Business
Special Equity Awards: Navigating Governance Considerations
In 2023, Fair Isaac Corporation’s board faced a situation many compensation committees encounter: a proven, long-tenured CEO who had become
About this update from Fair Isaac Corporation
[{"type":"text","content":" In 2023, Fair Isaac Corporation’s board faced a situation many compensation committees encounter: a proven, long-tenured CEO who had become retirement-eligible, an active market for executive talent, and a retention challenge the regular program was not designed to solve on its own. The board’s answer was a $30 million 5-year retention grant outside of the regular program. It was a deliberate decision made for clear business reasons — and it is a recognizable example of why special equity awards remain a legitimate part of the compensation toolkit. Special awards exist because real situations arise that annual compensation programs are not built to handle. Unexpected leadership transitions, significant acquisitions, competitive retention risk for a critical executive, a new hire requiring substantial value to join — these are circumstances where a board may reasonably conclude that the regular program, however well designed, is not the right instrument. The question is rarely whether special awards are appropriate in principle. It is whether the specific award, in the specific circumstance, is designed and communicated well enough to hold up to scrutiny. That scrutiny is real and fairly consistent. Special and nonperformance-based equity awards appear regularly among the leading reasons shareholders cite when opposing say-on-pay proposals, and boards considering special awards should expect opposition. Challenged say-on-pay votes remain rare in absolute terms, but when support does erode, special awards are a frequent catalyst. The more relevant question for a board considering a special grant is not whether opposition is possible — it usually is — but what will shape the severity of that opposition and how durable it is likely to be. The answer varies considerably. Some companies recover say-on-pay support within a single cycle. Others face pressure across multiple proxy seasons. The difference tends to come down to a combination of factors: underlying company performance, the quality of engagement with key shareholders, demonstrated responsiveness to the concerns raised, as well as the overall design and disclosure of the award itself. There is no single formula that guarantees a smooth recovery, and boards that approach the aftermath as a routine engagement exercise sometimes find it is anything but. What tends to go well FW...