Institutional Shareholder Services (ISS) continues to influence shareholder voting outcomes on executive compensation, director elections, equity plans, shareholder rights, and governance practices. While ISS recommendations are not binding, they remain a meaningful input for many institutional investors and can materially affect voting results, especially where investors rely on ISS research or apply policies aligned with ISS benchmark positions.
When faced with an ISS no-vote or withhold recommendation, boards should respond with proactive engagement, strong disclosure, shareholder alignment, and disciplined governance oversight.
ISS Influence on Voting Outcomes: Still Significant, but Evolving
Glass Lewis and Institutional Shareholder Services (ISS) have long shaped proxy voting outcomes and remain influential in director elections, say-on-pay votes, equity plan approvals, shareholder proposals, and contested matters.
ISS influence is no longer purely mechanical. Large institutional investors increasingly apply their own voting policies, engage directly with issuers, and may deviate from proxy advisor recommendations when company-specific facts support a different conclusion. For many companies, institutional holders still account for a large share of votes, making ISS recommendations particularly relevant when ownership is concentrated among investors that use ISS research as an input.
An ISS against or withhold recommendation can create substantial voting pressure, but outcomes are not predetermined. Impact depends on shareholder composition, the subject of the recommendation, prior engagement, the quality of disclosure, and whether boards can credibly demonstrate responsiveness to investor concerns.
Six 2026 ISS Trends Boards Need to Watch
ISS’s 2026 benchmark policy updates are effective for shareholder meetings held on or after Feb. 1, 2026, with a focus on compensation design, long-term alignment, capital structure, responsiveness, and shareholder proposal analysis.
Greater Emphasis on Long-Term Pay-for-Performance Alignment
ISS will evaluate chief executive officer (CEO) pay alignment against company performance and total shareholder return (TSR) over five years, while also assessing CEO pay relative to peer median over one-year and three-year periods. This places greater weight on sustained value creation and reduces the impact of short-term volatility. Compensation committees should ensure the Compensation Discussion and Analysis (CD&A) connects pay decisions to strategy, shareholder returns, financial performance, and capital allocation priorities.
More Flexible Treatment of Time-Based Equity Awards
ISS has updated its approach to time-based equity and is taking a more flexible qualitative approach. It may view long-term awards favorably when they include meaningful vesting or post-vesting holding periods. This is relevant for companies using restricted stock or restricted stock units (RSUs) as part of a retention or long-term ownership strategy, though short vesting periods, weak holding requirements, or limited performance linkage may still draw scrutiny.
Increased Scrutiny of Responsiveness After Low Say-on-Pay Support
ISS focuses on board responsiveness when prior say-on-pay support falls below 70% of votes cast. It evaluates the quality of investor engagement, whether meaningful changes were made, and whether recent developments explain prior outcomes. Companies should disclose investor outreach, feedback themes, committee deliberations, and changes made, or explain why changes were not made.
Continued Focus on Problematic Director Compensation
ISS may recommend against directors responsible for non-employee director pay when excessive or problematic compensation patterns appear, including across non-consecutive years. Egregious arrangements may draw scrutiny even in the first year. Boards should review director compensation for market competitiveness and defensibility and explain outlier structures.
Heightened Attention to Unequal Voting Rights and Capital Structure
ISS has harmonized its approach to unequal voting rights and will generally recommend against directors at companies with multi-class capital structures that limit shareholder voting rights, subject to limited exceptions. Boards should assess sunset provisions, conversion mechanics, and clearly explain the business rationale and shareholder protections.
Shareholder Proposals: Lower Volume, More Governance Focus
The 2025 proxy season saw fewer shareholder proposals, particularly environmental and social proposals, while governance proposals continued to receive majority support. For 2026, ISS is taking a more case-by-case approach to certain environmental and social matters, but governance fundamentals, including shareholder rights, board accountability, responsiveness, capital structure, and compensation alignment, remain central to voting outcomes.
Current External Factors Affecting ISS Influence
The proxy advisory landscape is being shaped by political, legal, and regulatory scrutiny. Federal and state actors continue to examine proxy advisor influence, with ongoing investigations, litigation, and potential U.S. Securities and Exchange Commission (SEC) review.
These developments may affect how proxy advisors operate or how institutional investors use their recommendations. For the 2026 proxy season, boards should assume ISS remains highly relevant and focus on where its recommendations are likely to matter most and where direct investor engagement may be more effective.
Strategies for Boards Facing ISS No-Vote Recommendations
Engage Early and Proactively
Boards should engage early with ISS and Glass Lewis to understand concerns and address factual inaccuracies before recommendations are finalized. Ongoing outreach helps identify recurring issues before they escalate.
Prioritize the Shareholders Who Can Be Influenced
Boards should understand which investors rely on ISS and which apply independent policies so engagement efforts can be targeted effectively.
Strengthen the Compensation Narrative
Given ISS’s focus on long-term alignment, the CD&A should clearly explain how compensation outcomes support sustained shareholder value, including vesting, holding requirements, and ownership expectations.
Demonstrate Responsiveness Through Action and Disclosure
If prior support was low, boards should show how they responded through investor outreach, committee deliberation, and resulting changes.
Review Governance Structures Before They Become Voting Issues
Boards should evaluate whether voting rights structures, board classifications, or equity plan provisions could trigger ISS concern and address them proactively.
Use Proxy Solicitation Strategically
When a negative ISS recommendation is likely or issued, boards should use targeted outreach to identify voting risk, correct misunderstandings, and communicate the board’s rationale clearly and credibly.
Strengthen Your Strategy Before Proxy Season Begins
Connect with a CBIZ advisor to spot voting risks early, sharpen your message, and help your board respond with clarity.
Disclaimer:
Navigating ISS no-vote recommendations requires boards to adopt a proactive, strategic, and investor-informed approach. ISS remains influential, but its impact depends on shareholder base composition, the strength of the company’s disclosure, the board’s responsiveness, and the credibility of the company’s governance and compensation rationale.
For the 2026 proxy season, boards should pay particular attention to long-term pay-for-performance alignment, time-based equity design, say-on-pay responsiveness, non-employee director compensation, unequal voting rights, and shareholder proposal trends. Companies that engage early, disclose clearly, demonstrate accountability, and align governance practices with shareholder interests will be better positioned to mitigate the impact of adverse recommendations and secure shareholder support.
Frequently Asked Questions
The first step is to understand exactly what drove the recommendation and how your largest shareholders are likely to respond. From there, the board should focus on the issues that can still influence the vote, such as disclosure, investor outreach, and a clear explanation of the board’s rationale.
It can carry real weight, but it does not decide the outcome on its own. The impact depends on your shareholder base, the issue on the ballot, your past engagement with investors, and whether the company has made a credible case for its position.
Boards can lower risk by reviewing compensation and governance practices early, identifying potential pressure points, and improving proxy disclosure before concerns surface. Early shareholder engagement also helps boards understand where investors may push back and where the company needs a stronger story.
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