Glass Lewis final voting policy updates: Executive pay implications for the 2026 proxy season
Proxy advisor Glass Lewis released its final 2026 benchmark policy guidelines in early December with impacts for say-on-pay (SOP) and shareholder proposal vote recommendations. The updates affecting SOP are consistent with the quantitative pay-for-performance (P4P) methodology changes that Glass Lewis previewed earlier this year (see ISS and Glass Lewis gear up for 2026: both launch policy surveys, Glass Lewis previews methodology changes). The updates affecting shareholder proposal vote recommendations reflect recent SEC changes to the shareholder proposal process that make it easier for companies to exclude shareholder proposals. The final guidelines are effective for annual meetings held after Jan. 1, 2026.
Of note, the updates don’t reflect responses to the myriad of topics covered in the proxy advisor’s annual benchmark survey. This may be because Glass Lewis will stop offering standard benchmark guidelines in 2027. The proxy advisor may take those responses into account as it transitions clients to differentiated, client-specific voting frameworks. Meanwhile, Glass Lewis notes that its benchmark policy represents just one of its policy offerings.
Proxy advisor Institutional Shareholder Services (ISS) also updated its benchmark policies, effective for annual meetings held on or after Feb. 1, 2026 (see ISS final voting policy updates: Key implications for the 2026 proxy season).
Voting policy proposed updates
Pay-for-performance methodology
Glass Lewis is revising its proprietary P4P methodology.
Key changes. The P4P methodology will change as follows:
- Numeric quantitative scores ranging from 0 to 100 will replace the A to F letter grading system.
- Five concern levels ― ranging from “severe” to “negligible” ― will correspond to a 20-point range as follows:
- Severe concern: 0 to 20 points
- High concern: 21 to 40 points
- Medium concern: 41 to 60 points
- Low concern: 61 to 80 points
- Negligible concern: 81 to 100 points
Glass Lewis intends for the majority of companies to receive a score in ranges that indicate low or negligible concern.
- P4P evaluation period will be extended from three to five years. (ISS also extended its P4P evaluation period to five years.)
- New financial tests will include CEO compensation actually paid (CAP), as disclosed in the proxy pay-versus-performance table, vs total shareholder return (TSR) relative to peers and CEO short-term incentive (STI) payouts as a percent of target vs TSR relative to general market benchmarks.
- Qualitative assessment will cover non-specified “additional facets of compensation.”
- P4P tests will be performed only on companies with:
- Three (vs the current two) or more consecutive years of comparable compensation data;
- Three (vs the current two) or more consecutive years of comparable financial data, covering a minimum of four financial metrics, including TSR plus three metrics from among ROE, ROA, EPS, Revenue, OCF, TBV, and FFO; and
- At least 10 but not more than 15 industry and market cap peer companies (selected using Glass Lewis’ proprietary methodology) that meet the same pay and financial data requirements.
P4P tests. P4P scores will be determined based on the following six tests:
Test |
Comparator Group |
Description |
1 - Granted CEO pay vs TSR |
GL Peers |
Five-year weighted average (requires three years of data to perform test) |
2 - Granted CEO pay vs financial performance |
GL Peers |
Five-year weighted average (requires three years of consecutive data to perform test) with four-metric minimum. TSR, revenue growth, ROA, and ROE are standard; up to two additional metrics may be included, with EPS growth and operating cash flow growth most common |
3 - CEO STI payout as % of target vs TSR |
General market benchmarks |
Average of five one-year measurement periods |
4 - Total granted NEO pay (including CEO) vs financial performance |
GL Peers |
Five-year weighted average measurement period (requires three years of data to perform test) |
5 - CEO CAP vs TSR |
GL market cap peers |
Ratio of five-year aggregate CEO CAP and five-year cumulative TSR (each from PVP table) |
6 - Qualitative test |
N/A |
One-off awards; upward discretion exercised; fixed pay greater than variable pay; uncapped/undisclosed incentives; excessive maximum LTIP payout; short vesting period for LTI; non-disclosure of performance goals
|
- Performance measures (except ROA and ROE) are based on a weighted average of one-, two-, three-, four-, and five-year annualized growth rates.
- ROA and ROE are based on a weighted average of the five annual ROA and ROE figures.
- Sector-specific metrics are as follows:
- Banks/Financials/Mortgage REITs (excluding payment systems GICs): Annualized TBV per share and EPS growth
- Most equity REITs and specialized REITs (excluding timber REITs and communication tower REITs): FFO growth and operating cash flow growth
- All other sectors: EPS growth and operating cash flow growth
- In the case of multiple CEOs, test includes pay of all who served during the year, with cash prorated for time served in the role, equity for the role aggregated, and cash severance excluded.
How the tests are weighted and scored is proprietary and continues to be something of a “black box.” Companies that demonstrate a weaker P4P link are more likely to receive a negative SOP recommendation, but Glass Lewis takes a case-by-case approach that considers several qualitative factors that include, but aren’t limited to: overall incentive structure, trajectory of program and disclosed future changes, and the operational, economic and business context for the year in review.
For more information, see Glass Lewis’s Pay-for-Performance Methodology Overview.
Shareholder proposals
In light of recent changes to the shareholder proposal process that make it easier for companies to exclude shareholder proposals and largely take the SEC staff out of the business of issuing no-action letters, Glass Lewis has adjusted some of its language regarding its general approach to shareholder proposals. The proxy advisor will generally approach shareholder proposals with the basic premise that shareholders should be given an opportunity to vote on matters of material importance. But, given ongoing changes at the SEC and the prospect of additional changes to the staff’s shareholder proposal process, Glass Lewis may update the guidelines prior to or during the 2026 proxy season.
Evolution of proxy advisor and investor business models
The new Glass Lewis policies come as proxy advisors are facing significant pushback from the SEC, lawmakers, the executive branch, business groups and individual states. Partly in response to this, and to accommodate investors with different priorities, Glass Lewis is moving away from “one-size-fits-all” benchmark policies toward more consideration of individual investor priorities. The proxy advisor will stop offering standard benchmark guidelines in 2027 and begin to transition clients to differentiated, client-specific voting frameworks reflecting the clients’ individual investment philosophies and stewardship priorities. Investors will be able to choose from among four voting frameworks: management-aligned, governance fundamentals, active owner, and sustainability-focused.
Glass Lewis isn’t alone in making changes to its business model. Although ISS has retained its benchmark policies and updated them for 2026, it has also introduced two new governance research services (Gov360 and Custom Lens) that allow institutional investors to leverage governance data from its research and technology solutions arm (ISS STOXX) and tailor their voting decisions beyond standard benchmark recommendations. And major asset managers like BlackRock, Vanguard, and State Street are dividing their investment stewardship functions into two separate teams, each governed by distinct decision-makers, policies, and methodologies that could accommodate differing priorities on matters such as environmental and social issues.
All of these developments will offer companies more flexibility but will make it more challenging to presume shareholder support based solely on adherence to proxy advisor and institutional investor policies and will create a more complex and fragmented proxy season. For more information, see Evolving rules on proxy advisors, engagements and proposals shake up 2026 proxy season playbook.
is a Partner and Senior Legal Consultant in Mercer's Law & Regulatory Group (L&R) based in New York. She specializes in technical legal and regulatory issues affecting executive compensation and corporate governance. She focuses on SEC disclosure, tax, employment and change in control agreements, equity programs, and employee benefit issues that arise in the context of corporate transactions and initial public offerings.
is a Senior Legal Consultant in Mercer's Law & Regulatory Group (L&R) based in Washington DC. She provides expert analyses on a variety of US and Canadian compliance and policy matters, and advises clients on securities and corporate governance issues affecting executive pay in North America.
is a Parter and the Head of Mercer’s US & Canada Executive Rewards Practice. He advises US and Canadian companies’ Compensation Committees and senior leadership teams on a wide variety of executive compensation topics and Board of Director pay issues. In addition, he leads the go-to-market strategies, as well as the development of intellectual capital and technical solutions, for Mercer’s Executive Rewards Practice in the US and Canada.