ISS & Glass Lewis 2026 Proxy Policy Updates

ISS and Glass Lewis have issued their 2026 proxy voting policy updates. For any public company currently preparing its proxy statement, several of these changes are not incremental — they directly alter how compensation decisions, board composition, and governance structures will be scored this season.

Below is a direct comparison of what changed between 2025 and 2026, and what each change means for your company right now.

Pay-for-performance: the evaluation window has doubled in length

2025: ISS tightened its qualitative scrutiny of performance equity design. Companies that showed quantitative pay misalignment faced greater pressure to explain their equity structures and disclosure in the proxy. The message was clear: bad numbers plus poor narrative equals a negative recommendation.

2026: ISS has extended its primary pay-for-performance evaluation window from three years to five. The Relative Degree of Alignment, Multiple of Median, and Financial Performance Assessment tests now all assess CEO compensation and company performance over a five-year horizon rather than three.

What this means for your company: If your company awarded elevated compensation packages in 2021 or 2022 — years of strong equity markets and aggressive pay — and your TSR has underperformed since, that period is now inside the scoring window. You cannot model your 2026 ISS outcome using only recent data. Finance and IR teams need to run the five-year pay-and-TSR trajectory now, before the proxy is filed, not after an adverse recommendation arrives. Companies that prepared only for last year's three-year framework are materially underestimating their exposure.

Time-based equity: the rules changed — but so did the disclosure requirement

2025: ISS signalled it was evaluating whether to give more credit to extended time-based vesting structures, following investor feedback that heavy performance-vesting designs were becoming complex and less effective. ISS explicitly flagged this as a potential 2026 policy change.

2026: That change is now in effect. ISS will give qualitative credit to time-based equity awards that carry extended vesting schedules or meaningful stock retention requirements — even where they make up the majority of the long-term incentive mix. Previously, a time-heavy equity structure was a qualitative red flag.

What this means for your company: If your compensation committee shifted toward time-based vesting in 2024 or 2025, that decision no longer automatically creates a qualitative concern — but only if your proxy explains it. The rationale for the vesting structure, the retention requirements, and the link to long-term alignment all need to be in the CD&A. The policy change creates flexibility; the disclosure requirement is what activates it. Companies that have restructured their equity mix but have not updated their proxy narrative accordingly are still exposed. Note also: this flexibility does not apply to special or one-time awards — those should remain predominantly performance-conditioned.

Say-on-pay responsiveness: the engagement standard has shifted

2025: Glass Lewis introduced a formal requirement for boards to engage with shareholders and provide meaningful disclosure when any shareholder proposal receives more than 30% support — even short of a majority. Both firms maintained that majority-supported proposals required explicit board action or explanation.

2026: ISS adjusted its responsiveness framework in a direction that provides more room for smaller and mid-cap companies. Under the prior policy, receiving less than 70% say-on-pay support in one year triggered near-automatic scrutiny the following year if the company could not demonstrate that engagement with investors had produced specific feedback. In 2026, ISS will now accept a company's documented effort to engage — even if investors declined meetings or gave no specific response — provided the company made substantive pay programme changes and disclosed a credible rationale.

What this means for your company: If your say-on-pay vote came in below 70% in 2025, you are not automatically facing an adverse recommendation in 2026 simply because large institutional holders did not respond to your outreach. What matters now is that you documented the effort, made genuine programme changes, and disclosed both in the proxy. For companies without dedicated institutional IR infrastructure — a common reality for smaller public companies — this is a meaningful shift away from a process standard toward a substance standard.

Board diversity: automatic negative recommendations have been suspended

2025: Both ISS and Glass Lewis maintained diversity-based voting policies — generally recommending votes against nominating committee chairs at companies that lacked gender or racial/ethnic diversity on the board.

2026: ISS has indefinitely suspended the use of board gender and racial/ethnic diversity as a factor in director election recommendations. Glass Lewis has similarly moved away from formulaic diversity triggers, treating diversity as one of multiple governance considerations rather than a standalone basis for a negative recommendation.

What this means for your company: If your board faced negative recommendations in prior seasons on diversity grounds, that specific trigger is gone for 2026. Both firms continue to evaluate board composition qualitatively — this is not a signal to deprioritise diversity — but the automatic recommendation against the nominating committee chair based on composition alone has been suspended. Boards that were previously at risk of losing a director vote solely on this basis have meaningful relief this cycle.

Glass Lewis replaced its pay grading system entirely

2025: Glass Lewis retained its A-to-F letter grade for pay-for-performance evaluation — a single grade, with limited transparency into which inputs drove the outcome.

2026: Glass Lewis has replaced it with a numerical scorecard from 0 to 100 across six weighted tests: granted CEO pay versus TSR, granted CEO pay versus financial performance, short-term incentive payouts versus TSR, total NEO pay versus financial performance, compensation-actually-paid versus TSR, and qualitative factors.

What this means for your company: You can now see exactly which of the six tests is driving a concern rather than receiving a single opaque grade. If your company scores well on TSR alignment but poorly on short-term payout levels, the scorecard shows that. Compensation committees and their advisors can now target proxy disclosure at the specific metrics generating concern. Companies that previously received poor Glass Lewis grades without clear explanation should treat the new scorecard as an opportunity to identify and address the root cause before the proxy is finalised.

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