Institutional Shareholder Services (ISS) recently released its policy survey questionnaire, the first formal step in updating its voting policy framework for the 2027 proxy season. Each year, this survey gathers input from investors, issuers and other market participants on the direction ISS should take on a range of governance topics. The responses meaningfully shape the guidelines proxy advisors and institutional shareholders will apply when evaluating a company’s compensation practices the following spring.
This year’s questionnaire touches several areas, but executive compensation is, as usual, front and center. Below, we walk through five of the more consequential questions ISS is exploring and the landscape behind each one.
1. Discretionary Bonuses at Financial Services Companies
ISS’s quantitative pay-for-performance test compares CEO pay to total shareholder return, but its qualitative review separately flags plans that lean heavily on subjective or discretionary bonuses rather than pre-set formulas. The underlying view is that discretion weakens the visible link between pay and results.
Financial institutions have long pushed back on this framing. Since the 2008 financial crisis, “sound incentive compensation” guidance from banking regulators has actually discouraged rigid, formula-driven bonuses tied to short-term metrics, on the theory that those formulas can incentivize excessive risk-taking. Discretion, in this context, lets a compensation committee risk-adjust outcomes in ways a formula wouldn’t catch. The open question for ISS is whether discretion should remain a red flag industry-wide, or whether financial services warrants a carve-out given this regulatory tension.
2. Disclosure as a Mitigant
If discretion isn’t going away, the fallback is transparency about how it was used. More robust disclosure of the specific factors a committee weighed, and why actual payouts differed from formulaic outcomes, doesn’t eliminate ISS’s qualitative concern outright. But it could give ISS and investors a better basis for judging whether discretion was exercised reasonably rather than applied as a rubber stamp. Expect this to be a continued area of emphasis in CD&A drafting regardless of how ISS ultimately lands on the broader discretion question.
3. Signaling Concerns Without a Say-on-Pay Vote
Emerging Growth Companies, and in limited cases smaller reporting companies, can currently skip mandatory say-on-pay votes. That exemption pool may be about to get much larger: the SEC’s May 2026 filer status proposal would consolidate filer categories and extend scaled accommodations, historically reserved for smaller and emerging issuers, to an estimated 81% of reporting companies. If adopted, far more companies could qualify for exemptions like this one.
Without a say-on-pay vote to serve as an outlet for shareholder displeasure, ISS needs an alternative lever, typically a recommended “against” vote on compensation committee members. That raises two open sub-questions: should ISS target the full committee or just the chair, and what vote result should count as “low enough” to trigger ISS’s responsiveness policy, which requires a board to explain or respond to opposition. Director elections normally use a 50% majority-support trigger, while say-on-pay uses roughly 70%. Since a committee-member vote used as a say-on-pay proxy isn’t really an ordinary director election, it remains unsettled which benchmark should apply.
4. Withholding Forward-Looking LTI Targets for "Competitive Harm"
Companies sometimes omit specific forward-looking long-term incentive targets, such as three-year revenue or margin goals, from proxy disclosure, arguing that revealing them would tip off competitors to strategic plans. This mirrors trade-secret and confidential-treatment arguments used elsewhere in securities disclosure.
Investors and ISS are often skeptical of this rationale, since it can also be used to obscure whether targets are rigorous or set conservatively enough to all but guarantee payout. At its core, this question is about where to draw the line between legitimate competitive sensitivity and disclosure avoidance, and ISS’s survey responses here will help clarify how much benefit of the doubt companies should expect to receive going forward.
5. Relative vs. Absolute Metrics
The competitive-harm argument tends to be weaker for relative metrics, such as total shareholder return measured against a peer index, than for absolute ones. A target of “beat the peer median” doesn’t reveal company-specific budget or strategic detail the way an absolute target, such as a specific revenue figure by a given year, would. ISS is asking whether non-disclosure should draw more skepticism when the underlying metric is relative rather than absolute. For companies currently withholding target detail on competitive-harm grounds, this is worth watching closely, since it could shift the disclosure calculus differently depending on metric design.
What This Means for Compensation Committees
None of these questions have settled answers yet, and that’s the point of a policy survey. ISS is testing the market’s appetite before finalizing 2027 guidelines. But the themes are consistent with where governance scrutiny has been heading for several proxy seasons now: more pressure on discretion-heavy pay decisions, continued erosion of exemptions that let companies avoid direct shareholder feedback, and persistent tension between disclosure and competitive sensitivity.
Compensation committees don’t need to have a position on every question above, but they should be aware that ISS’s eventual policy updates, whichever way they land, will affect how pay decisions are evaluated next spring. Companies that already lean on discretionary bonus structures, rely on say-on-pay exemptions, or withhold forward-looking LTI targets for competitive reasons are the most likely to feel the effects of whatever ISS decides.
The comment period on this survey gives issuers, investors and advisors a real opportunity to shape the outcome rather than simply react to it. Companies with a stake in these questions should consider weighing in directly, raising it during shareholder engagement sessions, and should use the next several months to pressure-test their own disclosure practices against where the guidance appears to be heading.
Frequently Asked Questions
It’s the annual mechanism ISS uses to gather input from investors, issuers and advisors before setting its benchmark voting policies for the coming proxy season. Responses to this year’s questionnaire will shape how ISS evaluates executive pay decisions, disclosure practices and board accountability heading into 2027.
No. The questionnaire is a research step, not a rule change. ISS typically reviews responses over the summer and fall and publishes finalized policy updates later in the year, ahead of the 2027 proxy season.
Financial services companies with discretion-heavy bonus plans, companies that currently rely on say-on-pay exemptions (or expect to qualify under the SEC’s proposed filer status changes), and companies withholding forward-looking LTI targets on competitive-harm grounds all have something at stake in how ISS ultimately lands.
Yes. ISS’s survey and related comment periods are open to issuers, investors and advisors, and engaging directly is one of the few chances to shape the guidance before it’s finalized rather than simply adapting to it after the fact.
We help clients pressure-test current pay and disclosure practices against where ISS and investor policy appear to be heading, and can advise on messaging for shareholder engagement conversations. Reach out below if you’d like to talk through your specific situation.