2026 Equity Plan Trends: What Companies Are Changing

The start of a new year (and proxy season) is a great time to think about updating your equity plan. In this blog entry, I highlight results of our recent pulse survey on how companies are changing (and not changing) their equity plans.

How Companies Are Updating Their Equity Plans in 2026

Just over half (57%) of companies are planning to make changes to their equity plans or are contemplating doing so in 2026. Tech and life science companies are more likely to be planning or contemplating changes than companies in other sectors (62% of tech/life science companies are planning or contemplating changes, compared to only 53% of companies in other sectors).

The most common types of changes being considered include vesting schedules, performance metrics, types of equity vehicles, and eligibility.

Equity Pools and Budgets in 2025 and 2026

It likely comes as no surprise to my readers that tech and life science companies report larger equity pools (grant-date fair value of all equity awards expressed as a percentage of operating income) than companies in other sectors. Just over half of tech and life science companies report equity pools of 9% or more, compared to only about a quarter of companies in other sectors.

[Note that a substantial percentage of respondents (41% of respondents overall for FY25 and 45% for FY26) did not know their equity pool size. These respondents are excluded from the data on equity pool sizes. If we knew the pool sizes for these respondents and could include them in the data, the results could be materially affected. Keep this in mind when using the data for decision-making.]

About half of companies report that their equity spend has increased over the past few years (just slightly more so in the case of companies outside of the tech and life sciences sectors). But only 35% of companies expect their equity budget to increase in 2026; 55% expect their budget to remain the same.

Tech and life science companies are slightly more likely to expect their budget to increase (37% compared to 32% of other companies), but not materially so.

Burn Rates in 2025 and 2026

Just as tech and life science companies have larger equity pools, they also have higher burn rates. For 2025, 45% of tech and life science companies report burn rates of 3% or higher, and only 24% report burn rates of less than 1%. The reverse is true in other sectors: only 26% report burn rates of 3% or higher, and 40% report burn rates under 1%.

Over 90% of companies report that they anticipate their burn rate will not change significantly in 2026 (i.e., their burn rate will fall within the same survey bucket in 2026 as it did in 2025). Thus, while equity award features and eligibility may be changing, when it comes to companies’ overall equity pools and burn rates, it seems that 2026 will be largely status quo.

Concern Over ISS Burn Rate Caps

Interestingly, almost half of all companies report that they are not at all concerned about exceeding the ISS burn rate caps applicable to them. I’m not sure whether this means these companies have no need to exceed the cap or that they don’t believe exceeding the cap will affect shareholder support for their plan.

Anticipated Performance Award Payouts

Less than half (44%) of companies expect FY25 performance award payouts to exceed target, down from five years ago. In an NASPP pulse survey conducted in June 2021, 54% of companies reported that award payouts for their most recent fiscal year exceeded target. Most companies have a fiscal year that aligns with the calendar year, so the payouts covered in that June 2021 survey would mostly have been for 2020—a year I remember as being pretty grim.

Thus, I’m surprised to see an expected decline in performance award payouts. Does this mean that 2025 is even grimmer than 2020 (or was 2020 not as grim as I remember)? Have performance goals become more challenging? Did boards make adjustments to payouts for economic conditions in 2020 that they aren’t willing to make now?

Participation in Discretionary Equity Programs

The NASPP/Deloitte Tax Equity Incentive Design Survey collects data on which employee ranks receive discretionary equity awards (e.g., restricted stock and RSUs, stock options, performance awards), but it does not report on whether equity awards are offered to all or only some employees within each rank. The pulse survey provided an opportunity to collect data in this area.

Virtually all companies offer equity to all executives, and most (80% overall—slightly more for tech/life sciences and slightly less for other sectors) offer equity to all senior managers. This is what I expected and is not particularly interesting—you probably could have guessed these results without a survey.

It is more interesting to look at granting practices for lower-ranking employees. This is also where practices at tech and life science companies diverge from those of other companies. Over half of tech and life science companies grant equity to all managers, and over a third grant equity to all individual contributors. In other sectors, the percentage of companies that grant equity to all employees at these levels drops to 21% for managers and 10% for individual contributors.

When companies grant equity to only some employees at the manager and individual contributor levels, participation is most commonly left to the discretion of employees’ managers. It is also common for participation to be tied to pay or job levels.

Top Challenges in Managing Equity Compensation Programs

Lastly, the top two challenges survey respondents report in terms of understanding or managing their equity programs are participant education and tax implications. Third place goes to valuation and market volatility.

More Information

Check out the full results of the survey to learn more.