On November 25, 2025, ISS Governance announced the release of its 2026 Benchmark Policy Updates, which will apply to shareholder meetings on or after February 1, 2026. Set forth below are key changes for U.S. companies. The full 2026 Benchmark Policy document and updated FAQs, which often provide additional details regarding the policy changes, are expected to be published and available on ISS’s website by mid-December.

1. Problematic Capital Structures—Unequal Voting Rights. ISS will continue to issue adverse vote recommendations for directors of companies with classes of common stock that carry unequal voting rights, subject to limited exceptions. Beginning in 2026, this policy will expand to include directors at companies with common or preferred stock that provides unequal voting rights. ISS noted that such structures are problematic regardless of whether the shares with superior voting rights are common or preferred.
   
   In connection with this update, ISS is adding two new exceptions to its policy. It will generally not issue an adverse vote recommendation 1) where the convertible preferred shares vote on an “as-converted” basis or 2) in situations where the enhanced voting rights are limited in duration and applicability (e.g., intended to overcome low voting turnout so that a specific non-controversial agenda item will be approved), and are voted in a way that mirrors the votes of the common shares.
   
   In addition to its current policy of recommending against proposals to create a new class of common stock, beginning in 2026, ISS will generally recommend against proposals to create a new class of preferred stock with superior voting rights, subject to the same two exceptions discussed above.
   
   
2. Executive Compensation.
   
   Pay-for-Performance Evaluation. ISS is revising its pay-for-performance evaluation to focus on a longer time horizon. The quantitative analysis that ISS uses to measure a company’s pay and performance alignment relative to the company’s ISS-developed peer group will now measure alignment between CEO pay and company performance over a five-year period (rather than a three-year period) and will analyze the multiple of the CEO’s total pay relative to the peer group median over both one- and three-year period (rather than just the most recent fiscal year). These changes are intended to better reflect sustained value creation and reduce the impact of short-term volatility or one-time events.
   
   ISS is also expanding its qualitative pay-for-performance analysis, which complements the quantitative analysis, to allow for greater flexibility in assessing the proportion of time-based to performance-based equity compensation when time-based equity awards include extended vesting and/or retention requirements that demonstrate a long-term focus. This change reflects evolving investor views on performance equity programs and the appropriate mix of time- and performance-based equity. Prior to this change, ISS considered a mix with a preponderance of time-based equity awards to be problematic; now, time-based equity with extended time horizons will be viewed positively if deemed sufficiently long-term in nature. The key to the impact of this change will be how long ISS requires the vesting/retention elements to last.
   
   Board/Compensation Committee Responsiveness. ISS is updating its approach to board and compensation committee responsiveness following low say-on-pay support. When support falls below 70 percent, ISS will continue to review factors such as engagement efforts and disclosure in assessing compensation committee and board responsiveness. Earlier this year, the SEC staff provided updated guidance on eligibility to use Schedule 13G and circumstances when a shareholder’s engagement with management on a particular topic could result in a loss of Schedule 13G eligibility. As a result of this guidance, institutional investors (who frequently rely on Schedule 13G) are exercising increased caution in their engagement. In light of the potential for a measured approach to engagement this proxy season, ISS has noted that it may be “more difficult for issuers to receive feedback after a low say-on-pay vote result.” Accordingly, ISS is updating its policy for situations where a company discloses meaningful engagement efforts but also states that it was unable to obtain specific feedback. Rather than viewing the absence of feedback negatively in these situations, ISS will assess company actions taken in response to the low say-on-pay vote as well as the company’s explanation as to why such actions are beneficial for shareholders.
   
   Non-Employee Director Pay. ISS is broadening its policy on high or otherwise problematic non-employee director pay and may now issue adverse recommendations in the first year of occurrence or when a pattern emerges across non-consecutive years (rather than requiring two or more consecutive years) without disclosure of a compelling rationale or other mitigating factors. According to ISS, practices that shareholders may find problematic include (but are not limited to) particularly large pay (e.g., exceeds that of the company’s executive officers or industry peers measured by index and GICS industry group, not company peers), performance awards, retirement benefits, excessive perquisites, or inadequate disclosure or lack of clear rationale in the proxy statement for unusual payments.
   
   Equity Plan Proposals. ISS is making certain updates to its Equity Plan Scorecard (EPSC) approach to evaluating equity plan proposals. ISS is adding a scored factor under the Plan Features pillar to assess whether a plan includes cash-denominated award limits for non-employee directors, which ISS says, “is considered best practice.” For 2026, this factor will only apply to the S&P 500 and Russell 3000 EPSC models. More importantly, ISS is adding a new negative overriding factor generally resulting in an “Against” recommendation if the plan lacks sufficient positive features under the Plan Features pillar, even if the proposal would otherwise pass the scorecard. As part of ISS’s rationale for this change, it notes that “numerous cases have been identified for plans evaluated under the” scorecard that received an overall passing score “despite receiving a very poor or zero Plan Features pillar score.” For 2026, this factor will apply to the S&P 500, Russell 3000, and non-Russell 3000 EPSC models.
3. Environmental and Social Shareholder Proposals. ISS is shifting from a “vote for” to a “vote case-by-case” approach on shareholder proposals relating to climate change and greenhouse gas emissions disclosures, diversity policy or initiatives and workforce diversity data (including EEO-1) disclosures, reports on company or company supplier labor and human rights standards, and political contributions disclosures. With respect to climate, diversity, and human rights proposals, ISS acknowledged the continued decline in shareholder support for these proposals, and with respect to diversity proposals, the changing regulatory landscape in the U.S.

For more information about ISS’s 2026 Benchmark Policy Updates or any related matter, please contact any member of the firm’s Public Company Representation or Employee Compensation and Benefits practice.