& Securities

Institutional Shareholder Services (ISS) has released results of its annual Global Benchmark Policy Survey (available here), which for U.S. companies, provide perspectives on board matters, governance and risk oversight, shareholder proposals, shareholder rights and executive compensation. ISS received 248 responses to the survey, which, like last year, reflected a decline in the response rate across the two main categories of respondents. Overall, 165 investors (primarily comprised of asset managers) and 83 non-investors (primarily comprised of public companies) provided responses, a decline from 199 investor and 126 non-investor responses to the previous survey.

The survey results are expected to inform policy changes for the upcoming 2026 proxy season. ISS expects to release draft policy updates based on these results in the coming weeks, and, after a public comment period, to announce final policy updates around late November. The final policies will be effective for annual shareholder meetings occurring on or after February 1, 2026.

Highlights of the survey results that may inform changes to ISS’s policies for 2026 include the following:

Governance and Risk Oversight

• Board Diversity and DEI (U.S.). In light of the fragmented political landscape and following ISS suspending its consideration of gender, racial and/or ethnic diversity when evaluating recommendations for director elections, ISS asked how respondents best describe their current approaches to board diversity and DEI matters generally. Investor and non-investor approaches largely differed. Most investor respondents (29%) aligned with the view that they continue to remain focused on the importance of board, executive and workforce diversity, including diversity targets, and expect most U.S. companies to disclose their approach to diversity-related metrics of their boards and other DEI matters, and another 24% of investors noted that DEI practices have evolved, but how companies assess risks and opportunities associated with DEI (i.e., scaling back or maintaining programs) is helpful. Most non-investor respondents (34%) noted that they either no longer or never had numerical board or executive diversity targets, but expect U.S. companies to continue to have a mix of characteristics comparable to market norms and company business needs. Just over 20% of both investor and non-investor respondents indicated that shareholder proposals pertaining to DEI topics have become more complex and should be considered on a case-by-case basis.
  
• Artificial Intelligence (All Countries). In light of increasing shareholder interest in the opportunities and challenges posed by AI, ISS asked respondents a series of questions concerning AI-related risk management. When queried on whether companies should utilize a global framework (e.g., OECD AI Principles, NIST AI RMF), non-investors predominantly (84%) believed that relying on such frameworks was immature, while 58% of investor respondents conversely believed that it would be timely for companies engaging with AI to utilize such frameworks. With regards to a company’s public disclosure board oversight of AI-risk, both investor and non-investor respondents (54% and 73% respectively) believed that AI-risk oversight should be publicly shared only in cases where AI already played a significant role in the business or strategy. Similarly, respondents were asked the extent to which a board’s public disclosure of AI oversight was indicative of the company’s general understanding of AI-related issues and risks.

• Other Risk Disclosures (All Countries). Respondents were additionally asked on how important they felt it was for companies to disclose risks relating to biodiversity, cybersecurity and human rights. A significant percentage of investors thought that disclosures related to biodiversity, cybersecurity, and human rights risks were very important (54%, 79% and 73% respectively) while a significant amount of non-investors (43%) thought that disclosure of biodiversity risk was not important, while 51% of non-investors rated cybersecurity risk disclosure as being very important and non-investors’ sentiments on the importance of human rights-related disclosures were scattered.

Board Matters

• Independent Board Chair (U.S.). ISS asked U.S. respondents for their views on independent board chair proposals in light of their continued popularity. Investor respondents were generally split, with 43% of such respondents indicating that an independent board chair is the best way to ensure robust oversight for shareholders and that shareholder proposals at companies without a commitment to independent oversight are understandable, while 38% noted that an independent board chair was generally good, but exceptions may be appropriate (and should be disclosed). In contrast, a majority of non-investor respondents (51%) preferred that a board have the flexibility to determine its own leadership structure.
  
• Director Overboarding (All Countries).
  • Non-Executive Directors. Respondents had mixed opinions about a preferred limit on board seats for non-executive directors. Around a quarter of respondents (26% of investors and 19% of non-investors) responded that five public company board seats (current ISS limit) was an appropriate maximum limit, while a comparable-sized group (25% of investors and 22% of non-investors) believed four total public company board seats constituted an appropriate limit. Over a third of non-investor respondents (38%) and only 9% of investor respondents believed no limit was necessary and preferred that the board determine what constituted an appropriate limitation for its non-executive directors.
    
  • CEOs. With respect to CEOs, more than a majority of investor respondents (55%) and a third of non-investor respondents (34%) believed that one public company board seat in addition where the director serves as CEO (current ISS policy) was an appropriate maximum limit. Most non-investors (39%) indicated that no limits should be imposed CEOs in favor of board discretion. ISS further asked respondents to consider whether it was appropriate for a CEO to hold a board chair position at a public company outside the company’s group, to which the vast majority of investor respondents (77%) did not believe it was appropriate for a CEO to be the board chair of an outside public company, while non-investor views varied.

Shareholder Rights

• Multi-Class Capital Structures (All Countries). ISS’s current policy on multi-class capital structures generally considers whether a company has two or more classes of common stock with different voting entitlements, but does not consider “non-common” shares that may have superior voting rights to common stock. With this in mind, ISS asked respondents to consider whether “non-common” shares should be evaluated in the same manner as common shares that have more than one vote per share. The vast majority of investor respondents (71%) noted that “non-common” shares should be evaluated similarly to such common shares, while a majority of non-investors (62%) disagreed, suggesting continued investor skepticism toward structures that concentrate control through super‑voting rights outside common stock, with non-investor respondents more inclined to preserve flexibility.

• Shareholder Proposals – Burden of Proof (U.S.). ISS asked respondents for feedback about what circumstances would warrant the ability for a proponent to provide a detailed company-specific case for a shareholder proposal. For the most part, respondents (43% of investors and 60% of non-investors) generally preferred that proponents provide detailed and company specific proposals, while a smaller group of respondents (24% of investors and 14% of non-investors) noted that a detailed proposal was less important, but warranted if the proposal required action beyond disclosure by a company.

• Written Consent (U.S.). Considering that the right to act by written consent is rarely used by institutional investors, and predominantly exercised by controlling shareholders at controlled companies, ISS asked respondents for their views on the right to take action by written consent. The majority of investor respondents (57%) expressed a strong preference for the ability to act by written consent at non-controlled companies. Conversely, almost half of non-investor respondents (49%) expressed a preference against written consent rights at non-controlled companies and noted that such rights were unlikely to be used in a manner that benefits minority shareholders. About a third of all respondents (31% of non-investors and 34% of investors) noted that their preference for written consent rights depends on the circumstances and highlighted that a robust right to call a special meeting generally deemed the right to written consent unnecessary.

Executive Compensation

• Non-Executive Director Pay (U.S.). ISS has asked respondents to identify non-executive director pay practices that would warrant immediate concern for investors, even if only observed within a one-year period. About a third of investors generally identified the following pay practices as problematic and warranting attention within a one-year period: (1) inadequate disclosure or lack of clearly disclosed rationale in the proxy for unusual payments (34%); (2) excessive perquisites (such as travel), performance awards, stock option grants, or retirement benefits (32%); and (3) particularly large pay magnitude or pay that exceeds that of executive officers (33%). While approximately 25% of non-investor respondents did not believe any problematic practices identified by ISS should immediately trigger an adverse vote recommendation, nearly a third of respondents (31%) identified inadequate disclosure or lack of clearly disclosed rationale in the proxy for unusual payments as a problematic pay practice meriting an adverse vote recommendation.

• Time-Based vs. Performance-Based Long-Term Equity Incentives (All Countries). In response to questions about whether long-term equity awards should be limited or even replaced entirely by plans consisting of time-based equity incentives because of the complexity, cost or lack of rigor, most investors are still looking for a balanced incentive program with both time and performance-based awards. About a third of investor respondents (38%) and almost half of non-investor respondents (45%) preferred a mix of time- and performance-based equity awards, while around a third of investor respondents (31%) noted that the appropriate mix of time-based equity compensation would depend on the circumstances of the company. With regard to what constituted a reasonable mix of time- and performance-based awards, investors had no significant preference. ISS further asked U.S. respondents their opinion on what constituted an appropriate long-term scheme to eliminate performance requirements for executive long-term executive awards. The most popular response from investor respondents (31%) specified a three-year vesting plus at least a two year post vesting retention requirement, while 21% of investors expressed that equity awards should always include performance conditions regardless of the length of vesting. A quarter of investors and non-investors considered a period of five years to be a sufficiently long term.

• Say-On-Pay Responsiveness Policy (U.S.). In light of recent SEC guidance that could potentially deter institutional investors from engaging with companies or providing feedback, ISS has noted that institutional investors may halt or limit providing feedback on compensation issues, which may limit a company’s ability to learn and ultimately disclose shareholder concerns leading to a low say-on-pay vote result. With this trend in mind, ISS asked respondents how, in the context of say-on-pay responsiveness, ISS should view a company’s disclosure that they were unable to obtain shareholder feedback after attempting to engage with investors. Generally, both non-investor and investor respondents (88% and 64% respectively) displayed a preference that the absence of such feedback should not be viewed negatively if the company requested, but was unable to obtain, sufficient investor feedback.
  
• Modification or Removal of ESG/DEI Metrics for In-Flight Awards (U.S., Canada). When asked their view on how ISS should evaluate the removal of environmental and social (E&S) or diversity, equity and inclusion (DEI) from in-flight awards in light of the current political environment, investor and non-investor views significantly diverged. The vast majority of investor respondents (73%) expressed that ISS should continue to view such changes negatively unless a compelling rationale is provided, while most non-investors (76%) believed that the removal of such metrics from in-flight awards should not in itself be considered problematic.