As part of their annual policy review cycles, Institutional Shareholder Services (“ISS”) and Glass Lewis & Co. (“Glass Lewis”) have released their compensation-related voting policy updates that will apply starting with the 2026 proxy season.  The updates to ISS’s Benchmark Policy can be found here, and the updates to Glass Lewis’ Benchmark Policy Guidelines can be found here. Below is a summary of the significant changes announced by ISS and Glass Lewis.

ISS BENCHMARK POLICY UPDATE

Extending Timeframe for Pay-for-Performance Evaluation.  ISS’s pay-for-performance quantitative analysis to assess pay for performance alignment will be extended to a five-year look back period from a three-year period for certain components of the analysis. Specifically, pay-for-performance analyses will consider: (i) the degree of alignment between a company’s annualized total shareholder return rank and its CEO’s annualized total pay rank within a peer group, measured over a five-year period, and (ii) the rankings of its CEO total pay and the company’s financial performance within a peer group, each measured over a five-year period.  In addition, the timeframe for evaluating the multiple of a CEO’s total pay relative to a company’s peer group median has been extended to not only cover the most recent fiscal year but to also cover a three-year look back period.

U.S. Time-Based Equity Awards with Long-Term Time Horizons. ISS announced that it would be taking a more favorable view of time-based equity awards with extended time horizons with respect to its pay-for-performance analysis. ISS indicated that an equity pay mix that consists primarily or entirely of time-based awards will not in itself raise significant concerns in its qualitative pay-for-performance evaluation, provided that the time-based award design utilizes a sufficiently long-term time horizon and time-based equity award designs that generally utilize vesting and/or share retention requirements of at least five years from the grant date will be viewed as a positive factor in qualitative pay-for performance evaluations. Notably, many public companies have CEO compensation programs that have a significant percentage of performance-based equity awards, oftentimes up to 50% of the equity award grant date fair value.  Accordingly, ISS’s revised approach may result in this percentage decreasing over time.  

Responsiveness to Shareholders/Low Support on Say-On-Pay Vote. Recognizing that a company’s shareholder outreach does not necessarily elicit feedback from its shareholders, ISS has increased its flexibility when evaluating company responses to say-on-pay proposals with less than 70% approval if the company disclosed meaningful engagement efforts, even where they do not result in specific feedback from shareholders.  In such circumstances, ISS will assess the company’s actions taken in response to the say-on-pay vote as well as the company’s explanation as to why such actions are beneficial for shareholders.

High Non-Employee Director Pay.  ISS may make adverse recommendations against board committee members who are responsible for approving non-employee director compensation after only one year if such non-employee director compensation practices are egregious.   Egregious non-employee director compensation practices may include performance awards, retirement benefits or problematic perquisites. Also, ISS clarified that it may make adverse recommendations against the same board committee members if there is a pattern of excessive non-employee director compensation, which may include an analysis of consecutive years or non-consecutive years.  

GLASS LEWIS POLICY GUIDELINES UPDATE

Pay-for-Performance Methodology.  Glass Lewis updated its pay-for-performance methodology, transitioning from a single letter grade of “A” through “F”, to a scorecard-based approach that consists of up to six tests.  The six tests are:

  • CEO granted pay vs. total shareholder return performance
  • CEO granted pay vs. financial performance
  • Short-term incentive payouts vs. total shareholder return performance
  • Named executive officer granted pay vs. financial performance
  • CEO compensation-actually-paid vs. total shareholder return and
  • Qualitative factors (e.g., one-time award grants, upward discretion utilized).

Companies will receive a rating for each test, which will be aggregated on a weighted basis to determine an overall score ranging from 0 to 100.  Glass Lewis indicated that the scoring will not be negatively impacted even if all the tests may not be able to be completed.

LOOKING FORWARD

The ISS updates are effective for shareholder meetings held on or after February 1, 2026, and Glass Lewis began applying its new guidelines on January 1, 2026.  In addition to updating its Benchmark Policy, ISS released a number of updates to its Executive Compensation FAQs and its Equity Compensation Plan FAQs. Proskauer’s Employee Benefits and Executive Compensation team regularly advises companies on best practices with respect to implementing executive compensation programs, including the potential impact of proxy advisor policies on a company.  Please contact a member of the team to assess whether these changes impact your company, and, if they do, what, if anything, should be done to address the impact.

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Photo of Jesse T. Foley Jesse T. Foley

Jesse T. Foley is a labor associate and a member of the Employee Benefits & Executive Compensation Group.

Jesse has a diverse practice advising multiemployer and single-employer clients on all aspects related to the legal compliance and tax qualification of ERISA-covered pension and…

Jesse T. Foley is a labor associate and a member of the Employee Benefits & Executive Compensation Group.

Jesse has a diverse practice advising multiemployer and single-employer clients on all aspects related to the legal compliance and tax qualification of ERISA-covered pension and welfare plans, including the treatment of such plans in corporate financings and transactions.

In his multiemployer practice, he represents a number of funds, counseling Boards of Trustees on issues such as healthcare compliance, cybersecurity, government investigations, benefit suspensions, special financial assistance, and withdrawal liability.

In addition, Jesse advises private, public, and not-for-profit employers on all aspects of their non-qualified executive compensation arrangements.  Jesse regularly provides technical and practical advice on the establishment, administration, and continued legal compliance of deferred compensation and supplemental employee retirement plans.  As part of his practice, Jesse routinely negotiates and drafts equity plans and awards, employment agreements, severance agreements, and other compensation arrangements.

Jesse earned his J.D. degree from the University of Southern California, where he was a Senior Editor of the Southern California Law Review.  Jesse also frequently contributes to Proskauer’s Compensation & Benefits Blog.

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Photo of David B. Teigman David B. Teigman

David Teigman is a partner in the Tax Department and a member of the Employee Benefits & Executive Compensation Group. David focuses his practice on executive compensation and benefit matters, principally in connection with mergers and acquisitions, securities offerings and senior executive employment…

David Teigman is a partner in the Tax Department and a member of the Employee Benefits & Executive Compensation Group. David focuses his practice on executive compensation and benefit matters, principally in connection with mergers and acquisitions, securities offerings and senior executive employment relationships.

David regularly counsels public and private companies on compensatory and benefit arrangements, such as equity-based incentives, cash-based incentives and employment, change-in-control, retention, separation and consulting agreements. He also advises on corporate governance, tax law and securities law related to employment matters.

A frequent author, David has published the following articles:

  • “Share Reserve and Other Limits in Public Company Equity Plans” (Practical Law)
  • “Roadmap to Providing Appropriate Incentives to Employees When Your Company is Going to be Sold” (The M&A Lawyer)
  • “Taxation of an Option Exercise When the Shares are Subject to a Substantial Risk of Forfeiture” (Practical Law)

David is often called upon by leading industry publications, including Agenda/Financial Times, Law360, Financier Worldwide and Modern Healthcare, for his perspective on executive compensation and benefit issues.

David has been recognized and ranked by various directories.  Most recently, Chambers and Partners included the following comments in David’s ranking:  “He has fantastic technical skills and an ability to explain things in a way that makes them comprehensible and easily digestible.” “He is very knowledgeable in the executive compensation space and does a good job representing clients.”

David received his J.D., cum laude, from the University of Buffalo, where he was the Editor-in-Chief of the Buffalo Law Review and the Executive Editor of the Public Interest Law Journal, and his B.S. from Cornell University.

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Photo of Andrea S. Rattner Andrea S. Rattner

Andrea S. Rattner is a partner in the Tax Department and member of the Employee Benefits & Executive Compensation Group. For more than 30 years, her practice has focused on a broad range of executive compensation and employee benefits matters, advising clients on…

Andrea S. Rattner is a partner in the Tax Department and member of the Employee Benefits & Executive Compensation Group. For more than 30 years, her practice has focused on a broad range of executive compensation and employee benefits matters, advising clients on an ongoing basis as well as in the context of corporate transactions and other transformative and unique situations. Her clients include public and private companies, boards of directors, compensation committees and senior executives in a broad range of industries. Andrea has been involved in Firm management for many years, having served as a member of the Executive Committee and a former chair of the Tax Department.

Andrea counsels clients with respect to the tax, securities, corporate governance, stock exchange, ERISA and other implications affecting executive compensation arrangements. Andrea regularly provides advice regarding equity arrangements (such as stock options, restricted stock, RSUs, LLC/partnership interests and phantom equity), employment agreements, change-in-control agreements and all other types of compensation arrangements (including incentive awards, SERPs, deferred compensation and “409A” covered and exempt arrangements).

She counsels clients on benefits and compensation matters arising in all types of corporate transactions, including mergers & acquisitions, spin-offs, restructurings, joint ventures, debt and equity offerings and bankruptcies. In numerous transactions, she has addressed the treatment of stock options and other equity awards, change-in-control and “golden parachute” tax issues, severance obligations and separation agreements, the negotiation of new employment agreements and other executive arrangements, retention and other bonus plans, benefit plan liabilities, COBRA, PBGC-related issues and post-closing benefit plan and compensation structures and integration.

Andrea also advises clients on compliance with ERISA, the Internal Revenue Code, and other laws affecting employee benefit plans, as well as plan design, administration, termination, fiduciary duty issues, prohibited transactions, qualification requirements and other matters concerning pension, profit-sharing, employee stock ownership, 401(k), and other types of plans. She has extensive experience with respect to the legal consequences relating to the use of employer stock in tax-qualified plans such as ESOPs, profit-sharing, stock bonus and pension plans.

Andrea has been lauded by various legal rankings directories, including Chambers USA and Legal 500, noting that her “depth of knowledge and involvement in this practice area, [including] the business and trends, is terrific.” She is also recognized for having an “excellent understanding of the business community” and for being “pro-active in keeping clients up to date.” She writes and lectures frequently on employee benefits and executive compensation matters and is a co-editor and chapter author of Executive Compensation (Law Journal Press). Since 1993, she has served as an adjunct professor on the faculty of Cornell University (New York State School of Industrial & Labor Relations-Management Programs). Andrea is also active in Proskauer’s relationship with the Women Corporate Directors (WCD), the only global membership organization of its kind focused on helping women obtain and succeed in board positions.

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