Liz shared on TheCorporateCounsel.net earlier this week that, in late October, Glass Lewis announced the results from its annual policy survey. As she noted, you might be wondering, “does this still matter, since Glass Lewis is moving away from its house policy?” She says the answer is “yes,” for a few reasons:
1. That move isn’t happening until 2027.
2. Even after the “house policy” disappears, Glass Lewis is still going to provide research and perspectives to clients – it’s just that everything will be more customized, which is already happening at a certain level. Glass Lewis says results from the policy survey inform its case-by-case analysis of company circumstances in the research and filters that it provides to its global client base.
3. The policy gives insight into investors’ current views on several hot topics.
Here are a few takeaways on those hot topics related to compensation:
Make Whole Awards: Over the past year, use of the make-whole designation for U.S. sign-on awards has risen. Over half of all S&P 500 sign-on awards were identified as make-whole compensation this year, compared to 38% in 2024.
Non-investors were far more likely to view make whole awards as fundamentally different from other sign-on awards (40.8%, compared to just 5.3% among investors). Investors were split; while the top answer was to treat make whole grants on the same basis as other sign on awards (50%, compared to 27.6% among non-investors)), nearly as many were willing to view them differently so long as the grants are fully disclosed and clearly equivalent to what was forfeited (44.7%, compared to 31.6% among non-investors).
Time-Based Awards: U.S-based investors were far more open to the sole use of time-based awards as a part of the ongoing compensation structure so long as the practice was common with peers (43.5%, compared to 9.5% among investors from other regions) or as a retention measure (17.4% vs 9.5%). Meanwhile, investors from other regions appeared more likely to view them as a temporary stopgap, such was when the company is newly public (33.3%, compared to 13% among U.S. investors) or following a significant change in business strategy (38.1% vs 8.7%).
CEO Pay Ratio. To prepare for the possibility of reduced disclosures from the SEC regarding executive compensation, we asked for feedback on what elements of reporting are considered important to communicating and assessing U.S. executive compensation programs.
While most investor views were roughly aligned, there was a geographic split on the pay ratio, with 44% of U.S. respondents viewing it as not important, compared to just 8% among investors from other regions.
ISS Sustainability Solutions, the sustainable investment arm of ISS STOXX, announced updates to its Governance QualityScore for institutional investors last week. The updates introduce several new factors and extend existing factors to new markets. In addition to new factors that assess oversight of AI, four new questions for the U.S. market also address vesting periods for variable pay plans. Based on the detailed new Methodology Highlights (available for download), the new questions are:
What is the CEO vesting period for time-based options and/or stock appreciation rights? (Q475)
What is the CEO vesting period for time-based restricted stock? (Q476)
What is the CEO vesting period for performance-based options and/or stock appreciation rights? (Q477)
What is the CEO vesting period for performance-based restricted stock? (Q478)
At the same time, ISS announced a data verification period from November 10 to 21 during which companies can verify and submit changes to their data on all factors, new and old, before scores are made available under the updated methodology.
Yesterday, ISS announced that for companies with annual meetings between February 1, 2026 and September 15, 2026, its peer group review & submission window will open at 9:00 AM ET on Monday, November 10, and will close at 8:00 PM ET on Friday, November 21. Submissions should reflect peer companies used (or to be used) by the submitting company for pay-setting for the fiscal year ending prior to the company’s next upcoming annual meeting (so for your 2026 annual meeting, this would mean peers used for the 2025 fiscal year).
Here’s a reminder from the press release:
As part of ISS’ peer group construction process, on a semi-annual basis, corporations are requested to submit changes they have made to their self-selected peer groups for their next proxy disclosure. ISS considers companies’ self-selected peer groups as an important input as part of its own peer group construction methodology . . .
Companies that have made no changes to their previous proxy-disclosed executive compensation benchmarking peers, or companies that do not wish to provide this information in advance, are under no obligation to participate. For companies that do not submit any information, the proxy-disclosed peers from the company’s last proxy filing will automatically be factored into ISS’ peer group construction process.
Additional information on the ISS peer submission process, including links to ISS’ current recent peer selection methodology for the U.S., Canada, and Europe is available on the ISS website here.
We also shared some background info on constructing peer groups over the summer.
Last Thursday, ISS announced the launch of its comment period on proposed changes (shown in redlines) to its benchmark voting policies. During this open comment period, ISS gathers views from stakeholders (investors, companies, and other market participants) on its proposed voting policy changes for the next proxy season.
For 2026, comments are being sought on 19 proposed policy changes. Here is a summary of the executive compensation-related changes applicable to the U.S. market from the press release:
Non-employee director (NED) compensation practices – problematic high NED pay: Expands existing policy addressing problematic high NED pay practices, allowing for adverse vote recommendations in the first year of occurrence or when a pattern emerges across non-consecutive years.
Executive compensation – company responsiveness: In light of recent SEC guidance on Schedule 13G (passive) versus Schedule 13D (active) filing status for institutional investors, which may create legal uncertainties when companies seek to obtain feedback from shareholders, this proposed policy change allows more flexibility for companies to demonstrate responsiveness to low say-on-pay support.
Executive compensation – long-term alignment in pay-for-performance evaluation: Updates U.S. pay-for-performance quantitative screens to assess pay-for-performance alignment over a longer-term time horizon, considering a five-year period, compared to the current three years, while maintaining an assessment of pay quantum over the short term.
Executive compensation – time-based equity awards with long-term time horizon: This proposed policy update reflects the importance of a longer-term time horizon for time-based equity awards and represents a more flexible approach in evaluating equity pay mix in the pay-for-performance qualitative review.
Executive compensation – enhancements to equity plan scorecard: Adds a new scored factor under the Plan Features pillar to assess whether plans that include non-employee directors disclose cash-denominated award limits and introduces a new negative overriding factor for equity plans found to be lacking sufficient positive features under the Plan Features pillar.
The comment period opened yesterday and will run through 5 p.m. ET on November 11.
Comments received will be considered as ISS Governance finalizes the changes for its 2026 Benchmark voting policies, which will be announced in late November, and will generally be applicable for shareholder meetings taking place on or after 1 February, 2026.
I blogged earlier this week about annual incentive plan practices. These annual reviews are always interesting and helpful for benchmarking – but it’s important to acknowledge that the data lags actual trends, since it’s based on proxy statement disclosures of prior-year practices. As we know, a lot can change in one year!
This Equilar report takes a closer look at how things changed from 2023 to 2024, which may give more of a sense of the trend line as compensation committees start considering 2026 plans. Here are a few takeaways:
– 2024 saw a slight uptick in financial metric weighting. At the median in 2024, financial metrics made up 90% of the bonus plan, up from 85% in 2023, and 2024 also saw a corresponding downtick in non-financial weighting and prevalence. Market-based metrics (e.g., stock price) continue to be rarely used. The backlash against ESG/DEI metrics is a contributing factor to this small shift.
– Compared to 2023, 2024 saw a slight decline in individual performance usage (189 vs. 192). In terms of implementing individual performance, there was movement away from formal weightings and towards modifiers, mostly multipliers. For companies that weighted the individual performance component, weightings remained largely unchanged.
– On payouts, median corporate score factors in 2024 declined six percentage points at the median vs. 2023, and declined 7.1 percentage points on a total payout basis. The “corporate score” is the percentage achievement of goals – which corresponds to the payout. The decline in payouts could be due to overachievement of goals in 2023 that led to comparatively increased metric rigor in 2024.
– The use of discretion continued to decline from 2023 to 2024 – from 48 to 38 companies – compared to the surge that happened in the COVID years. In addition, one company in 2024 made an in-flight modification to the structure of their bonus plan, down from three in 2023.
– Circuit breaker usage declined from 37 companies to 36 from 2023 to 2024. In both years, a circuit breaker was triggered by three companies.
– Plans at 17 companies included a formal range of allowable discretion on the formulaic corporate score results, typically in the range of +/- 15% to 25%. This is distinct from other discretionary elements such as individual performance or discretionary metrics. In 2023, 16 companies included this feature in their plans.
The report also looks at common metrics. As you might guess, the biggest changes on that front are with ESG. Here’s more detail:
The prevalence of ESG metrics within formulaic plans was 32.7% in 2024 vs. 37.5% in 2023. Prevalence in this case only factors in metrics with a weighting or modifier effect and excludes ESG metrics embedded in individual performance or grouped strategic metrics. Within the subset of diversity metrics, there was a more dramatic decline from 12.2% of companies in 2023 to 7.4% in 2024. Lastly, the most dramatic decline occurred in diversity metrics with representation targets, which declined from 6.7% of companies in 2023 to 1.2% in 2024.
For companies that chose to retain diversity metrics in 2024, most eliminated any goals that could be interpreted as “quotas,” instead focusing on goals like diversity training, surveys on employee satisfaction and inclusion, and having diverse candidate slates for open positions. For companies that eliminated diversity metrics, most either shifted the weighting back to financial metrics or to a more general strategic goals metric covering various qualitative aspirations.
The Equilar study covers the largest 500 U.S. public companies by revenue, and was compiled using Equilar’s “IPAC” tool.
I blogged a couple weeks ago about using the information disclosed under Item 402(v) – the SEC’s “pay versus performance” rule – to structure compensation programs. This paper from ISS Corporate (available for download) also extols the benefits of statistical modeling for goal setting. Here’s an excerpt:
A goal-setting approach that incorporates statistical analysis can help ensure that goals are challenging but achievable and present payout opportunities that are fair for both executives and shareholders. By modeling incentive programs at the outset with statistical assumptions such as metric growth rate, volatility, and correlations, companies can better assess potential performance and payout levels according to their probabilities of achievement.
Such quantitative analyses may consider uncertainties including looming recession fears, unintended trade war repercussions or changing dynamics from the introduction of AI. A data-driven approach to goal setting, such as using Monte Carlo simulations, can aid in developing well-designed and rigorous incentive programs that won’t create problems down the road.
For compensation committees that aren’t already using modeling and think the “juice isn’t worth the squeeze,” the paper discusses how a data-driven approach can help avoid at least three pitfalls:
FW Cook recently published its annual incentive plan report – which reviews plans at the top 250 largest S&P 500 companies by market cap, based on 2024 practices disclosed in 2025 proxy statements. Here are a few key highlights:
• Plan Types: Formulaic annual incentive plan design with predetermined metrics and weightings remains the chosen approach by 93% of companies, aligning with shareholder and proxy advisor preferences.
• Financial Measures: Profit and revenue measures are the most prevalent and tend to account for the greatest weighting. Use of 2 or 3 financial metrics remains most prevalent, as this practice allows participants to address key business priorities without diluting management’s focus.
• Non-Financial Measures: A non-financial component is highly prevalent in annual incentive plans as a complement to core financial measures, with 80% of companies using a non-financial measure. While most ESG performance metric categories measured remain unchanged over the past 2 years, use of diversity & inclusion measures declined precipitously in the most recent year as companies have eliminated or rebranded these types of goals.
• Goal-Setting: Most companies continue to set more challenging target goals relative to prior year’s actual results.
The report gives supplemental details by sector – which are worth reviewing since practices can vary across industries. It also identifies the companies included in the study.
Yesterday, Glass Lewis issued a major announcement about what it calls “substantial enhancements to its business model.” Glass Lewis points out that these enhancements are made possible by technological advancements, in particular AI and smart technology that enables customization of its proxy voting advice. The announcement notes:
Over the next two years, Glass Lewis plans to make two significant changes to the way it applies proxy voting policies and delivers its highly-regarded proxy research and voting recommendations.
First, Glass Lewis will help all clients move beyond standard policies, guiding them in creating voting frameworks that reflect their individual investment philosophies and stewardship priorities. A majority of the firm’s clients already use their own custom policy guidelines or a specific thematic policy. The goal is to enable all clients to vote according to their own policies.
Second, Glass Lewis will move away from singularly-focused research and vote recommendations based on its house policy and shift to providing multiple perspectives that reflect the varied viewpoints of clients. While still under development, the spectrum of perspectives could range from one that leans toward management and others that reflect more governance fundamentals. Beginning in 2027, clients will be able to access any or all of these perspectives to inform their proxy voting decisions.
“Technology has advanced enough now to allow us to apply smart technologies and AI in particular to complex proxy voting processes,” said Mann. “With these tools, Glass Lewis is modernizing proxy voting practices, removing the perception of influence, and transforming proxy voting into a more strategic and client-driven experience.”
The abandonment of benchmark voting policies in favor of more bespoke voting advice could potentially complicate the proxy voting and engagement environment, as companies try to determine how investors will vote on specific proposals and director elections. At the same time, the technology-enabled move to more tailored voting advice could ultimately result in more moderate (and less extreme) voting policy outcomes. In any event, the move by Glass Lewis is big news for the proxy advisory business, as well as for companies and investors.
You can register to attend today’s conference online and receive access to the archive of yesterday’s program by visiting our online store or by calling us at 800-737-1271. Our conferences are bundled together into a single two-day event for registration and pricing, so your purchase will cover both events.
– How to Attend Online: Our conferences are hosted online through the RingCentral Events platform. When you register for the conferences, you’ll receive a registration confirmation email that will contain your personalized link. Just click on that link to be instantly directed to the event. The link is unique to you and cannot be shared with others. It bypasses the need for registered users to sign into RingCentral Events and brings you directly into your RingCentral Events account and into the event.
Once in the event, click the “Stage” button from the menu on the left of the webpage. In order to view the session currently playing on stage, you will need to press the play button on the video. If you need technical assistance, members of our team will be available within the platform and via email at info@ccrcorp.com to assist you throughout the conferences.
– Access to Archives & On-Demand CLE: Your registration includes access to the conference archives (including written transcripts!), which will be available until October 21, 2026 – but you’ll need your confirmation email to access them so be sure to retain it! One big reason to make sure you do that is that if you can’t attend the conferences live, you may earn on-demand CLE credit by viewing the archives. See these “CLE FAQs for Archived Conference Sessions (ON DEMAND)” for more information.
– Thanks to Our Sponsors! A huge “thank you” to our sponsors who have helped make these events possible. Our platinum sponsor for this year’s conferences is Goodwin, our gold sponsor is Ballard Spahr, our silver sponsors are Cooley, King & Spalding, Kirkland & Ellis, Latham & Watkins, Morrison Foerster, O’Melveny, Sidley, Troutman Pepper Locke, and Wilson Sonsini – and a special shoutout to our breakfast roundtable sponsors Cleary and Dragon GC. We are extremely grateful for the support of our sponsors!
I’m thrilled to be joined by so many of you in Las Vegas and virtually this week, beginning with our “Proxy Disclosure Conference” today and continuing with our “22nd Annual Executive Compensation Conference” tomorrow. The agendas for our conferences include 15 substantive panels over 2 days. Today’s programming includes these exciting panels:
If you can’t be here in person, you can still register to attend today’s program and tomorrow’s “22nd Annual Executive Compensation Conference” online by visiting our online store or by calling us at 800-737-1271. (And if you miss any panels, your registration includes access to the archives!) Our conferences are bundled together into a single two-day event for registration and pricing, so your purchase will cover both events.
– How to Attend Online: Our conferences are hosted online through the RingCentral Events platform. When you register for the conferences, you’ll receive a registration confirmation email that will contain your personalized link. Just click on that link to be instantly directed to the event. The link is unique to you and cannot be shared with others. It bypasses the need for registered users to sign into RingCentral Events and brings you directly into your RingCentral Events account and into the event.
Once in the event, click the “Stage” button from the menu on the left of the webpage. In order to view the session currently playing on stage, you will need to press the play button on the video. If you need technical assistance, members of our team will be available within the platform and via email at info@ccrcorp.com to assist you throughout the conferences.
– Access to Archives & On-Demand CLE: Your registration includes access to the conference archives (including written transcripts!), which will be available until October 21, 2026 – but you’ll need your confirmation email to access them so be sure to retain it! One big reason to make sure you do that is that if you can’t attend the conferences live, you may earn on-demand CLE credit by viewing the archives. See these “CLE FAQs for Archived Conference Sessions (ON DEMAND)” for more information.
– Thanks to Our Sponsors! A huge THANK YOU to our sponsors who have helped make these events possible. Our platinum sponsor for this year’s conferences is Goodwin, our gold sponsor is Ballard Spahr, our silver sponsors are Cooley, King & Spalding, Kirkland & Ellis, Latham & Watkins, Morrison Foerster, O’Melveny, Sidley, Troutman Pepper Locke, and Wilson Sonsini – and a special shoutout to our breakfast roundtable sponsors Cleary and Dragon GC. We are extremely grateful for the support of our sponsors!