The Advisors' Blog

As Liz shared yesterday, in three parts, on TheCorporateCounsel.net, ISS Governance published results from its annual global benchmark policy survey — part of the process for developing its annual voting policy updates — on Monday. As we shared when the survey was released, questions solicited input from investors and non-investors on non-executive director pay, time- vs. performance-based equity, say-on-pay responsiveness and the modification or removal of ESG metrics, among other things. Here’s a brief summary of some of the compensation-related survey results:

Non-executive director pay. The survey asked respondents to identify specific problematic practices in director pay that should warrant immediate concerns and potentially adverse ISS vote recommendations (even if only in one year). Investors chose:

– 34% – Inadequate disclosure or lack of clearly disclosed rationale in the proxy for unusual NED payments
– 32% – Excessive perquisites (such as travel), performance awards, stock option grants, or retirement benefits
– 33% – Particularly large NED pay magnitude or NED pay that exceeds that of executive officers

Among non-investors, 25% of their choices were for “No”, indicating that a quarter of this group does not believe that any of these problematic practices should immediately trigger an adverse vote recommendation.

Time- vs. performance-based equity. When asked if time-based equity structures are acceptable for part or all of executive long-term incentive awards, the results among investors were:

– 38% – Yes, but only for part of the awards; plans should provide a mix of time- and performance-based awards
– 31% – It depends. The adoption of time-based equity compensation with an extended time horizon may be acceptable for certain industries or due to specific factors disclosed by the company

When asked to provide views on a reasonable mix, investors’ responses did not highlight any significant preference. Non-investors supported “not exceed 50% of the awards” (30%) and “Time-based awards with a sufficiently long-term time horizon are not problematic and they can comprise either all or a majority part of long-term executive incentives” (30%).

In terms of what represents long-term vesting or retention periods to dispense with performance awards, all or in part:

– 46% of investors responded, “At least 5 years vesting and/or post-vesting retention requirement in aggregate (for example, 3 years vesting plus 2 years post-vesting retention)”
– 57% of non-investors responded, “At least 3 years vesting, without a further post-vesting retention period”

Say-on-pay responsiveness policy.

– 64% of investors and 88% of non-investors responded that, “The absence of disclosed shareholder feedback should not be viewed negatively if the company discloses that it attempted but was unable to obtain sufficient investor feedback”
– 80% of investors and 91% of non-investors responded, “Yes, pay program changes, when showing improvement in remuneration practices, can be considered responsive, even in the absence of disclosed shareholder feedback”

Modification or removal of ESG metrics. When asked how ISS should assess the removal of E&S or DEI-related metrics from in-flight awards:

– 73% of investors responded, “Continue with the current approach, whereby changes to in-flight awards are generally viewed negatively absent a compelling rationale”
– 76% of non-investor respondents preferred “The removal of E&S or DEI metrics from in-flight awards generally should not in and of itself be considered problematic absent other concerns”

In terms of next steps, ISS’s press release says:

ISS will over the coming weeks release key draft policy updates and open a public comment period for all interested market participants on certain proposed changes to its voting policies for next year. The open comment period is designed to elicit objective and specific feedback from investors, companies, and other market participants on implementing the proposed policy updates. Final policy updates are expected to be announced around late November and will take effect for shareholder meetings occurring on or after Feb. 1, 2026.

– Meredith Ervine