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 Cook works with companies on both sides of this. Some grant special awards and navigate the aftermath effectively. Others look at the same situation and find a way to address it within the regular program. We don’t arrive with a predetermined view on which is right — that depends too much on the company, the circumstance, and the state of the board’s relationship with its major shareholders going in. What we do observe is a set of consistent patterns among boards that handle these situations well.

It usually starts with the business case. Most boards can construct a rationale for a special award — the retention risk is real, the competitive market is real, the regular program was not designed for this situation. The harder question is whether that rationale holds up when stated plainly, without the benefit of proxy-crafted language, to a skeptical institutional investor. If the answer is uncertain, that is usually a sign to slow down and stress-test the case further before proceeding.

Boards that navigate this well also tend to think ahead — specifically, about what the story looks like if circumstances don’t resolve cleanly. When the board does not yet have a viable successor in place, a retention grant has a straightforward logic at the time of grant. The board needed time, and the award bought it. That story is easier to tell if a transition happens eighteen months later. It gets harder if two or three proxy seasons pass, the CEO is still in place, succession is still unresolved, and shareholders are left wondering what the award actually accomplished beyond extending the status quo. The question worth asking in advance is not whether the rationale works today — it usually does — but how it ages if the underlying situation moves slowly or not at all.

Related to that is a consideration that often gets underestimated: what the grant closes off. No board grants a special award knowing exactly what the next two or three years will bring. Business circumstances shift, and some of those shifts — an acquisition, an unexpected performance shortfall, a leadership change — may call for compensation responses that are themselves outside the ordinary. When that happens, a board that has recently granted a special award faces a harder conversation. Shareholders have limited appetite for repeated departures from normal practice, even when each one is justified on its own. The cost of a special award is not only the grant itself — it is the flexibility it may take away from the board later, when a more consequential decision requires shareholder patience.

Perhaps the most underutilized practice is engaging key shareholders before the award is finalized. Not to seek approval — that is not how these conversations work — but to surface concerns early, test the rationale, and better understand how the award is likely to be received before the first disclosure is drafted. Boards that do this are better positioned both for the annual meeting and for setting out a clear rationale in the initial proxy or 8-K, rather than clarifying it later in response to investor questions. Concerns about performance conditions, vesting periods, sizing, or framing are far easier to address before the grant than after.

Special equity awards are a legitimate and sometimes necessary part of the compensation toolkit. The boards that use them most effectively are not necessarily those that avoid controversy — in some circumstances, a degree of shareholder pushback is an expected part of the process. What distinguishes them is the rigor of the decision-making before the grant is made and the credibility of the engagement and disclosure that follow.