Krystal Biotech Inc

This proposal asks shareholders to cast an advisory "say-on-pay" vote approving the overall compensation of the Company’s named executive officers as disclosed in the proxy. Management is seeking this advisory approval to confirm that its executive compensation philosophy—emphasizing a mix of base salary, performance-based annual cash bonuses tied to corporate and individual objectives, and long-term equity incentives (options and RSUs)—is aligned with stockholder expectations and Company performance. The Company highlights that a large portion of NEO pay is “at risk” and tied to long-term stock price performance to align management incentives with stockholders. Contextually, the Company previously received strong support in its 2024 say-on-pay vote (over 96% support), and the Compensation Committee uses market data and an independent consultant to set pay levels and peer benchmarking. Although advisory and non-binding, the Board will review the outcome and take it into consideration when making future compensation decisions; thus, the vote functions as a governance signal rather than creating contractual entitlements. The Company frames the program as calibrated to attract and retain executives, reward achievement of operational and strategic goals (including commercial performance of VYJUVEK and pipeline advancement), and limit excessive risk-taking via multi-year vesting, clawback provisions, and other safeguards. The Board recommends a vote FOR, asserting the compensation is reasonable, performance-linked, and market competitive; however, shareholders should note the advisory nature of the vote and that the Compensation Committee retains discretion to modify programs. Given the Company’s commercial launch progress and material revenue growth in 2025, management argues the compensation structure appropriately balances short- and long-term incentives to drive sustainable value creation. Analysts assessing the proposal should weigh the robustness of disclosure, the high proportion of equity-based pay, prior shareholder support, and governance mechanisms (independent committee, consultant, clawback policy) in judging whether approval signals effective alignment between pay and performance.

This management proposal asks shareholders to approve a formal Non-Employee Director Compensation Policy (the Compensation Policy) and the affiliated 2026 Program detailing cash retainers and equity awards for non-employee directors. Management is seeking shareholder approval both to formalize a market-competitive board compensation program (50th percentile positioning) and to satisfy a condition of a proposed settlement of a derivative litigation alleging excessive director compensation; the policy’s effectiveness requires both stockholder approval and court approval of the settlement. The 2026 Program sets a $50,000 base annual board retainer, supplemental retainers for committee chairs/members, a $40,000 lead director retainer, and annual equity awards targeted at $400,000 grant-date value (60% options/40% RSUs) with special initial grants for new directors and multi-year vesting; the Policy contemplates retaining an independent consultant and annual peer benchmarking, and allows the Board to increase compensation up to the 75th percentile in future years within the Settlement Governance Period without additional stockholder votes. The board recommends FOR, arguing the Policy promotes transparency, helps attract and retain qualified directors, and fulfills commitments under the settlement to enhance disclosure and submit the policy to a vote. Significant contextual governance considerations include the derivative suit (Corbin v. Janney et al.) and the fact that votes by non-employee directors and certain litigation defendants are excluded from the tally; effectiveness is also conditioned on Delaware Court approval of the settlement. If not approved, the Company states directors will not receive compensation under the Policy until both stockholder and court approvals occur and the Company may present another proposed plan for a future vote. For sophisticated evaluation, analysts should weigh the settlement-driven need for this vote, the reasonableness of the 2026 Program relative to peers, the limits on future increases during the Settlement Governance Period, the exclusion of certain votes, and potential governance optics related to director compensation litigation when judging whether the policy aligns with long-term stockholder interests.