The Advisors' Blog

This recent Pay Governance memo shares an observation about how ISS’s say-on-pay recommendations in the 2025 proxy season differed from past trends:

ISS quantitative P4P test results have historically been a reliable predictor of an ISS “against” SOP recommendation. However, in 2025, we observed strong quantitative P4P results for companies receiving opposition from ISS on SOP […] [I]n 2025, 73% of S&P 500 companies that received an “against” SOP recommendation from ISS scored “low” concern on the primary RDA test. In other words, the majority of S&P 500 companies opposed by ISS on SOP demonstrated alignment between CEO pay and TSR relative to ISS-defined peers. Further, nearly half of S&P 500 companies (48%) received an overall “low” concern when incorporating the other quantitative P4P tests.

This suggests that qualitative factors played an outsized role in ISS’s 2025 say-on-pay analyses, so the tip here is not to ignore those even if you expect the quantitative analysis to come out OK.

Among S&P 500 companies receiving ISS SOP opposition in 2025, the top three areas of ISS criticism within its qualitative review were related to the use of non-standard pay elements, such as special awards, high-value security benefits, and severance payments for voluntary separation.

Looking at this proxy season, the memo points to the lengthened timeframes for the primary quantitative analysis effective for the 2026 proxy season. It says that this change may complicate things for some companies, especially those with significant one-time awards.

For companies that demonstrated recent strong P4P alignment, concern levels could be elevated by the longer lookback periods for pay and performance, and vice versa. The extended time period also means that one-time awards will be included in these calculations longer, potentially raising ISS’s concern levels for RDA and MOM.

It’s worth noting that ISS doesn’t expect this shift to drastically change the number of companies that receive an “adverse” recommendation, although it may change which companies receive one. ISS’s Marc Goldstein addressed this briefly during our “ISS Policy Updates and Key Issues for 2026” Webcast on TheCorporateCounsel.net. He shared:

We do not anticipate that the number of adverse recommendations will be materially impacted. This isn’t a way to increase the number of adverse recommendations or decrease it. It will potentially result in different companies receiving adverse recommendations, but the intention isn’t to have a radically different number of adverse recommendations in either direction.

I’ll say it just because it may not be obvious, but the quantitative screen is always just the first step in the analysis. If the concern level is elevated, then we do a deep dive in a qualitative review examining the features of the pay program in detail.

– Meredith Ervine