidelines to provide that it will no longer consider the gender and racial and/or ethnic diversity of a company’s board when making director election voting recommendations. While Glass Lewis did not revise its existing policy, it did release a statement to its clients that it has modified its approach to providing proxy voting guidance related to the consideration of diversity.
In light of the foregoing, we saw a significant shift in companies’ approaches to board diversity disclosures in their proxy statements. In addition to the removal of explicit references to “DEI” and “diversity,” companies eliminated previously provided individual director diversity information.
Many companies, however, opted to retain aggregated board diversity statistics. Companies also revised their discussions regarding the consideration of diversity in director candidates.
2025 Say-on-Pay
While support for say-on-pay (SoP) proposals remained generally unchanged, proxy advisors scrutinize companies where the SoP approvals fall below certain specified thresholds and will expect companies to address SoP in next year’s proxy statement (70% approval for ISS and 80% for Glass Lewis). If SoP approval levels dipped below the above levels or materially decreased year-over-year, now is the time to think about engaging with institutional investors.
Equity Plan Proposals
The equity plan proposal process is complicated, requires coordination with advisors (legal and consultants) and significant planning around share calculations, plan terms, and disclosure. Companies should be planning now for the 2026 proxy season if they expect to include an equity plan proposal in the proxy.
Clawbacks
For a few years now, ISS has allotted points under its equity plan scorecard methodology if the company’s clawback policy authorizes recoupment upon a financial restatement of both time-based and performance-based incentive compensation. However, 2025 was the first year they required the policy to be “robust,” and a traditional Dodd-Frank policy will not satisfy this requirement. As such, many companies are adopting broader discretionary clawback policies that explicitly cover time-vesting awards.
Other Disclosures
2025 saw companies refining disclosures around executive severance and perquisites, offering clearer tables and concise narratives on payout triggers, amounts, and justifications—a direct response to rising investor and proxy advisor scrutiny.
SEC Roundtable Recap
Panelist suggestions included paring back executive compensation disclosure rules and urging the US Securities and Exchange Commission (SEC) to change its interpretation of bona fide personal security expenses as a perquisite.
Looking Ahead
Based on the trends and developments in this most recent proxy season, public companies should approach pay disclosures, DEI commitments, and compensation governance as interconnected priorities rather than siloed obligations. As regulators, proxy advisors, and shareholders continue to refine their expectations, companies that lead with clarity, consistency, and a forward-thinking pay philosophy will be best positioned to maintain credibility and investor confidence in a rapidly evolving landscape.
If you have any questions or would like more information on the issues discussed in this Insight, please contact any of the following: