Stewardship in Action: Engagement Snapshots on Executive Pay Incentives and Peer Groups

This article is part of a Stewardship in Action series that relays brief, on-the-ground snapshots of how Glass Lewis’ Stewardship team engages publicly listed companies on behalf of investors on a range of material environmental, social, and governance (ESG) issues. Previous installments can be read here. The engagements are dedicated to helping institutional shareholders identify and address ESG issues that can potentially affect the long-term value of their portfolio companies. Engagement on these issues is essential in fostering constructive dialogue and positive change.¹ All company names have been anonymized.

Snapshot One: Engaging on the Executive Remuneration Structure With a Biotech Company

Best Practices on Executive Remuneration Structure

A sound executive remuneration structure is clearly disclosed and aligns pay with the long-term performance of the company and the interests of its shareholders. This entails linking executive pay to performance metrics measured over the short and long term. A good mix of incentives should encourage prudent risk-taking and discourage behaviors that prioritize short-term gains over sustainable growth and shareholder value. The remuneration structure must be transparent to enable shareholders to evaluate its functioning and the rationale behind compensation decisions must be clearly disclosed.

The Company

‍Biotech Company engages in the development of various therapies for the treatment of autoimmune diseases internationally.

The Issues

Executive Pay: We initiated our engagement efforts with Biotech Company in 2024 and 2025 in response to ongoing shareholder concerns regarding executive remuneration. The company did not utilize an objective, formula-based approach to setting long-term executive compensation levels, which appeared to be determined on a purely discretionary basis.

The Engagement Objective

The company needed to subject the vesting of the long-term incentive to performance metrics in its executive compensation plan.

Progress on Change

Ongoing Discussions

Since launching engagement efforts with the company, two separate remuneration policies were submitted for shareholder approval at two consecutive AGMs. On both occasions, the proposals received significant shareholder opposition with a sizeable minority voting against the policies. Despite revisions proposed each year, remaining negative elements continued to outweigh the positive changes presented by Biotech Company.

A virtual engagement meeting with the company was held in late 2025 to discuss its executive remuneration framework, with a particular focus on the long-term incentive plan (LTIP) and shareholder engagement practices. We acknowledged that the company already made meaningful progress in aligning pay with performance and in addressing shareholder concerns. We sought to gain further clarity on the proposed policy changes introduced ahead of an upcoming shareholder meeting and encouraged continued enhancements to transparency and structure.

Our review of the proposed changes highlighted positive developments, including the removal of a separate cap on LTIP opportunity for future CEOs, the inclusion of performance share units (PSUs), and improved disclosure of performance measures. The company confirmed that PSUs were awarded for FY2025 in accordance with the current policy and that this received favorable feedback. Regarding the proportion of LTI awards delivered in stock options and PSUs, the company stated that currently, the proposed ratios were considered most appropriate. However, the company intends to remain attentive to shareholder feedback and has incorporated language in the policy to allow flexibility to increase the proportion of PSUs awarded.

In relation to shareholder engagement, the company described a broadened outreach effort, expanding its visibility from the top 30 to the top 100 shareholders. It also engaged external advisors to support outreach to smaller investors and used feedback to inform revisions to the remuneration policy. The company noted that shareholders who had previously opposed the policy expressed satisfaction with the changes, particularly the removal of a separate cap on LTIP opportunity for future CEOs.

On peer group composition, the company confirmed that the group is reviewed annually with external support, and recent additions have increased EU-based peer representation.

Following our engagement meeting, the company submitted a revised remuneration policy for shareholder approval which was widely approved, reflecting a considerable improvement on shareholder support compared with previous AGM outcomes.   

Shareholder and Stewardship Outcomes
The engagement is completed, reflecting the improvements made to the LTI structure and the positive voting results at the recent shareholder meeting. The introduction of performance conditions under the LTIP represents a positive step toward improved alignment between pay and performance, by applying performance conditions to a portion of the awards (measured over a period of at least three years) and by subjecting all LTIP awards to a three-year vesting period. In addition, the company has demonstrated its commitment to maintaining flexibility and to continuing to evolve its practices in response to shareholder feedback and changing market standards.

Snapshot Two: Engaging on Executive Pay Benchmarking With an Advanced Analytics Company

Best Practices on Benchmarking Executive Pay

Referencing a specially formed and relevant group of peer companies helps the board in benchmarking pay levels, structures, and governance standards that are appropriately competitive in the market for executive talent. The factors driving the composition of a peer group will vary depending on a company’s unique circumstances, but typically include market capitalization, revenue and assets, or similar business models, industry classification, brand recognition, and complexity of operations, amongst others. The peer group should reflect a range of plausible competitive outcomes, with the company situated near the middle. Companies should avoid selecting overly aspirational peers, and/or setting pay levels above the median for their chosen group.

The Company

Analytics Company engages in the provision of advanced analytics, technology solutions and clinical research services to the life sciences industry.

The Issues

Executive Pay: The engagement with Analytics Company was initiated in 2024 to encourage it to revise its peer group composition for benchmarking executive pay. Prior to the engagement, based on shareholder feedback, the company committed to stop using a secondary peer group to set CEO pay and revised its main peer group in 2023. However, Glass Lewis identified that the revised main peer group included many outsized companies.

At the time of the company’s 2024 AGM, Glass Lewis identified that a significant proportion of the peer group consisted of companies with more than twice the company's market capitalization and revenue. As a result, the CEO’s pay was positioned above median relative to peers. The previous peer group disclosed in 2023 included companies that were more comparable in size, placing the company at the median in market capitalization and revenue.

The Engagement Objective

The company needed to revise the composition of the peer group used for benchmarking its executive pay.

Progress on Change

Following outreach efforts in 2024 and 2025, we held a virtual engagement meeting with the company. The meeting was attended by the company’s general counsel and assistant general counsel. 

During our engagement meeting, we discussed the company’s peer group composition and shareholder engagement on executive pay. We acknowledged that the company revised its compensation peer group in 2023 and asked about any shareholder feedback on this revision and potential future changes. The company explained that the peer group was revised through the advice of a new compensation consultant, and the decision to move to a single peer group was based on shareholder feedback.

The company highlighted challenges with the single peer group, noting that there was no perfect fit of peers with respect to business comparability and size, and also noted that peer selection is based on size compatibility and talent competition. While the company indicated that it may revisit the peer group in the coming years, it was satisfied with the current composition, with no imminent plans for significant changes.

Beyond peer group composition, the company provided an overview of its shareholder engagement program, noting proactive outreach to top shareholders and the role of the nominating and governance committee in overseeing feedback. We encouraged further granularity in reporting on shareholder engagement themes and outcomes, particularly where there has been historic dissent. The company indicated that while engagement interest has declined as compensation plans have stabilized, it remains open to feedback and committed to transparent communication.

Shareholder and Stewardship Outcomes

The company was open to feedback and provided insights regarding its approach to shareholder engagement and executive pay issues, including peer group composition. However, the company indicated that it has no plans to revise its peer group for benchmarking executive pay in the near term. We will continue to monitor the company’s disclosures for any updates regarding the engagement objective and continue our engagement efforts.