VanEckPrivateGrowthFundFormN-2(October2026)

United States


	GLASS LEWIS

2026 Benchmark Policy Guidelines

www.glasslewis.com


2026 Benchmark Policy Guidelines — United States	2

Table of Contents

Guidelines Introduction7

Summary of Changes for 20267

Clarifying Amendments8

Majority Vote for Election of Directors8

Amendments to the Certificate of Incorporation and/or Bylaws8

Supermajority Vote Requirements8

General Approach to Shareholder Proposals8

A Board of Directors that Serves Shareholder Interest10

Election of Directors10

Independence10

Committee Independence13

Independent Chair14

Performance15

Board Responsiveness16

Board Responsiveness to Shareholder Proposals17

The Role of a Committee Chair18

Audit Committees and Performance18

Standards for Assessing the Audit Committee19

Material Weaknesses21

Compensation Committee Performance22

Nominating and Governance Committee Performance24

Board-Level Risk Management Oversight28

Board Oversight of Environmental and Social Issues28

Board Oversight of Technology29

Board Accountability for Environmental and Social Performance31

Director Commitments32

Other Considerations33

Controlled Companies35

Significant Shareholders36

Governance Following an IPO, Spin-Off, or Direct Listing36

Governance Following a Business Combination with a Special Purpose Acquisition Company37


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Dual-Listed or Foreign-Incorporated Companies38

OTC-listed Companies38

Mutual Fund Boards39

Declassified Boards40

Board Composition and Refreshment41

Board Diversity42

Board Gender Diversity42

Board Underrepresented Community Diversity43

State Laws on Diversity43

Disclosure of Director Diversity and Skills43

Proxy Access44

Majority Vote for Election of Directors44

The Majority Vote Standard44

The Plurality Vote Standard45

Conflicting and Excluded Proposals45

Transparency and Integrity in Financial Reporting48

Auditor Ratification48

Voting Recommendations on Auditor Ratification49

Pension Accounting Issues50

The Link Between Compensation and Performance51

Advisory Vote on Executive Compensation (Say-on-Pay)51

Say-on-Pay Voting Recommendations52

Company Responsiveness54

Pay for Performance54

Short-Term Incentives56

Long-Term Incentives57

Grants of Front-Loaded Awards58

Linking Executive Pay to Environmental and Social Criteria59

One-Time Awards60

Contractual Payments and Arrangements60

Sign-on Awards and Severance Benefits61

Change in Control61


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Excise Tax Gross-ups61

Amended Employment Agreements62

Recoupment Provisions (Clawbacks)62

Hedging of Stock63

Pledging of Stock63

Executive Ownership Guidelines64

Compensation Consultant Independence64

CEO Pay Ratio64

Frequency of Say-on-Pay65

Vote on Golden Parachute Arrangements65

Equity-Based Compensation Proposals65

Option Exchanges and Repricing67

Option Backdating, Spring-Loading and Bullet-Dodging68

Director Compensation Plans69

Employee Stock Purchase Plans69

Executive Compensation Tax Deductibility — Amendment to IRC 162(M)70

Governance Structure and the Shareholder Franchise71

Amendments to the Certificate of Incorporation and/or Bylaws71

Anti-Takeover Measures71

Poison Pills (Shareholder Rights Plans)71

NOL Poison Pills72

Fair Price Provisions73

Control Share Statutes74

Quorum Requirements74

Director and Officer Indemnification75

Officer Exculpation75


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Reincorporation75

Exclusive Forum and Fee-Shifting Bylaw Provisions76

Mandatory Arbitration Provisions77

Authorized Shares78

Advance Notice Requirements79

Virtual Shareholder Meetings79

Voting Structure80

Multi-Class Share Structures80

Cumulative Voting81

Supermajority Vote Requirements82

Transaction of Other Business82

Anti-Greenmail Proposals82

Mutual Funds: Investment Policies and Advisory Agreements82

Real Estate Investment Trusts83

Preferred Stock Issuances at REITs83

Business Development Companies84

Authorization to Sell Shares at a Price Below Net Asset Value84

Auditor Ratification and Below-NAV Issuances84

Special Purpose Acquisition Companies85

Extension of Business Combination Deadline85

SPAC Board Independence85

Director Commitments of SPAC Executives86

Shareholder Proposals86

Overall Approach to Environmental, Social & Governance Issues 87

Connect with Glass Lewis89


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About Glass Lewis

Glass Lewis is the world’s choice for governance solutions. We enable institutional investors and publicly

listed companies to make informed decisions based on research and data. We cover 30,000+ meetings each year,

across approximately 100 global markets. Our team has been providing in-depth analysis of companies since

2003, relying solely on publicly available information to inform its policies, research, and voting

recommendations.

Our customers include the majority of the world’s largest pension plans, mutual funds, and asset

managers, collectively managing over $40 trillion in assets. We have teams located across the United States,

Europe, and Asia-Pacific giving us global reach with a local perspective on the important governance issues.

Investors around the world depend on Glass Lewis’ Viewpoint platform to manage their proxy voting, policy

implementation, recordkeeping, and reporting. Our industry leading Proxy Paper product provides

comprehensive research and voting recommendations weeks ahead of voting deadlines. Public companies can

also use our innovative Report Feedback Statement to deliver their opinion on our proxy research directly to the

voting decision makers at every investor client in time for voting decisions to be made or changed.

The research team engages extensively with public companies, investors, regulators, and other industry

stakeholders to gain relevant context into the realities surrounding companies, sectors, and the market in

general. This enables us to provide the most comprehensive and pragmatic insights to our customers.

Join the Conversation

Glass Lewis is committed to ongoing engagement with all market participants.

info@glasslewis.com | www.glasslewis.com


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Purpose

The purpose of the Benchmark Policy proxy research and advice is to serve as a framework that facilitates

shareholder voting in favor of governance structures that will drive performance and promote and maintain

long-term shareholder value.

Guidelines Introduction

Summary of Changes for 2026

Glass Lewis evaluates these guidelines on an ongoing basis and formally updates them on an annual basis.

For 2026, the language in this document has been updated to clarify that these guidelines contain the views of

the Benchmark Policy. The Benchmark Policy reflects broad investor opinion and widely accepted governance

principles and is intended to provide clients with nuanced analysis informed by market best practice, regulation,

and prevailing investor sentiment. This change better conveys Glass Lewis’ role as a service provider to a diverse,

global client base with a wide spectrum of viewpoints and objectives. The Benchmark Policy represents just one

of Glass Lewis’ policy offerings.

In addition, the following noteworthy revisions have been made to the Benchmark Policy, which are summarized

below and discussed in greater detail in the relevant section of this document.

Mandatory Arbitration Provisions

The Benchmark Policy guidelines now include a discussion on its approach to mandatory arbitration provisions.

Specifically, when evaluating companies’ governing documents following completion of a company’s IPO, spin-

off, or direct listing, the Benchmark Policy will review whether a company has adopted a mandatory arbitration

provision or other potentially negative governance provisions. In such cases, it may lead the Benchmark Policy to

issue a recommendation that shareholders oppose the election of the chair of the governance committee, or, in

certain circumstances, the entire committee. In addition, the Benchmark Policy will generally recommend that

shareholders vote against any bylaw or charter amendment seeking to adopt a mandatory arbitration provision

unless the company provides sufficient rationale and disclosure.

Pay-for-Performance Methodology

The “Pay for Performance” section of these guidelines has been updated to reflect enhancements and

modifications to Glass Lewis’s proprietary pay-for-performance model. Rather than a single letter grade of “A”

through “F”, the model will use a scorecard-based approach, consisting of up to six tests. Each test will receive a

rating, which will be aggregated on a weighted basis to determine an overall score ranging from 0 to 100. To

better understand the model, please see the Pay-for-Performance Methodology Overview.


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Clarifying Amendments

The following sections of the Benchmark Policy have been clarified:

Shareholder Rights

The Benchmark Policy’s discussion on cases where the board has amended the company’s governing documents

to reduce or remove important shareholder rights has been updated to reflect additional considerations that

may lead the Benchmark Policy to recommend that shareholders vote against the chair of the governance

committee, or the entire committee. Examples of amendments that could lead to such recommendations

include those that: (i) limit the ability of shareholders to submit shareholder proposals; (ii) limit the ability of

shareholders to file derivative lawsuits; and (iii) implement plurality voting in lieu of majority voting.

Majority Vote for Election of Directors

The Benchmark Policy’s discussion on voting standards for the election of directors has been updated to make

certain clarifying changes and update outdated references. There have been no changes in policy or approach as

a result of these updates.

Amendments to the Certificate of Incorporation and/or Bylaws

The Benchmark Policy’s approach to amendments to the certificate of incorporation and/or bylaws has been

consolidated into a single section. The Benchmark Policy guidelines now stipulate that it evaluates proposed

amendments to a company's certificate of incorporation and/or bylaws on a case-by-case basis. The Benchmark

Policy is strongly opposed to the practice of bundling several amendments under a single proposal because it

prevents shareholders from reviewing each amendment on its own merit. In general, the Benchmark Policy will

recommend voting for amendments that are unlikely to have a material negative impact on shareholders'

interests.

Supermajority Vote Requirements

The Benchmark Policy’s discussion on supermajority vote requirements has been updated to clarify that, in cases

where a company seeks to abolish supermajority voting requirements, the Benchmark Policy will evaluate such

proposals on a case-by-case basis. The Benchmark Policy has also been updated to reflect that when companies

have a large or controlling shareholder, supermajority vote requirements may be appropriate to protect the

interests of minority shareholders and that, in such cases, the Benchmark Policy may oppose the elimination of

these requirements.

General Approach to Shareholder Proposals

Noting the dynamic nature of, and impending changes to, the shareholder proposal process in the United States,

the Benchmark Policy has adjusted some of its language regarding the general approach to shareholder

proposals, including guidance around companies’ treatment of the SEC’s former no-action process. While this

specific guidance has been removed, the Benchmark Policy will generally approach these matters with the basic

premise that shareholders should be afforded the opportunity to vote on matters of material importance. Given


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ongoing changes and the prospect of additional changes to the shareholder proposal process, the Benchmark

Policy may be updated prior to or during the 2026 proxy season should its approach to these matters change or

regulatory developments warrant such an update.

1 NASDAQ originally proposed a five-year look-back period but both it and the NYSE ultimately settled on a three-year look-

back prior to finalizing their rules. The Benchmark Policy views a five-year standard for former employment relationships as

more appropriate, because the unwinding of conflicting relationships between former management and board members is

more likely to be complete and final after five years. However, the five-year look-back period is not applied to directors who

have previously served as executives of the company on an interim basis for less than one year.


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A Board of Directors that Serves Shareholder

Interest

Election of Directors

The Benchmark Policy looks for talented boards with a record of protecting shareholders and delivering value

over the medium- and long-term. It takes the view that a board can best protect and enhance the interests of

shareholders if it is sufficiently independent, has a record of positive performance, and consists of individuals

with diverse backgrounds and a breadth and depth of relevant experience.

Independence

The independence of directors, or lack thereof, is ultimately demonstrated through the decisions they make. In

assessing the independence of directors, the Benchmark Policy will take into consideration, when appropriate,

whether a director has a track record indicative of making objective decisions. Likewise, when assessing the

independence of directors, the Benchmark Policy will also consider a director’s track record on other boards that

could indicate a lack of objective decision-making. The determination of whether a director is independent or

not takes into consideration both compliance with applicable independence listing requirements as well as

judgments made by the director.

The Benchmark Policy looks at each director nominee to examine the director’s relationships with the company,

the company’s executives, and other directors to evaluate whether personal, familial, or financial relationships

(not including director compensation) may impact the director’s decisions. Such relationships may make it

difficult for a director to put shareholders’ interests above the director’s or the related party’s interests.

Thus, the Benchmark Policy puts directors into three categories based on an examination of the type of

relationship they have with the company:

Independent Director — An independent director has no material financial, familial or other current

relationships with the company, its executives, or other board members, except for board service and

standard fees paid for that service. Relationships that existed within three to five years1 before the

inquiry are usually considered “current” for purposes of this test. For material financial relationships

with the company, the Benchmark Policy applies a three-year look back, and for former employment

relationships with the company, it applies a five-year look back.

Affiliated Director — An affiliated director has (or within the past three years, had) a material financial,

familial or other relationship with the company or its executives, but is not an employee of the

2 If a company does not consider a non-employee director to be independent, that director will be classified as an affiliate

under the Benchmark Policy.

3 The Benchmark Policy allows a five-year grace period for former executives of the company or merged companies who

have consulting agreements with the surviving company. (The Benchmark Policy does not automatically recommend voting

against directors in such cases for the first five years.) If the consulting agreement persists after this five-year grace period,

the Benchmark Policy applies the materiality thresholds outlined in the definition of “material.”

4 This includes a director who serves on a board as a representative (as part of his or her basic responsibilities) of an

investment firm with greater than 20% ownership. However, while the Benchmark Policy will generally consider them to be

affiliated, it will not recommend voting against these individuals unless (i) the investment firm has disproportionate board

representation or (ii) the director serves on the audit committee.

5 The Benchmark Policy may deem such a transaction to be immaterial where the amount represents less than 1% of the

firm’s annual revenues and the board provides a compelling rationale as to why the director’s independence is not affected

by the relationship.

6 The Benchmark Policy will generally take into consideration the size and nature of such charitable entities in relation to

the company’s size and industry along with any other relevant factors such as the director’s role at the charity. However,

unlike for other types of related party transactions, The Benchmark Policy generally does not apply a look-back period to

affiliated relationships involving charitable contributions; if the relationship between the director and the school or charity

ceases, or if the company discontinues its donations to the entity, the Benchmark Policy will consider the director to be

independent.


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company.2 This includes directors whose employers have a material financial relationship with the

company.3 In addition, the Benchmark Policy considers a director who either owns or controls 20% or

more of the company’s voting stock, or is an employee or affiliate of an entity that controls such

amount, as an affiliate.4

The Benchmark Policy considers 20%+ shareholders as affiliates because they typically have access to, and

involvement with, the management of a company that is fundamentally different from that of ordinary

shareholders. More importantly, these holders may have interests that diverge from those of ordinary holders,

for reasons such as the liquidity (or lack thereof) of their holdings, personal tax issues, etc. In addition, a director

who owns 20% or more of a company can exert disproportionate influence on the board, and, therefore, such a

director’s independence may be hampered, particularly when serving on the audit committee.

The Benchmark Policy applies a three-year look back period to all directors who have an affiliation with the

company other than former employment, for which it applies a five-year look back.

Definition of “Material”: A material relationship is one in which the dollar value meets or exceeds:

•$50,000 (or where no amount is disclosed) for directors who are paid for a service they have agreed

to perform for the company, outside of their service as a director, including professional or other

services. This threshold also applies to directors who are the majority or principal owner of a firm that

receives such payments; or

•$120,000 (or where no amount is disclosed) for those directors employed by a professional services firm

such as a law firm, investment bank, or consulting firm and the company pays the firm, not the

individual, for services.5 This dollar limit would also apply to charitable contributions to schools where a

board member is a professor; or charities where a director serves on the board or is an executive;6 and

any aircraft and real estate dealings between the company and the director’s firm; or

7 This includes cases where a director is employed by, or closely affiliated with, a private equity firm that profits from an

acquisition made by the company. Unless disclosure suggests otherwise, the Benchmark Policy presumes the director is

affiliated.

8 Pursuant to SEC rule Item 404 of Regulation S-K under the Securities Exchange Act, compensation exceeding $120,000 is

the minimum threshold deemed material for disclosure of transactions involving family members of directors.

8 With a staggered board, if the affiliates or insiders that the Benchmark Policy would consider opposing are not actually up

for election, the concern regarding those directors will instead be noted. The Benchmark Policy will not recommend voting

against the other affiliates or insiders who are up for election just to achieve two-thirds independence. However, a

recommendation to oppose the election of directors subject to the concern at their next election will be considered, if the

issue giving rise to the concern is not resolved.


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•1% of either company’s consolidated gross revenue for other business relationships (e.g., where the

director is an executive officer of a company that provides services or products to or receives services or

products from the company).7

Definition of “Familial” — Familial relationships include a person’s spouse, parents, children, siblings,

grandparents, uncles, aunts, cousins, nieces, nephews, in-laws, and anyone (other than domestic employees)

who shares such person’s home. A director is an affiliate if: i) he or she has a family member who is employed by

the company and receives $120,0008 or more in annual compensation; or, ii) he or she has a family member who

is employed by the company and the company does not disclose this individual’s compensation.

Definition of “Company” — A company includes any parent or subsidiary in a group with the company or any

entity that merged with, was acquired by, or acquired the company.

Inside Director — An inside director simultaneously serves as a director and as an employee of the

company. This category may include a board chair who acts as an employee of the company or is paid as

an employee of the company. An inside director who derives a greater amount of income as a result of

affiliated transactions with the company rather than through the compensation paid by the company

(i.e., salary, bonus, etc. as a company employee) may face a conflict between making decisions that are

in the best interests of the company versus those in the director’s own best interests. Therefore, the

Benchmark Policy will recommend voting against such a director.

Additionally, the Benchmark Policy considers a director who is currently serving in an interim management

position as an insider, while a director who previously served in an interim management position for less than

one year and is no longer serving in such capacity is considered independent. Moreover, a director who

previously served in an interim management position for over one year and is no longer serving in such capacity

is considered an affiliate for five years following the date of the director’s resignation or departure from the

interim management position.

Voting Recommendations on the Basis of Board Independence

Prevailing market practice indicates that a board will be most effective in protecting shareholders’ interests if it

is at least two-thirds independent. For example the Business Roundtable, the Conference Board, and the Council

of Institutional Investors (CII) each advocate that two-thirds of the board be independent. Where more than

one-third of the members are affiliated or inside directors, the Benchmark Policy typically8 recommends voting

against some of the inside and/or affiliated directors in order to satisfy the two-thirds threshold.

9 ICGN Global Principles, 2.4.

10 The Benchmark Policy will recommend voting against an audit committee member who owns 20% or more of the

company’s stock. Market best practice indicates that there should be a maximum of one director (or no directors if the

committee is composed of less than three directors) who owns 20% or more of the company’s stock on the compensation,

nominating, and governance committees.


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Additionally, many investors support the appointment of an independent presiding or lead director with

authority to set meeting agendas and to lead sessions outside the insider or affiliated chair’s presence.9 In

accordance with best practice, boards should appoint an independent lead director when the chair is not

independent, and especially when the board is insufficiently independent.

Committee Independence

Generally, only independent directors should serve on a company’s audit, compensation, nominating, and

governance committees.10 The Benchmark Policy typically recommends that shareholders vote against any

affiliated or inside director seeking appointment to an audit, compensation, nominating, or governance

committee, or who has served in that capacity in the past year, except in certain circumstances.

Pursuant to Section 952 of the Dodd-Frank Act, as of January 11, 2013, the U.S. Securities and Exchange

Commission (SEC) approved new listing requirements for both the NYSE and NASDAQ which require that boards

apply enhanced standards of independence when making an affirmative determination of the independence of

compensation committee members. Specifically, when making this determination, in addition to the factors

considered when assessing general director independence, the board’s considerations must include: (i) the

source of compensation of the director, including any consulting, advisory or other compensatory fee paid by

the listed company to the director (the “Fees Factor”); and (ii) whether the director is affiliated with the listing

company, its subsidiaries, or affiliates of its subsidiaries (the “Affiliation Factor”).

It is important for boards to consider these enhanced independence factors when assessing compensation

committee members. However, as discussed above in the section titled Independence, the Benchmark Policy’s

definitions and categories are applied when assessing the independence of directors, and these standards also

consider consulting and advisory fees paid to the director, as well as the director’s affiliations with the company

and its subsidiaries and affiliates. The Benchmark Policy may recommend voting against compensation

committee members who are not independent based on these standards.

Independent Chair

In line with CII’s Policies on Corporate Governance and the International Corporate Governance Network’s

(ICGN) Global Governance Principles, the Benchmark Policy is of the view that the board should be chaired by an

independent director. Separating the roles of CEO (or, more rarely, another executive position) and chair

generally creates a better governance structure than a combined CEO/chair position. An executive manages the

business according to a course the board charts. Executives should report to the board regarding their

performance in achieving goals set by the board. This is needlessly complicated when a CEO chairs the board,

since a CEO/chair presumably will have a significant influence over the board.

While many companies have an independent lead or presiding director who performs many of the same

functions of an independent chair (e.g., setting the board meeting agenda), this alternate form of independent

board leadership typically does not provide as robust protection for shareholders as an independent chair.

11 Global Board and CEO Practice. “2024 CEO Transitions: The measure of the market.” Spencer Stuart, February 2025.

12 Spencer Stuart Board Index, 2025, p. 5.


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It can become difficult for a board to fulfill its role of overseer and policy setter when a CEO/chair controls the

agenda and the boardroom discussion. Such control can allow a CEO to have an entrenched position, leading to

longer-than-optimal terms, fewer checks on management, less scrutiny of the business operation, and

limitations on independent, shareholder-focused goal setting by the board.

A CEO should set the strategic course for the company, with the board’s approval, and the board should enable

the CEO to carry out the CEO’s vision for accomplishing the board’s objectives. Failure to achieve the board’s

objectives should lead the board to replace that CEO with someone in whom the board has confidence.

Likewise, an independent chair can better oversee executives and set a pro-shareholder agenda without the

management conflicts that a CEO and other executive insiders often face. Such oversight and concern for

shareholders allows for a more proactive and effective board of directors that is better able to look out for the

interests of shareholders.

Further, it is the board’s responsibility to select a chief executive who can best serve a company and its

shareholders and to replace this person when his or her duties have not been appropriately fulfilled. Such a

replacement becomes more difficult and may happen less frequently when the chief executive is also in the

position of overseeing the board.

Moreover, many companies appear to be moving toward more independent board leadership — one study

indicates that only 5%of incoming S&P 1500 CEOs in 2024 were awarded the chair title.11 Another study found

that 61% of S&P 500 boards separated the CEO and chair roles in 2025 ( up from 37%in 2009) although the same

study found that only 42%of S&P 500 boards have truly independent chairs.12

In addition, the Benchmark Policy scrutinizes avowedly “independent” chairs and lead directors. Directors

serving in these roles should be unquestionably independent, or the company should not treat them as such.

The Benchmark Policy does not recommend that shareholders vote against CEOs who chair the board. However,

it typically supports separating the roles of chair and CEO whenever that question is directly posed in a proxy

(typically in the form of a shareholder proposal).

Further, where a company has neither an independent chair nor independent lead director, the Benchmark

Policy will recommend voting against the chair of the governance committee.

Performance

The most crucial test of a board’s commitment to the company and its shareholders lies in the actions of the

board and its members. The Benchmark Policy looks at the performance of these individuals as directors and

executives of the company and of other companies where they have served.

A director’s past conduct is often indicative of future conduct and performance. Directors with a history of

overpaying executives or of serving on boards where avoidable disasters have occurred often serve on the

boards of companies with similar problems. The Benchmark Policy leverages a proprietary database of directors

that tracks the performance of directors across companies worldwide.

13 However, where a director has served for less than one full year, the Benchmark Policy will typically not recommend

voting against for failure to attend 75% of meetings. Rather, the analysis will include a note regarding the poor attendance

with a recommendation to track this issue going forward. The Benchmark Policy will also refrain from recommending

opposition to directors when the proxy discloses that the director missed the meetings due to serious illness or other

extenuating circumstances.


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Voting Recommendations on the Basis of Performance

The Benchmark Policy typically recommends that shareholders vote against directors who have served on

boards or as executives of companies with records of poor performance, inadequate risk oversight, excessive

compensation, audit- or accounting-related issues, and/or other indicators of mismanagement or actions against

the interests of shareholders. The Benchmark Policy will evaluate such directors based on, among other factors,

the length of time passed since the incident giving rise to the concern, shareholder support for the director, the

severity of the issue, the director’s role (e.g., committee membership), director tenure at the subject company,

whether ethical lapses accompanied the oversight lapse, and evidence of strong oversight at other companies.

Likewise, the backgrounds of those who serve on key board committees are examined to ensure that they have

the required skills and diverse backgrounds to make informed judgments about the subject matter for which the

committee is responsible.

Many shareholders generally avoid electing directors who have a record of not fulfilling their responsibilities to

shareholders at any company where they have held a board or executive position. The Benchmark Policy

typically recommends voting against:

•A director who fails to attend a minimum of 75% of board and applicable committee meetings,

calculated in the aggregate.13

•A director who belatedly filed a significant form(s) 4 or 5, or who has a pattern of late filings if the late

filing was the director’s fault (the analysis looks at these late filing situations on a case-by-case basis).

•A director who is also the CEO of a company where a serious and material restatement occurred after

the CEO had previously certified the pre-restatement financial statements.

•A director who has received two against recommendations under the Benchmark Policy for identical

reasons within the prior year at different companies (the same situation must also apply at the company

being analyzed).

Furthermore, with consideration given to the company’s overall corporate governance, pay-for-performance

alignment and board responsiveness to shareholders, the Benchmark Policy may recommend voting against

directors who served throughout a period in which the company performed significantly worse than peers and

the directors have not taken reasonable steps to address the poor performance.

Board Responsiveness

Boards should generally be responsive to shareholders when a significant percentage of shareholders vote

contrary to the recommendation of management, depending on the issue.

When 20% or more of shareholders vote contrary to management (which occurs when more than 20% of votes

on the proposal are cast as “against” and/or abstain), market best practice indicates that boards engage with


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shareholders on the issue and demonstrate some initial level of responsiveness. These include instances when

20% or more of shareholders:

(i)withhold votes from (or vote against) a director nominee; or

(ii)vote against a management-sponsored proposal.

Many investors view a 20% threshold as significant enough to warrant a close examination of the underlying

issues and an evaluation of whether the board responded appropriately following the vote, particularly in the

case of a vote on executive compensation or on the election of a director. While the 20% threshold alone will

not automatically generate a negative vote recommendation under the Benchmark Policy on a future proposal

on the same topic, it may be a contributing factor to a recommendation to vote against such a proposal in the

event the Benchmark Policy determines that the board did not respond appropriately.

When a majority of shareholders vote contrary to management, boards are generally expected to engage with

shareholders on the issue and provide a more robust response to fully address shareholder concerns. These

include instances when a majority or more of shareholders:

(i)withhold votes from (or vote against) a director nominee;

(ii)vote against a management-sponsored proposal;

At controlled companies and companies that have multi-class share structures with unequal voting rights, the

Benchmark Policy will carefully examine the level of approval or disapproval attributed to unaffiliated

shareholders when determining whether board responsiveness is warranted. In the case of companies that have

multi-class share structures with unequal voting rights, the Benchmark Policy will generally examine the level of

approval or disapproval attributed to unaffiliated shareholders on a “one share, one vote” basis. At controlled

and multi-class companies, when at least 20% or more of unaffiliated shareholders vote contrary to

management, market best practice indicates a preference that boards engage with shareholders and

demonstrate some initial level of responsiveness, and when a majority or more of unaffiliated shareholders vote

contrary to management, the Benchmark Policy will look to boards to engage with unaffiliated shareholders and

provide a more robust response to address shareholder concerns.

As a general framework, the evaluation of board responsiveness involves a review of publicly available

disclosures (e.g., the proxy statement, annual report, 8-Ks, company website, etc.) released after the date of the

company’s last annual meeting through the publication date of the most current Proxy Paper. Depending on the

specific issue, the focus typically includes, but is not limited to, the following:

•At the board level, any changes in directorships, committee memberships, disclosure of related party

transactions, meeting attendance, or other responsibilities;

•Any revisions made to the company’s articles of incorporation, bylaws or other governance documents;

•Any press or news releases indicating changes in, or the adoption of, new company policies, business

practices or special reports; and

•Any modifications made to the design and structure of the company’s compensation program, as well as

an assessment of the company’s engagement with shareholders on compensation issues as discussed in

the Compensation Discussion & Analysis (CD&A), particularly following a material vote against a

company’s say-on-pay.


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•Proxy statement disclosure discussing the board’s efforts to engage with shareholders and the actions

taken to address shareholder concerns.

The Benchmark Policy analysis will include a case-by-case assessment of the specific elements of board

responsiveness that were examined along with an explanation of how that assessment impacts the current

voting recommendations.

Board Responsiveness to Shareholder Proposals

Majority-Supported Shareholder Proposals

Clear action from the board is generally expected when shareholder proposals receive support from a majority

of votes cast (excluding abstentions and broker non-votes). This may include fully implementing the request of

the shareholder proposal and/or engaging with shareholders on the issue and providing sufficient disclosures to

address shareholder concerns.

Significantly Supported Shareholder Proposals

A shareholder proposal that receives significant support (generally more than 30% but less than majority of

votes cast) typically reflects concern about an issue by a substantial portion of the company’s shareholders. In

these circumstances, many investors expect the board to show an initial level of responsiveness to the concern.

Therefore, in instances where a shareholder proposal has received at least 30% shareholder support, boards

should generally engage with shareholders on the issue and provide disclosure addressing shareholder concerns

and outreach initiatives. To be clear, this does not involve an expectation that the board fully implement the

request of the shareholder proposal. Rather, the Benchmark Policy looks for some level of board outreach and

disclosure concerning the issue and the Board’s response to it.

Further, as discussed above, at controlled companies and companies that have multi-class share structures with

unequal voting rights, the Benchmark Policy will carefully examine the level of approval or disapproval attributed

to unaffiliated shareholders when determining whether board responsiveness is warranted.

The Role of a Committee Chair

Given their assigned leadership role and additional responsibilities, a designated committee chair is generally

considered to have primary responsibility for the actions of their respective committee. As such, many of the

Benchmark Policy’s committee-specific voting recommendations are against the applicable committee chair

rather than the entire committee (depending on the seriousness of the issue). In cases where the committee

chair is not up for election due to a staggered board, and where multiple concerns have been identified, the

Benchmark Policy will generally recommend voting against other members of the committee who are up for

election, on a case-by-case basis.

In cases where the Benchmark Policy would ordinarily recommend voting against a committee chair but the

chair is not specified, the following general rules are applied:

•If there is no committee chair, the Benchmark Policy will recommend voting against the longest-serving

committee member or, if the longest-serving committee member cannot be determined, the longest-

serving board member serving on the committee (i.e., in either case, the “senior director”); and

14 Commission on Public Trust and Private Enterprise. The Conference Board. 2003.


2026 Benchmark Policy Guidelines — United States	18

•If there is no committee chair, but multiple senior directors are serving on the committee, the

Benchmark Policy will recommend voting against both (or all) such senior directors.

In accordance with prevailing market practice, companies should provide clear disclosure of which director is

charged with overseeing each committee. In cases where that simple framework is ignored and a reasonable

analysis cannot determine which committee member is the designated leader, many investors take the view

that shareholder action against the longest serving committee member(s) is warranted. To reiterate, this only

applies if the Benchmark Policy would ordinarily recommend voting against the committee chair but there is

either no such position or no designated director in such role.

Audit Committees and Performance

Audit committees are integral in overseeing the financial reporting process because stable capital markets

depend on reliable, transparent, and objective financial information to support an efficient and effective capital

market process. Audit committees play a vital role in providing this disclosure to shareholders.

When assessing an audit committee’s performance, investors should be aware that an audit committee does not

prepare financial statements, is not responsible for making the key judgments and assumptions that affect the

financial statements, and does not audit the numbers or the disclosures provided to investors. Rather, an audit

committee monitors and oversees the process and procedures that management and auditors perform. The

1999 Report and Recommendations of the Blue Ribbon Committee on Improving the Effectiveness of Corporate

Audit Committees stated it best:

A proper and well-functioning system exists, therefore, when the three main groups responsible for

financial reporting — the full board including the audit committee, financial management including the

internal auditors, and the outside auditors — form a ‘three legged stool’ that supports responsible

financial disclosure and active participatory oversight. However, in the view of the Committee, the audit

committee must be ‘first among equals’ in this process, since the audit committee is an extension of the

full board and hence the ultimate monitor of the process.

Standards for Assessing the Audit Committee

For an audit committee to function effectively on investors’ behalf, it must include members with sufficient

knowledge to diligently carry out their responsibilities. In its audit and accounting recommendations, the

Conference Board Commission on Public Trust and Private Enterprise said “members of the audit committee

must be independent and have both knowledge and experience in auditing financial matters.”14

Many investors are skeptical of audit committees where there are members that lack expertise as a Certified

Public Accountant (CPA), Chief Financial Officer (CFO) or corporate controller, or similar experience. The

Benchmark Policy will not necessarily recommend voting against members of an audit committee if they lack

such expertise on that basis alone. However, where there are indications of poor oversight or problems such as

restatements, the lack of relevant skills and experience among audit committee members may contribute to a

recommendation to oppose the election of the chair and/or other members of the audit committee.

The Benchmark Policy generally assesses audit committees against the decisions they make with respect to their

oversight and monitoring roles. The quality and integrity of the financial statements and earnings reports, the

15 The Benchmark Policy may exempt certain audit committee members from the above threshold if, upon further analysis

of relevant factors- such as the director’s experience, the size, industry-mix and location of the companies involved and the

director’s attendance at all the companies-it can reasonably be determined that the audit committee member is likely not

hindered by multiple audit committee commitments.


2026 Benchmark Policy Guidelines — United States	19

completeness of disclosures necessary for investors to make informed decisions, and the effectiveness of the

internal controls should provide reasonable assurance that the financial statements are materially free from

errors. The independence of the external auditors and the results of their work all provide useful information by

which to assess the audit committee.

When assessing the decisions and actions of the audit committee, the Benchmark Policy typically defers to the

judgment of the committee members and generally recommends voting in favor of its members. However, the

Benchmark Policy will consider recommending that shareholders vote against the following:

•All members of the audit committee when options were backdated, there is a lack of adequate controls

in place, there was a resulting restatement, and disclosures indicate there was a lack of documentation

with respect to the option grants.

•The audit committee chair, if the audit committee does not have a financial expert or the committee’s

financial expert does not have a demonstrable financial background sufficient to understand the

financial issues unique to public companies.

•The audit committee chair, if the audit committee did not meet at least four times during the year.

•The audit committee chair, if the committee has less than three members.

•Any audit committee member who sits on more than three public company audit committees, unless

the audit committee member is a retired CPA, CFO, controller or has similar experience, in which case

the limit shall be four committees, taking time and availability into consideration including a review of

the audit committee member’s attendance at all board and committee meetings.15

•All members of an audit committee who are up for election and who served on the committee at the

time of the audit, if audit and audit-related fees total one-third or less of the total fees billed by the

auditor.

•The audit committee chair, when tax and/or other fees are greater than audit and audit-related fees

paid to the auditor for more than one year in a row (in which case the Benchmark Policy also

recommends against ratification of the auditor).

•The audit committee chair when fees paid to the auditor are not disclosed.

•All members of an audit committee where non-audit fees include fees for tax services (including, but not

limited to, such things as tax avoidance or shelter schemes) for senior executives of the company. Such

services are prohibited by the Public Company Accounting Oversight Board (PCAOB).

•All members of an audit committee who reappointed an auditor that the Benchmark Policy no longer

considers to be independent for reasons unrelated to fee proportions.

•All members of an audit committee when audit fees are excessively low, especially when compared with

other companies in the same industry.

16 Auditors are required to report all potential illegal acts to management and the audit committee unless they are clearly

inconsequential in nature. If the audit committee or the board fails to take appropriate action on an act that has been

determined to be a violation of the law, the independent auditor is required to send a section 10A letter to the SEC. Such

letters are rare and therefore should be taken seriously.

17 Research indicates that revenue fraud now accounts for over 60% of SEC fraud cases, and that companies that engage in

fraud experience significant negative abnormal stock price declines—facing bankruptcy, delisting, and material asset sales

at much higher rates than do non-fraud firms (Committee of Sponsoring Organizations of the Treadway Commission.

“Fraudulent Financial Reporting: 1998-2007.” May 2010).

18 The SEC issued guidance in March 2021 related to classification of warrants as liabilities at special purpose acquisition

companies (SPACs). The Benchmark Policy will generally refrain from recommending against audit committee members

when the restatement in question is solely as a result of the aforementioned SEC guidance.


2026 Benchmark Policy Guidelines — United States	20

•The audit committee chair, if the committee failed to put auditor ratification on the ballot for

shareholder approval. However, if the non-audit fees or tax fees exceed audit plus audit-related fees in

either the current or the prior year, then the Benchmark Policy will recommend voting against the entire

audit committee.

•All members of an audit committee where the auditor has resigned and reported that a section 10A16

letter has been issued.

•All members of an audit committee at a time when material accounting fraud occurred at the

company.17

•All members of an audit committee at a time when annual and/or multiple quarterly financial

statements had to be restated, and any of the following factors apply:18

oThe restatement involves fraud or manipulation by insiders;

oThe restatement is accompanied by an SEC inquiry or investigation;

oThe restatement involves revenue recognition;

oThe restatement results in a greater than 5% adjustment to costs of goods sold, operating

expense, or operating cash flows; or

oThe restatement results in a greater than 5% adjustment to net income, 10% adjustment to

assets or shareholders equity, or cash flows from financing or investing activities.

•All members of an audit committee if the company repeatedly fails to file its financial reports in a timely

fashion. For example, the company has filed two or more quarterly or annual financial statements late

within the last five quarters.

•All members of an audit committee when it has been disclosed that a law enforcement agency

has charged the company and/or its employees with a violation of the Foreign Corrupt Practices

Act (FCPA).

•All members of an audit committee when the company has aggressive accounting policies or lack of

sufficient transparency in its financial statements.

•All members of the audit committee when there is a disagreement with the auditor and the auditor

resigns or is dismissed (e.g., the company receives an adverse opinion on its financial statements from

the auditor).

19 The Council of Institutional Investors. “Corporate Governance Policies,” p. 4, April 5, 2006; and “Letter from Council of

Institutional Investors to the AICPA,” November 8, 2006.


2026 Benchmark Policy Guidelines — United States	21

•All members of the audit committee if the contract with the auditor specifically limits the auditor’s

liability to the company for damages.19

•All members of the audit committee who served since the date of the company’s last annual meeting if,

since the last annual meeting, the company has reported a material weakness that has not yet been

corrected and the company has not disclosed a remediation plan; or when a material weakness has been

ongoing for more than one year and the company has not disclosed an updated remediation plan that

clearly outlines the company’s progress toward remediating the material weakness.

Material Weaknesses

Effective internal controls over financial reporting should ensure the integrity of companies’ accounting and

financial reporting.

The SEC guidance regarding Management's Report on Internal Control Over Financial Reporting requires that

reports on internal control should include: (i) a statement of management's responsibility for establishing and

maintaining adequate internal control over financial reporting for the company; (ii) management's assessment

of the effectiveness of the company's internal control over financial reporting as of the end of the company's

most recent fiscal year; (iii) a statement identifying the framework used by management to evaluate the

effectiveness of the company's internal control over financial reporting; and (iv) a statement that the registered

public accounting firm that audited the company's financial statements included in the annual report has issued

an attestation report on management's assessment of the company's internal control over financial reporting.

A material weakness occurs when a company identifies a deficiency, or a combination of deficiencies, in internal

controls over financial reporting, such that there is a reasonable possibility that a material misstatement of the

company's annual or interim financial statements will not be prevented or detected on a timely basis. Failure to

maintain effective internal controls can create doubts regarding the reliability of financial reporting and the

preparation of financial statements in accordance with U.S. GAAP and may lead to companies publishing

financial statements that are not free of errors or misstatements.

It is the responsibility of audit committees to ensure that material weaknesses are remediated in a timely

manner and that companies disclose remediation plans that include detailed steps to resolve a given material

weakness. In cases where a material weakness has been ongoing for more than one fiscal year, it is generally

expected that the company will disclose an updated remediation plan at least annually thereafter. Updates to

existing remediation plans should state the progress the company has made toward remediating the material

weakness and the remaining actions the company plans to take until the material weakness is fully remediated.

When a material weakness is reported and the company has not disclosed a remediation plan, or when a

material weakness has been ongoing for more than one year and the company has not disclosed an updated

remediation plan that clearly outlines its progress toward remediating the material weakness, the Benchmark

Policy will consider recommending that shareholders vote against all members of a company’s audit committee

who served on the committee during the time when the material weakness was identified.


2026 Benchmark Policy Guidelines — United States	22

Many investors view audit committee reports that are boilerplate and which provide little or no information or

transparency as unfavorable. Therefore, when a problem such as a material weakness, restatement or late filings

occurs, the Benchmark Policy will take into consideration the transparency of the audit committee report.

Compensation Committee Performance

Compensation committees have a critical role in determining the compensation of executives. This includes

deciding the basis on which compensation is determined, as well as the amounts and types of compensation

to be paid. This process begins with the hiring and initial establishment of employment agreements, including

the terms for such items as pay, pensions and severance arrangements. It is important in establishing

compensation arrangements that compensation be consistent with, and based on the long-term economic

performance of, the business’s long-term shareholder returns.

Compensation committees are also responsible for the oversight of the transparency of compensation. This

oversight includes disclosure of compensation arrangements, the matrix used in assessing pay for performance,

and the use of compensation consultants. In order to ensure the independence of the board’s compensation

consultant, market best practice indicates a preference that the compensation committee only engage a

compensation consultant that is not also providing any services to the company or management apart from their

contract with the compensation committee. It is important to many investors that they have clear and complete

disclosure of all the significant terms of compensation arrangements in order to make informed decisions with

respect to the oversight and decisions of the compensation committee.

Finally, compensation committees are responsible for oversight of internal controls over the executive

compensation process. This includes controls over gathering information used to determine compensation,

establishing equity award plans, and granting equity awards. For example, the use of a compensation consultant

who maintains a business relationship with company management may cause the committee to make decisions

based on information that is compromised by the consultant’s conflict of interests. Lax controls can also

contribute to improper awards of compensation such as through granting of backdated or spring-loaded

options, or granting of bonuses when triggers for bonus payments have not been met.

A careful review of the CD&A report included in each company’s proxy is central to understanding the actions of

the compensation committee. The Benchmark Policy analysis includes a review of the CD&A in the evaluation of

the overall compensation practices of a company, as overseen by the compensation committee. The CD&A is

also integral to the evaluation of compensation proposals at companies, such as advisory votes on executive

compensation.

When assessing the performance of compensation committees, the Benchmark Policy will consider

recommending that shareholders vote against the following:

•All members of a compensation committee during whose tenure the committee failed to address

shareholder concerns following majority shareholder rejection of the say-on-pay proposal in the

previous year. Where the proposal was approved but there was significant shareholder opposition (i.e.,

greater than 20% of votes cast) to the say-on-pay proposal in the prior year and the board did not

respond sufficiently to the vote, including actively engaging shareholders on this issue, the Benchmark

Policy will also consider recommending voting against the chair of the compensation committee or all

members of the compensation committee, depending on the severity and history of the compensation

problems and the level of shareholder opposition.

20 If a company provides shareholders with a say-on-pay proposal, the Benchmark Policy will initially only recommend

voting against the company's say-on-pay proposal and will not recommend voting against the members of the

compensation committee unless there is a pattern of failing to align pay and performance and/or the company exhibits

egregious compensation practices. For cases in which the disconnect between pay and performance is marginal and the

company has outperformed its peers, the Benchmark Policy may consider not recommending against compensation

committee members.


2026 Benchmark Policy Guidelines — United States	23

•All members of the compensation committee who are up for election and served on the committee

when the company failed to align pay with performance if shareholders are not provided with an

advisory vote on executive compensation at the annual meeting.20

•Any member of the compensation committee who has served on the compensation committee of at

least two other public companies that have consistently failed to align pay with performance and whose

oversight of compensation at the company in question is suspect.

•All members of the compensation committee (during the relevant time period) if the company entered

into excessive employment agreements and/or severance agreements.

•All members of the compensation committee when performance goals were changed (i.e., lowered)

when employees failed or were unlikely to meet original goals, or performance-based compensation was

paid despite goals not being attained.

•All members of the compensation committee if excessive employee perquisites and benefits

were allowed.

•The compensation committee chair if the compensation committee did not meet during the year.

•All members of the compensation committee when the company repriced options or completed a “self

tender offer” without shareholder approval within the past two years.

•All members of the compensation committee when vesting of in-the-money options is accelerated.

•All members of the compensation committee when option exercise prices were backdated. The

Benchmark Policy will recommend voting against an executive director who played a role in and

participated in option backdating.

•All members of the compensation committee when option exercise prices were spring-loaded or

otherwise timed around the release of material information.

•All members of the compensation committee when a new employment contract is given to an executive

that does not include a clawback provision and the company had a material restatement, especially if

the restatement was due to fraud.

•The chair of the compensation committee where the CD&A provides insufficient or unclear information

about performance metrics and goals, where the CD&A indicates that pay is not tied to performance, or

where the compensation committee or management has excessive discretion to alter performance

terms or increase amounts of awards in contravention of previously defined targets.

•All members of the compensation committee during whose tenure the committee failed to implement a

shareholder proposal regarding a compensation-related issue, where the proposal received the

affirmative vote of a majority of the voting shares at a shareholder meeting, and when a reasonable

21 In all other instances (i.e., a non-compensation-related shareholder proposal should have been implemented) the

Benchmark Policy recommends that shareholders vote against the members of the governance committee.

22 If the board does not have a committee responsible for governance oversight and the board did not implement a

shareholder proposal that received the requisite support, the Benchmark Policy will recommend voting against the entire

board. If the shareholder proposal at issue requested that the board adopt a declassified structure, the Benchmark Policy

will recommend voting against all director nominees up for election.


2026 Benchmark Policy Guidelines — United States	24

analysis suggests that the compensation committee (rather than the governance committee) should

have taken steps to implement the request.21

•All members of the compensation committee when the board has materially decreased proxy statement

disclosure regarding executive compensation policies and procedures in a manner which substantially

impacts shareholders’ ability to make an informed assessment of the company’s executive pay practices.

•All members of the compensation committee when new excise tax gross-up provisions are adopted in

employment agreements with executives, particularly in cases where the company previously

committed not to provide any such entitlements in the future.

•All members of the compensation committee when the board adopts a frequency for future advisory

votes on executive compensation that differs from the frequency approved by shareholders.

•The chair of the compensation committee when” mega-grants” have been granted and the awards

present concerns such as excessive quantum, lack of sufficient performance conditions, and/or are

excessively dilutive, among others.

Nominating and Governance Committee Performance

The nominating and governance committee is responsible for the board-level governance of the company and

its executives. In performing this role, the committee is responsible and accountable for selection of objective

and competent board members. It is also responsible for providing leadership on governance policies adopted

by the company, such as decisions to implement shareholder proposals that have received a majority vote. At

most companies, a single committee is charged with these oversight functions; at others, the governance and

nominating responsibilities are apportioned among two separate committees.

Many investors take the view that boards should have diverse backgrounds and members with a breadth and

depth of relevant experience and that nominating and governance committees should consider diversity when

making director nominations within the context of each specific company and its industry. Shareholders are

generally best served when boards make an effort to ensure a constituency that is not only reasonably diverse

on the basis of age, race, gender and ethnicity, but also on the basis of geographic knowledge, industry

experience, board tenure and culture. For further information on board diversity, please see In-Depth Report:

Board Gender Diversity.

Regarding the committee responsible for governance, the Benchmark Policy will consider recommending that

shareholders vote against the following:

•All members of the governance committee22 during whose tenure a shareholder proposal relating to

important shareholder rights received support from a majority of the votes cast (excluding abstentions

and broker non-votes) and the board has not begun to implement or enact the request of the

23 Where a compensation-related shareholder proposal should have been implemented, and when a reasonable analysis

suggests that the members of the compensation committee (rather than the governance committee) bear the responsibility

for failing to implement the request, the Benchmark Policy recommends that shareholders only vote against members of

the compensation committee.

24 Market expectations are such that one independent individual be appointed to serve as the lead or presiding director.

When such a position is rotated among directors from meeting to meeting, the Benchmark Policy will recommend voting

against the governance committee chair as the lack of fixed lead or presiding director means that, effectively, the board

does not have an independent board leader.

25 A forum selection clause is a bylaw provision stipulating that a certain state or federal jurisdiction is the exclusive forum

for specified legal matters. Such a clause effectively limits a shareholder's legal remedy regarding appropriate choice of venue

and related relief.

26 The analysis will evaluate the circumstances surrounding the adoption of any forum selection clause as well as the

general provisions contained therein. Where it can be reasonably determined that a forum selection clause is narrowly

crafted to suit the particular circumstances facing the company and/or a reasonable sunset provision is included, the

Benchmark Policy may make an exception to this policy.


2026 Benchmark Policy Guidelines — United States	25

proposal.23 Examples of such shareholder proposals include those seeking a declassified board structure,

a majority vote standard for director elections, or a right to call a special meeting. In determining

whether a board has sufficiently implemented such a proposal, the Benchmark Policy will examine the

quality of the right enacted or proffered by the board for any conditions that may unreasonably

interfere with the shareholders’ ability to exercise the right (e.g., overly restrictive procedural

requirements for calling a special meeting).

•The governance committee chair when the chair is not independent and an independent lead or

presiding director has not been appointed.24

•The governance committee chair at companies with a multi-class share structure and unequal voting

rights when the company does not provide for a reasonable sunset of the multi-class share structure

(generally seven years or less).

•In the absence of a nominating committee, the governance committee chair when there are fewer than

five, or the whole governance committee when there are more than 20 members on the board.

•The governance committee chair when the committee fails to meet during the year.

•The governance committee chair, when, for two consecutive years, the company provides what is

considered by the Benchmark Policy to be “inadequate” related party transaction disclosure (i.e., the

nature of such transactions and/or the monetary amounts involved are unclear or excessively vague,

thereby preventing a shareholder from being able to reasonably interpret the independence status of

multiple directors above and beyond what the company maintains is compliant with SEC or applicable

stock exchange listing requirements).

•The governance committee chair, when during the past year the board adopted a forum selection clause

(i.e., an exclusive forum provision)25 designating either a state's courts for intra-corporate disputes, and/

or federal courts for matters arising under the Securities Act of 1933 without shareholder approval,26 or

if the board is currently seeking shareholder approval of a forum selection clause pursuant to a bundled

bylaw amendment rather than as a separate proposal.


2026 Benchmark Policy Guidelines — United States	26

•All members of the governance committee during whose tenure the board adopted, without

shareholder approval, provisions in its charter or bylaws that, through rules on director compensation,

may inhibit the ability of shareholders to nominate directors.

•The governance committee chair, when the board takes actions to limit shareholders’ ability to vote on

matters material to shareholder rights (e.g., through the practice of excluding a shareholder proposal by

means of ratifying a management proposal that is materially different from the shareholder proposal).

•The governance committee chair when directors’ records for board and committee meeting attendance

are not disclosed, or when it is indicated that a director attended less than 75% of board and committee

meetings but disclosure is sufficiently vague that it is not possible to determine which specific director’s

attendance was lacking.

•The governance committee chair when a detailed record of proxy voting results from the prior annual

meeting has not been disclosed.

•The governance committee chair when a company does not clearly disclose the identity of a shareholder

proponent (or lead proponent when there are multiple filers) in their proxy statement. For a detailed

explanation of this policy, please refer to the comprehensive Benchmark Policy Guidelines for

Shareholder Proposals & ESG-Related Issues, available at www.glasslewis.com/voting-policies-current/.

In addition, the Benchmark Policy may recommend that shareholders vote against the chair of the governance

committee, or the entire committee, when the board has amended the company’s governing documents to

reduce or remove important shareholder rights, or to otherwise impede the ability of shareholders to exercise

such rights, and has done so without seeking shareholder approval. Examples of board actions that may result in

such a recommendation include:

•The elimination of the ability of shareholders to call a special meeting or to act by written consent;

•An increase to the ownership threshold required for shareholders to call a special meeting;

•An increase to vote requirements for charter or bylaw amendments; The adoption of provisions that

limit the ability of shareholders to pursue full legal recourse — such as bylaws that require arbitration of

shareholder claims or that require shareholder plaintiffs to pay the company’s legal expenses in the

absence of a court victory (i.e., “fee-shifting” or “loser pays” bylaws);

•The adoption of provisions that limit the ability of shareholders to submit shareholder proposals;

•The adoption of provisions that limit the ability of shareholders to file derivative lawsuits;

•The adoption of a plurality voting standard for the election of directors in lieu of a majority voting

standard;

•The adoption of a classified board structure; or

•The elimination of the ability of shareholders to remove a director without cause.

Regarding the nominating committee, the Benchmark Policy will consider recommending that shareholders vote

against the following:

27 Considering that shareholder disapproval clearly relates to the director who received a greater than 50% against vote

rather than the nominating chair, the Benchmark Policy reviews the severity of the issue(s) that initially raised shareholder

concern as well as company responsiveness to such matters, and will only recommend voting against the nominating chair if

a reasonable analysis suggests that it would be most appropriate. In rare cases, the Benchmark Policy will consider

recommending against the nominating chair when a director receives a substantial (i.e., 20% or more) vote against based on

the same analysis.

28 Women and directors that identify with a gender other than male or female.

29 For more information on how the Benchmark Policy applies these diversity considerations, see the Section below on

“Board Diversity”.


2026 Benchmark Policy Guidelines — United States	27

•All members of the nominating committee, when the committee nominated or renominated

an individual who had a significant conflict of interest or whose past actions demonstrated a lack of

integrity or inability to represent shareholder interests.

•The nominating committee chair, if the nominating committee did not meet during the year.

•In the absence of a governance committee, the nominating committee chair when the chair is not

independent, and an independent lead or presiding director has not been appointed.

•The nominating committee chair, when there are fewer than five, or the whole nominating committee

when there are more than 20 members on the board.

•The nominating committee chair, when a director received a greater than 50% against vote the prior

year and not only was the director not removed, but the issues that raised shareholder concern were

not corrected.27

•The chair of the nominating committee of a board that is not at least 30% gender diverse,28 or all

members of the nominating committee of a board with no gender diverse directors, at companies within

the Russell 3000 index. For companies outside of the Russell 3000 index, the Benchmark Policy will

recommend voting against the chair of the nominating committee if there are no gender diverse

directors.

•The chair of the nominating committee of a board with fewer than one director from an

underrepresented community on the board, at companies within the Russell 1000 index.29

•The nominating committee chair when, alongside other governance or board performance concerns, the

average tenure of non-executive directors is 10 years or more and no new independent directors have

joined the board in the past five years. The Benchmark Policy will not make recommendations solely on

this basis; rather, insufficient board refreshment may be a contributing factor in the recommendations

when additional board-related concerns have been identified.

In addition, the Benchmark Policy may consider recommending shareholders vote against the chair of the

nominating committee where the board’s failure to ensure the board has directors with relevant experience,

either through periodic director assessment or board refreshment, has contributed to a company’s poor

performance. Where these issues warrant shareholder opposition and in the absence of both a governance and

a nominating committee, the Benchmark Policy will recommend voting against the board chair, unless the chair

also serves as the CEO, in which case it will recommend voting against the longest-serving director.

30 A committee responsible for risk management could be a dedicated risk committee, the audit committee, or the finance

committee, depending on a given company’s board structure and method of disclosure. At some companies, the entire

board is charged with risk management.


2026 Benchmark Policy Guidelines — United States	28

Board-Level Risk Management Oversight

The Benchmark Policy evaluates the risk management function of a public company board on a strictly case-by-

case basis. Sound risk management, while necessary at all companies, is particularly important at financial firms,

which inherently maintain significant exposure to financial risk. Market best practice indicates that financial

firms should have a chief risk officer reporting directly to the board and a dedicated risk committee or a

committee of the board charged with risk oversight. Moreover, many non-financial firms maintain strategies

that involve a high level of exposure to financial risk. Similarly, since many non-financial firms have complex

hedging or trading strategies, those firms should also have a chief risk officer and a risk committee.

These views on risk oversight are consistent with those expressed by various regulatory bodies. In its December

2009 Final Rule release on Proxy Disclosure Enhancements, the SEC noted that risk oversight is a key

competence of the board and that additional disclosures would improve investor and shareholder

understanding of the role of the board in the organization’s risk management practices. The final rules, which

became effective on February 28, 2010, explicitly require companies and mutual funds to describe (while

allowing for some degree of flexibility) the board’s role in the oversight of risk.

When analyzing the risk management practices of public companies, the Benchmark Policy will take note of any

significant losses or writedowns on financial assets and/or structured transactions. In cases where a company

has disclosed a sizable loss or writedown, and where the company’s board-level risk committee’s poor oversight

contributed to the loss, the Benchmark Policy will recommend that shareholders vote against such committee

members on that basis. In addition, in cases where a company maintains a significant level of exposure to

financial risk but fails to disclose any explicit form of board-level risk oversight (via a dedicated committee or

otherwise),30 the Benchmark Policy will consider recommending a vote against the board chair on that basis.

However, it generally would not recommend voting against a combined chair/CEO, except in egregious cases.

Board Oversight of Environmental and Social Issues

Insufficient oversight of material environmental and social issues can present direct legal, financial, regulatory

and reputational risks that could serve to harm shareholder interests. Therefore, shareholders generally benefit

when such issues are carefully monitored and managed by companies, and when companies have an

appropriate oversight structure in place to ensure that they are mitigating attendant risks and capitalizing on

related opportunities to the best extent possible.

To that end, the Benchmark Policy looks to companies to ensure that boards maintain clear oversight of material

risks to their operations, including those that are environmental and social in nature. These risks could include,

but are not limited to, matters related to climate change, human capital management, diversity, stakeholder

relations, and health, safety & environment. Given the importance of the board’s role in overseeing

environmental and social risks, this responsibility should be formally designated and codified in the appropriate

committee charters or other governing documents.

While it is important that material environmental and social issues are overseen at the board level and that

shareholders are afforded meaningful disclosure of these oversight responsibilities, the Benchmark Policy is of

the view that that companies should determine the best structure for this oversight. This oversight can be

31 CII Policies on Corporate Governance, 2.7; ICGN Global Principles, 6.2.


2026 Benchmark Policy Guidelines — United States	29

effectively conducted by specific directors, the entire board, a separate committee, or combined with the

responsibilities of a key committee.

For companies in the Russell 3000 index and in instances where material oversight concerns are identified, the

Benchmark Policy will review a company’s overall governance practices and identify which directors or board-

level committees have been charged with oversight of environmental and/or social issues. Furthermore, given

the importance of the board’s role in overseeing environmental and social risks, the Benchmark Policy will

generally recommend voting against the governance committee chair of a company in the Russell 1000 index

that fails to provide explicit disclosure concerning the board’s role in overseeing these issues.

When evaluating the board’s role in overseeing environmental and/or social issues, the Benchmark Policy will

examine a company’s committee charters and governing documents to determine if the company has codified

and maintained a meaningful level of oversight of and accountability for a company’s material environmental

and social impacts.

Board Oversight of Technology

Cyber Risk Oversight

Companies and consumers are exposed to a growing risk of cyber-attacks. These attacks can result in customer

or employee data breaches, harm to a company’s reputation, significant fines or penalties, and an interruption

to a company’s operations. Further, in some instances, cyber breaches can result in national security concerns,

such as those impacting companies operating as utilities, defense contractors, and energy companies.

In response to these issues, regulators have increasingly been focused on ensuring companies are providing

appropriate and timely disclosures and protections to stakeholders that could have been adversely impacted by

a breach in a company’s cyber infrastructure.

On July 26, 2023, the SEC approved final rules requiring public companies to report cybersecurity incidents

deemed material within four days of identifying them, detailing their nature, scope, timing, and material impact

under Item 1.05 on Form 8-K.

Furthermore, in annual reports, companies must disclose their processes for assessing, identifying, and

managing material cybersecurity risks, along with their material effects; and describe whether any risks from

prior incidents have materially affected its business strategy, results of operations, or financial condition (or are

reasonably likely to), pursuant to Regulation S-K Item 106. Item 106 will also require registrants to describe the

board of directors’ oversight of risks from cybersecurity threats and management’s role and expertise in

assessing and managing material risks from cybersecurity threats. Similar rules were also adopted for foreign

private issuers. The final rules became effective on September 5, 2023.

Given the regulatory focus on, and the potential adverse outcomes from, cyber-related issues, many investors

view cyber risk as material for all companies. Accordingly, it is critical that companies evaluate and mitigate

these risks to the greatest extent possible. 31 With that view, all issuers are encouraged to provide clear

disclosure concerning the role of the board in overseeing issues related to cybersecurity, including how

companies are ensuring directors are fully versed on this rapidly evolving and dynamic issue. Such disclosure can

help shareholders understand the seriousness with which companies take this issue.


2026 Benchmark Policy Guidelines — United States	30

In the absence of material cyber incidents, the Benchmark Policy will generally not make voting

recommendations on the basis of a company’s oversight or disclosure concerning cyber-related issues. However,

in instances where cyber-attacks have caused significant harm to shareholders, the board’s oversight of

cybersecurity as well as the company’s response and disclosures will be closely evaluated.

Moreover, in instances where a company has been materially impacted by a cyber-attack, it is reasonable for

shareholders to expect periodic updates communicating the company’s ongoing progress towards resolving and

remediating the impact of the cyber-attack. Shareholders are best served when such updates include (but are

not necessarily limited to) details such as when the company has fully restored its information systems, when

the company has returned to normal operations, what resources the company is providing for affected

stakeholders, and any other potentially relevant information, until the company considers the impact of the

cyber-attack to be fully remediated. These disclosures should focus on the company’s response to address the

impacts to affected stakeholders and should not reveal specific and/or technical details that could impede the

company’s response or remediation of the incident or that could assist threat actors.

In such instances, the Benchmark Policy may recommend against appropriate directors if the board’s oversight,

response or disclosure concerning cybersecurity-related issues is found to be insufficient, or are not provided to

shareholders.

Board Oversight of Artificial Intelligence

In recent years, companies have rapidly begun to develop and adopt uses for artificial intelligence (AI)

technologies throughout various aspects of their operations. Deployed and overseen effectively, AI technologies

have the potential to make companies’ operations and systems more efficient and productive. However, as the

use of these technologies has grown, so have the potential risks associated with companies’ development and

use of AI. Given these potential risks, boards should be cognizant of, and take steps to mitigate exposure to, any

material risks that could arise from their use or development of AI.

Companies that use or develop AI technologies should consider adopting strong internal frameworks that

include ethical considerations and ensure they have provided a sufficient level of oversight of AI. As such,

boards may seek to ensure effective oversight and address skills gaps by engaging in continued board education

and/or appointing directors with AI expertise. With that view, all companies that develop or employ the use of

AI in their operations should provide clear disclosure concerning the role of the board in overseeing issues

related to AI, including how companies are ensuring directors are fully versed on this rapidly evolving and

dynamic issue. Such disclosure can help shareholders understand the seriousness with which companies take

this issue.

While market best practice indicates that it is important that these issues are overseen at the board level and

that shareholders are afforded meaningful disclosure of these oversight responsibilities, generally, companies

should determine the best structure for this oversight. This oversight can be effectively conducted by specific

directors, the entire board, a separate committee, or combined with the responsibilities of a key committee.

In the absence of material incidents related to a company’s use or management of AI-related issues, the

Benchmark Policy will generally not make voting recommendations on the basis of a company’s oversight of, or

disclosure concerning, AI-related issues. However, in instances where there is evidence that insufficient

oversight and/or management of AI technologies has resulted in material harm to shareholders, the Benchmark

Policy will review a company’s overall governance practices and identify which directors or board-level

committees have been charged with oversight of AI-related risks. It will also closely evaluate the board’s

response to, and management of, this issue as well as any associated disclosures and may recommend against

32 This policy will generally apply to companies in the following SASB-defined industries: agricultural products, air freight &

logistics, airlines, chemicals, construction materials, containers & packaging, cruise lines, electric utilities & power

generators, food retailers & distributors, health care distributors, iron & steel producers, marine transportation, meat,

poultry & dairy, metals & mining, non-alcoholic beverages, oil & gas, pulp & paper products, rail transportation, road

transportation, semiconductors, waste management.


2026 Benchmark Policy Guidelines — United States	31

appropriate directors if the board’s oversight, response or disclosure concerning AI-related issues is found to be

insufficient.

Board Accountability for Environmental and Social Performance

The Benchmark Policy carefully monitors companies’ performance with respect to environmental and social

issues, including those related to climate and human capital management. In situations where a company has

not properly managed or mitigated material environmental or social risks to the detriment of shareholder value,

or when such mismanagement has threatened shareholder value, the Benchmark Policy may recommend that

shareholders vote against the members of the board who are responsible for oversight of environmental and

social risks. In the absence of explicit board oversight of environmental and social issues, the Benchmark Policy

may recommend that shareholders vote against members of the audit committee. In making these

determinations, the Benchmark Policy will carefully review the situation, its effect on shareholder value, as well

as any corrective action or other response made by the company.

For more information on how the Benchmark Policy evaluates environmental and social issues, please see the

“Overall Approach to ESG” section of these guidelines as well as the comprehensive Benchmark Policy Guidelines

for Shareholder Proposals & ESG-Related Issues, available at www.glasslewis.com/voting-policies-current/.

Board Accountability for Climate-Related Issues

Given the exceptionally broad impacts of a changing climate on companies, the economy, and society in general,

climate risk can present a material risk for companies in all industries. Accordingly, it is important that boards

consider and evaluate their operational resilience under lower-carbon scenarios. While all companies maintain

exposure to climate-related risks, additional consideration should be given to, and disclosure should be provided

by, those companies whose own GHG emissions represent a financially material risk. For companies with this

increased risk exposure, the Benchmark Policy evaluates whether companies are providing clear and

comprehensive disclosure regarding these risks, including how they are being mitigated and overseen. Such

information is crucial to allow investors to understand the company’s management of this issue as well as the

potential impact of a lower carbon future on the company’s operations.

In line with this view, the Benchmark Policy will carefully examine the climate-related disclosures provided by

companies in the S&P 500 index with material exposure to climate risk stemming from their own operations,32

as well as companies where their emissions, climate impacts, or stakeholder scrutiny thereof, represent an

outsized, financially material risk, in order to assess whether they have produced disclosures in line with the

recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), IFRS S2 Climate-related

Disclosures, or other equivalent climate reporting framework. The Benchmark Policy will also assess whether

these companies have disclosed explicit and clearly defined board-level oversight responsibilities for climate-

related issues. In instances where either (or both) of these disclosures are found to be absent or significantly

lacking, the Benchmark Policy may recommend voting against the chair of the committee (or board) charged

with oversight of climate-related issues, or if no committee has been charged with such oversight, the chair of

the governance committee. Further, the Benchmark Policy may extend this recommendation on this basis to

33 For example, the 2015-2016 NACD Public Company Governance Survey states that, on average, directors spent a total of

248.2 hours annual on board-related matters during the past year, which it describes as a “historically high level” that is

significantly above the average hours recorded in 2006. Additionally, the 2025 Spencer Stuart Board Index indicates that,

56% of S&P 500 CEOs do not serve on a public company board in addition to their own, while 41.6% of S&P 500 CEOs serve

on one additional public board, 1.4% of CEOs serve on two additional public company boards, and no CEOs serve on three.

34 When the executive officer in question serves only as an executive at a special purpose acquisition company (SPAC) the

Benchmark Policy will generally apply the higher threshold of five public company directorships.


2026 Benchmark Policy Guidelines — United States	32

additional members of the responsible committee in cases where the committee chair is not standing for

election due to a classified board, or based on other factors, including the company’s size, industry and its

overall governance profile.

Director Commitments

Directors should have the necessary time to fulfill their duties to shareholders, as overcommitted directors may

pose a material risk to a company’s shareholders, particularly during periods of crisis. In addition, recent

research indicates that the time commitment associated with being a director has been on a significant upward

trend in the past decade.33 As a result, the Benchmark Policy generally recommends that shareholders vote

against a director who serves as an executive officer (other than executive chair) of any public company34 while

serving on more than one external public company board, a director who serves as an executive chair of any

public company while serving on more than two external public company boards, and any other director who

serves on more than five public company boards.

Because executives will primarily devote their attention to executive duties, the Benchmark Policy generally will

not recommend that shareholders vote against overcommitted directors at the companies where they serve as

an executive.

When determining whether a director’s service on an excessive number of boards may limit the ability of the

director to devote sufficient time to board duties, the Benchmark Policy may consider other potentially relevant

factors such as the size and location of the other companies where the director serves on the board, the

director’s board roles at the companies in question, whether the director serves on the board of any large

privately-held companies, the director’s tenure on the boards in question, and the director’s attendance record

at all companies. In the case of directors who serve in executive roles other than CEO (e.g., executive chair), the

specific duties and responsibilities of that role will be evaluated in determining whether an exception is

warranted.

The Benchmark Policy may also refrain from recommending against certain directors if the company provides

sufficient rationale for their continued board service. This rationale should allow shareholders to evaluate the

scope of the directors’ other commitments, as well as their contributions to the board including specialized

knowledge of the company’s industry, strategy or key markets, the diversity of skills, perspective and

background they provide, and other relevant factors. The Benchmark Policy will also generally refrain from

recommending a vote against a director who serves on an excessive number of boards within a consolidated

group of companies in related industries, or a director who represents a firm whose sole purpose is to manage a

portfolio of investments which include the company.

35 The Benchmark Policy will generally refrain from recommending against a director who provides consulting services for

the company if the director is excluded from membership on the board’s key committees and we have not identified

significant governance concerns with the board.

36 The Benchmark Policy does not apply a look-back period for this situation. The interlock policy applies to both public and

private companies. On a case-by-case basis, other types of interlocking relationships will be evaluated, such as interlocks with

close family members of executives or within group companies. Further, the analysis also evaluates multiple board interlocks

among non-insiders (i.e., multiple directors serving on the same boards at other companies), for evidence of a pattern of

poor oversight.

37 Refer to the “Governance Structure and the Shareholder Franchise” section for further discussion of anti-takeover

measures, including poison pills.


2026 Benchmark Policy Guidelines — United States	33

Other Considerations

In addition to the three key characteristics — independence, performance, experience —used to evaluate board

members, the Benchmark Policy also considers conflict-of-interest issues as well as the size of the board of

directors when making voting recommendations.

Conflicts of Interest

Board members should be wholly free of identifiable and substantial conflicts of interest, regardless of the

overall level of independent directors on the board. Accordingly, the Benchmark Policy recommends that

shareholders vote against the following types of directors:

•A CFO who is on the board: The CFO holds a unique position relative to financial reporting and disclosure

to shareholders. Due to the critical importance of financial disclosure and reporting, the CFO should

report to the board and not be a member of it.

•A director who provides — or a director who has an immediate family member who provides — material

consulting or other material, professional services to the company. These services may include legal,

consulting,35 or financial services. These relationships may create conflicts for directors, since they may

be forced to weigh their own interests against shareholder interests when making board decisions. In

addition, a company’s decisions regarding where to turn for the best professional services may be

compromised when doing business with the professional services firm of one of the company’s

directors.

•A director, or a director who has an immediate family member, who is engaging in airplane, real estate,

or similar deals, including perquisite-type grants from the company, amounting to more than $50,000.

Directors who receive these sorts of payments from the company will have to make unnecessarily

complicated decisions that may pit their interests against those of shareholders.

•Interlocking directorships: CEOs or other top executives who serve on each other’s boards can create an

interlock that poses conflicts that should be avoided to ensure the promotion of shareholder interests

above all else.36

•All board members who served at a time when a poison pill with a term of longer than one year was

adopted without shareholder approval within the prior twelve months.37 In the event a board is

classified and shareholders are, therefore, unable to vote against all directors, the Benchmark Policy will

recommend voting against the remaining directors the next year they are up for a shareholder vote. If a

poison pill with a term of one year or less was adopted without shareholder approval, and without

adequate justification, the Benchmark Policy will consider recommending that shareholders vote against


2026 Benchmark Policy Guidelines — United States	34

all members of the governance committee. If the board has, without seeking shareholder approval, and

without adequate justification, extended the term of a poison pill by one year or less in two consecutive

years, the Benchmark Policy will consider recommending that shareholders vote against the entire

board.

Size of the Board of Directors

While there is no consensus on a universally applicable optimal board size, market best practice indicates that,

absent compelling circumstances, boards should have at least five directors to ensure sufficient diversity in

decision-making and to enable the formation of key board committees with independent directors. Conversely,

boards with more than 20 members will typically suffer under the weight of “too many cooks in the kitchen” and

have difficulty reaching consensus and making timely decisions. Sometimes the presence of too many voices can

make it difficult to draw on the wisdom and experience in the room by virtue of the need to limit the discussion

so that each voice may be heard.

To that end, the Benchmark Policy typically recommends voting against the chair of the nominating committee

(or the governance committee, in the absence of a nominating committee) at a board with fewer than five

directors or more than 20 directors.

Controlled Companies

Controlled companies warrant certain exceptions to the Benchmark Policy’s independence standards. The

board’s function is to protect shareholder interests; however, when an individual or entity (or group of

shareholders party to a formal agreement) owns more than 50% of the voting shares, the interests of the

majority of shareholders are the interests of that entity or individual. Consequently, the Benchmark Policy does

not apply the usual two-thirds board independence rule and, therefore, will not recommend voting against

boards whose composition reflects the makeup of the shareholder base.

Independence Exceptions

The independence exceptions made for controlled companies are as follows:

•The Benchmark Policy does not require that controlled companies have boards that are at least two-

thirds independent. So long as the insiders and/or affiliates are connected with the controlling entity,

the presence of non-independent board members is acceptable.

•The compensation committee and nominating and governance committees do not need to consist solely

of independent directors.

oStanding nominating and corporate governance committees at controlled companies are

unnecessary. Although having a committee charged with the duties of searching for, selecting,

and nominating independent directors can be beneficial, the unique composition of a controlled

company’s shareholder base can make such committees weak and irrelevant.

oIndependent compensation committees at controlled companies are also unnecessary. Although

independent directors are the best choice for approving and monitoring senior executives’ pay,

controlled companies serve a unique shareholder base whose voting power ensures the

protection of its interests. As such, having affiliated directors on a controlled company’s

compensation committee is acceptable. However, given that a controlled company has certain

obligations to minority shareholders, many investors agree that insiders should not serve on the


2026 Benchmark Policy Guidelines — United States	35

compensation committee. Therefore, the Benchmark Policy will recommend voting against any

insider (the CEO or otherwise) serving on the compensation committee.

•Controlled companies do not need an independent chair or an independent lead or presiding director.

Although an independent director in a position of authority on the board — such as chair or presiding

director — can best carry out the board’s duties, controlled companies serve a unique shareholder base

whose voting power ensures the protection of its interests.

Size of the Board of Directors

The Benchmark Policy has no board size requirements for controlled companies.

Audit Committee Independence

Despite a controlled company’s status, unlike for the other key committees, market best practice indicates that

audit committees should consist solely of independent directors. Regardless of a company’s controlled status,

the interests of all shareholders must be protected by ensuring the integrity and accuracy of the company’s

financial statements. Allowing affiliated directors to oversee the preparation of financial reports could create an

insurmountable conflict of interest. As such, the Benchmark Policy typically recommends that shareholders vote

against any affiliated or inside director serving on an audit committee.

Board Responsiveness at Multi-Class Companies

At controlled companies and companies that have multi-class share structures with unequal voting rights, the

level of approval or disapproval attributed to unaffiliated shareholders will be carefully examined when

determining whether board responsiveness is warranted. In the case of companies that have multi-class share

structures with unequal voting rights, the Benchmark Policy analysis will generally include an examination of the

level of approval or disapproval attributed to unaffiliated shareholders on a “one share, one vote” basis. At

controlled and multi-class companies, when at least 20% or more of unaffiliated shareholders vote contrary to

management, boards should engage with shareholders and demonstrate some initial level of responsiveness;

and when a majority or more of unaffiliated shareholders vote contrary to management, boards should engage

with unaffiliated shareholders and provide a more robust response to fully address shareholder concerns.

Significant Shareholders

Where an individual or entity holds between 20-50% of a company’s voting power, the Benchmark Policy allows

for proportional representation on the board and committees (excluding the audit committee) based on the

individual or entity’s percentage of ownership.

Governance Following an IPO, Spin-Off, or Direct Listing

Companies that have recently completed an initial public offering (IPO), spin-off, or direct listing should generally

be allowed adequate time to fully comply with marketplace listing requirements and meet basic corporate

governance standards. The Benchmark Policy typically refrains from making recommendations on the basis of

governance standards (e.g., board independence, committee membership and structure, meeting attendance,

etc.) during the one-year period following an IPO.

However, some cases warrant shareholder action against the board of a company that has completed an IPO,

spin-off, or direct listing within the past year. When evaluating companies that have recently gone public, the


2026 Benchmark Policy Guidelines — United States	36

analysis will review the terms of the applicable governing documents in order to determine whether shareholder

rights are being severely restricted indefinitely. Many investors view board approval of highly restrictive

governing documents as a problematic governance practice and believe that such boards have demonstrated

that they may subvert shareholder interests following the IPO. In the evaluation of the governing documents,

the Benchmark Policy will consider:

•The adoption of anti-takeover provisions, such as a poison pill or classified board.

•Supermajority vote requirements to amend governing documents.

•The presence of exclusive forum or fee-shifting provisions.

•The presence of mandatory arbitration provisions.

•Whether shareholders can call special meetings or act by written consent.

•The voting standard provided for the election of directors.

•The ability of shareholders to remove directors without cause.

•The presence of evergreen provisions in the company’s equity compensation arrangements.

•The presence of a multi-class share structure that does not afford common shareholders voting power

that is aligned with their economic interest.

In cases where it has been determined that the board has approved overly restrictive governing documents, the

Benchmark Policy will generally recommend voting against members of the governance committee. If there is no

governance committee, or if a portion of such committee members are not standing for election due to a

classified board structure, the recommendation may be expanded to additional director nominees, based on

who is standing for election.

In cases where, preceding an IPO, the board adopts a multi-class share structure where voting rights are not

aligned with economic interest, or an anti-takeover provision, such as a poison pill or classified board, the

Benchmark Policy will generally recommend voting against all members of the board who served at the time of

the IPO if the board: (i) did not also commit to submitting these provisions to a shareholder vote at the

company’s first shareholder meeting following the IPO; or (ii) did not provide for a reasonable sunset of these

provisions (generally three to five years in the case of a classified board or poison pill; or seven years or less in

the case of a multi-class share structure). In the case of a multi-class share structure, if these provisions are put

to a shareholder vote, the analysis will examine the level of approval or disapproval attributed to unaffiliated

shareholders when determining the vote outcome.

Adopting an anti-takeover device can unfairly penalize future shareholders who (except for electing to buy or

sell the stock) are unable to weigh in on a matter that could potentially negatively impact their ownership

interest. This notion is strengthened when a board adopts a classified board with an infinite duration or a poison

pill with a five- to ten-year term immediately prior to going public, thereby insulating management for a

substantial amount of time.

In addition, shareholders should also be wary of companies that adopt supermajority voting requirements

before their IPO. Absent explicit provisions in the articles or bylaws stipulating that certain policies will be

phased out over a certain period of time, long-term shareholders could find themselves in the predicament of

having to attain a supermajority vote to approve future proposals seeking to eliminate such policies.

38 Where a company is not included in a relevant stock index (i.e. S&P 500, Russell 1000, or Russell 3000) due to its status as

a dual-listed or foreign-incorporated company and has comparable market capitalization as companies included in the

relevant index, the Benchmark Policy will generally apply the policies that relate to companies included in the relevant

index.


2026 Benchmark Policy Guidelines — United States	37

Governance Following a Business Combination with a Special Purpose Acquisition

Company

The business combination of a private company with a publicly traded special purpose acquisition company

(SPAC) facilitates the private entity becoming a publicly traded corporation. Thus, the business combination

represents the private company’s de-facto IPO. Some cases may warrant shareholder action against the board

of a company that has completed a business combination with a SPAC within the past year.

At meetings where shareholders vote on the business combination of a SPAC with a private company,

shareholders are generally voting on a new corporate charter for the post-combination company as a condition

for approval of the business combination. In many cases, shareholders are faced with the dilemma of having to

approve corporate charters that severely restrict shareholder rights to facilitate the business combination.

Therefore, when shareholders are required to approve binding charters as a condition for approval of a business

combination with a SPAC, many investors expect that shareholders be provided with advisory votes on material

charter amendments as a means to voice their opinions on such restrictive governance provisions.

When evaluating companies that have recently gone public via a business combination with a SPAC, the

Benchmark Policy will review the terms of the applicable governing documents to determine whether

shareholder rights are being severely restricted indefinitely and whether these restrictive provisions were put

forth for a shareholder vote on an advisory basis at the prior meeting where shareholders voted on the business

combination.

In cases where, prior to the combined company becoming publicly traded, the board adopts a multi-class share

structure where voting rights are not aligned with economic interest, or an anti-takeover provision, such as a

poison pill or classified board, the Benchmark Policy will generally recommend voting against all members of the

board who served at the time of the combined company becoming publicly traded if the board: (i) did not also

submit these provisions to a shareholder vote on an advisory basis at the prior meeting where shareholders

voted on the business combination; (ii) did not also commit to submitting these provisions to a shareholder vote

at the company’s first shareholder meeting following the company becoming publicly traded; or (iii) did not

provide for a reasonable sunset of these provisions (generally three to five years in the case of a classified board

or poison pill; or seven years or less in the case of a multi-class share structure).

As previously stated, the Benchmark Policy takes the view that adopting an anti-takeover device unfairly

penalizes future shareholders who (except for electing to buy or sell the stock) are unable to weigh in on a

matter that could potentially negatively impact their ownership interest. Accordingly, the same principles

outlined in the above section regarding the adoption of anti-takeover devices also apply to companies who have

recently completed a business combination.

Dual-Listed or Foreign-Incorporated Companies

For companies that trade on multiple exchanges or are incorporated in foreign jurisdictions but trade only in the

U.S., the Benchmark Policy applies the governance standard most relevant in each situation.38 The Benchmark


2026 Benchmark Policy Guidelines — United States	38

Policy will consider a number of factors in determining which country-specific governance standard to apply,

including but not limited to: (i) the corporate governance structure and features of the company including

whether the board structure is unique to a particular market; (ii) the nature of the proposals; (iii) the location of

the company’s primary listing, if one can be determined; (iv) the regulatory/governance regime that the board is

reporting against; and (v) the availability and completeness of the company’s SEC filings.

OTC-listed Companies

Companies trading on the OTC Bulletin Board are not considered “listed companies” under SEC rules and

therefore not subject to the same governance standards as listed companies. Nonetheless, more stringent

corporate governance standards should be applied to these companies given that their shares are still publicly

traded.

When reviewing OTC companies, the analysis will review the available disclosure relating to the shareholder

meeting to determine whether shareholders are able to evaluate several key pieces of information, including: (i)

the composition of the board’s key committees, if any; (ii) the level of share ownership of company insiders or

directors; (iii) the board meeting attendance record of directors; (iv) executive and non-employee director

compensation; (v) related-party transactions conducted during the past year; and (vi) the board’s leadership

structure and determinations regarding director independence.

The Benchmark Policy raises particular concern when company disclosure lacks any information regarding the

board’s key committees. Committees of the board are an essential tool for clarifying how the responsibilities of

the board are being delegated, and specifically for indicating which directors are accountable for ensuring: (i) the

independence and quality of directors, and the transparency and integrity of the nominating process; (ii)

compensation programs that are fair and appropriate; (iii) proper oversight of the company’s accounting,

financial reporting, and internal and external audits; and (iv) general adherence to principles of good corporate

governance.

In cases where shareholders are unable to identify which board members are responsible for ensuring oversight

of the above-mentioned responsibilities, the Benchmark Policy may consider recommending against certain

members of the board. It is the responsibility of the corporate governance committee to provide thorough

disclosure of the board’s governance practices. In the absence of such a committee, it is appropriate to hold the

board’s chair or, if such individual is an executive of the company, the longest-serving non-executive board

member accountable.

Mutual Fund Boards

Mutual funds, or investment companies, are structured differently from regular public companies (i.e., operating

companies). Typically, members of a fund’s advisor are on the board and management takes on a different role

from that of regular public companies. Thus, the Benchmark Policy focuses on a short list of requirements,

although many of the Benchmark Policy guidelines remain the same.

The following mutual fund policies are similar to the policies for regular public companies:

•Size of the board of directors — The board should be made up of between five and twenty directors.

•The CFO on the board — Neither the CFO of the fund nor the CFO of the fund’s registered investment

advisor should serve on the board.


2026 Benchmark Policy Guidelines — United States	39

•Independence of the audit committee — The audit committee should consist solely of independent

directors.

•Audit committee financial expert — At least one member of the audit committee should be designated

as the audit committee financial expert.

The following differences from regular public companies apply at mutual funds:

•Independence of the board —Market best practice indicates that three-fourths of an investment

company’s board should be made up of independent directors. This is consistent with a proposed SEC

rule on investment company boards. The Investment Company Act requires 40% of the board to be

independent. However, in 2001, the SEC amended the Exemptive Rules to require that a majority of a

mutual fund board be independent. In 2005, the SEC proposed increasing the independence threshold

to 75%, and the following year a federal appeals court ordered that this rule amendment be put back

out for public comment, putting it back into “proposed rule” status. Since mutual fund boards play a

vital role in overseeing the relationship between the fund and its investment manager, there is greater

need for independent oversight than there is for an operating company board.

•When the auditor is not up for ratification — The Benchmark Policy does not recommend voting against

the audit committee if the auditor is not up for ratification. Due to the different legal structure of an

investment company compared to an operating company, the auditor of an investment company (i.e.,

mutual fund) does not conduct the same level of financial review for each investment company as for an

operating company.

•Non-independent chair —The Benchmark Policy generally prefers that the roles of a mutual fund’s chair

and CEO should be separate. Accordingly, it recommends voting against the chair of an investment

company’s nominating committee as well as the board chair if the chair and CEO of a mutual fund are

the same person and the fund does not have an independent lead or presiding director.

•Multiple funds overseen by the same director — Unlike service on a public company board, mutual

fund boards require much less of a time commitment. Mutual fund directors typically serve on dozens of

other mutual fund boards, often within the same fund complex. The Investment Company Institute’s

(ICI) Overview of Fund Governance Practices, 1994-2012, indicates that the average number of funds

served by an independent director in 2012 was 53. Absent evidence that a specific director is hindered

from being an effective board member at a fund due to service on other funds’ boards, the Benchmark

Policy does not maintain a cap on the number of outside mutual fund boards that a director can serve

on.

Declassified Boards

Investors broadly view the repeal of staggered boards and the annual election of directors favorably. Generally,

staggered boards are less accountable to shareholders than boards that are elected annually. Furthermore, the

annual election of directors encourages board members to focus on shareholder interests.

Empirical studies have shown: (i) staggered boards are associated with a reduction in a firm’s valuation; and (ii)

in the context of hostile takeovers, staggered boards operate as a takeover defense, which entrenches

management, discourages potential acquirers, and delivers a lower return to target shareholders.

39 Lucian Bebchuk, John Coates IV, Guhan Subramanian, “The Powerful Antitakeover Force of Staggered Boards: Further

Findings and a Reply to Symposium Participants,” 55 Stanford Law Review 885-917 (2002).

40 Lucian Bebchuk, Alma Cohen, “The Costs of Entrenched Boards” (2004).

41 Lucian Bebchuk, Alma Cohen and Charles C.Y. Wang, “Staggered Boards and the Wealth of Shareholders: Evidence from

a Natural Experiment,” SSRN: http://ssrn.com/abstract=1706806 (2010), p. 26.

42 Spencer Stuart Board Index, 2025, p. 46.

43 Brad Goldberg, Michael Mencher, and Vince Flynn, “Proxy Season Highlights: Shareholder and Management Proposals,”

Cooley LLP, July 22, 2025.


2026 Benchmark Policy Guidelines — United States	40

Some research has indicated that shareholders are worse off when a staggered board blocks a transaction, and

that, when a staggered board negotiates a friendly transaction, no statistically significant difference in premium

occurs.39 Additional research found that charter-based staggered boards “reduce the market value of a firm by

4% to 6% of its market capitalization” and that “staggered boards bring about, and not merely reflect, this

reduction in market value.”40 A subsequent study reaffirmed that classified boards reduce shareholder value,

finding “that the ongoing process of dismantling staggered boards, encouraged by institutional investors, could

well contribute to increasing shareholder wealth.”41

Shareholders have increasingly come to agree with this view. In 2025, 89% of S&P 500 companies had

declassified boards, up from 68% in 2009.42 Management proposals to declassify boards are typically approved

with near unanimity and shareholder proposals on the topic often receive strong shareholder support; in 2025,

shareholder proposals requesting that companies declassify their boards received average support of 77.9%

(excluding abstentions and broker non-votes).43 Further, in the first half of 2025, over half of all those companies

targeted by shareholder proposals requesting that all directors stand for election annually did not recommend

that shareholders oppose the resolution, a departure from the more typical management recommendation to

vote against shareholder proposals.

Given that declassified boards promote director accountability, the empirical evidence suggesting staggered

boards reduce a company’s value, and the established shareholder opposition to such a structure, the

Benchmark Policy supports the declassification of boards and the annual election of directors.

Board Composition and Refreshment

Many investors support routine director evaluation, including independent external reviews, and periodic board

refreshment to foster the sharing of diverse perspectives in the boardroom and the generation of new ideas and

business strategies. The Benchmark Policy is of the view that the board should evaluate the need for changes to

board composition based on an analysis of skills and experience necessary for the company, as well as the

results of the director evaluations, as opposed to relying solely on age or tenure limits. When necessary,

shareholders can address concerns regarding proper board composition through director elections.

A director’s experience can be a valuable asset to shareholders because of the complex, critical issues that

boards face. This said, in rare circumstances, a lack of refreshment can contribute to inadequate board

responsiveness to poor company performance.

The Benchmark Policy will note as a potential concern instances where the average tenure of non-executive

directors is 10 years or more and no new directors have joined the board in the past five years. While the

analysis will highlight this as a potential area of concern, the Benchmark Policy will not make recommendations

strictly on this basis, unless other governance or board performance concerns are identified.


2026 Benchmark Policy Guidelines — United States	41

On occasion, age or term limits can be used to remove a director for boards that are unwilling to police their

membership and enforce turnover. Some shareholders support term limits to force change in such

circumstances.

While age limits can aid board succession planning, the long-term impact of age limits restricts experienced and

potentially valuable board members from service through an arbitrary means. Accordingly, many shareholders

favor monitoring the board’s overall composition, including the diversity of its members, the alignment of the

board’s areas of expertise with a company’s strategy, the board’s approach to corporate governance, and its

stewardship of company performance, rather than imposing inflexible rules that don’t necessarily correlate with

returns or benefits for shareholders.

However, if a board adopts term/age limits, it should not waive such limits. In cases where the board waives its

term/age limits for two or more consecutive years, the Benchmark Policy will generally recommend that

shareholders vote against the nominating and/or governance committee chair, unless a compelling rationale is

provided for why the board is proposing to waive this rule, such as consummation of a corporate transaction.

Board Diversity

The Benchmark Policy’s approach to providing proxy voting guidance considering diversity factors at U.S.

companies and its display in Proxy Papers was modified in March 2025. For more information, please see the

2025 Supplemental Statement on Diversity Considerations at US Companies.

Many investors consider it important to ensure that the board is composed of directors who have a diversity of

skills, thought and experience, as such diversity benefits companies by providing a broad range of perspectives

and insights. Accordingly, the Benchmark Policy closely reviews the board’s composition for representation of

diverse director candidates. For further information on board diversity, please see In-Depth Report: Board

Gender Diversity.

Board Gender Diversity

The nominating and governance committee is responsible for ensuring sufficient board diversity, or for publicly

communicating its rationale or a plan for increasing diversity. As such, the Benchmark Policy will generally

recommend voting against the chair of the nominating committee of a board that is not at least 30% gender

diverse, or all members of the nominating committee of a board with no gender diverse directors, at companies

within the Russell 3000 index. For companies outside the Russell 3000 index, the Benchmark Policy requires a

minimum of one gender diverse director.

When making these voting recommendations, a company’s disclosure of its diversity considerations will be

carefully reviewed and the Benchmark Policy may refrain from recommending that shareholders vote against

directors when boards have provided sufficient rationale for the lack of diversity or a plan to address the lack of

diversity, including a timeline of when the board intends to appoint additional gender diverse directors

(generally by the next annual meeting or as soon as reasonably practicable).

The gender diversity recommendations may be extended to additional members of the nominating committee in

cases where the committee chair is not standing for election due to a classified board, or based on other factors,

including the company’s size and industry, applicable laws in its state of headquarters, and its overall

governance profile.


2026 Benchmark Policy Guidelines — United States	42

Board Underrepresented Community Diversity

The Benchmark Policy will generally recommend against the chair of the nominating committee of a board with

fewer than one director from an underrepresented community at companies within the Russell 1000 index.

The Benchmark Policy defines “underrepresented community director” as an individual who self-identifies as

Black, African American, North African, Middle Eastern, Hispanic, Latino, Asian, Pacific Islander, Native American,

Native Hawaiian, or Alaskan Native, or who self-identifies as a member of the LGBTQIA+ community. For the

purposes of this evaluation, the analysis will rely solely on self-identified demographic information as disclosed

in company proxy statements.

When making these voting recommendations, a company’s disclosure of its diversity considerations will be

carefully reviewed and the Benchmark Policy may refrain from recommending that shareholders vote against

directors when boards have provided a sufficient rationale or plan to address the lack of diversity on the board,

including a timeline to appoint additional directors from an underrepresented community (generally by the next

annual meeting or as soon as reasonably practicable).

These recommendations may be extended to additional members of the nominating committee in cases where

the committee chair is not standing for election due to a classified board structure, or based on other factors,

including the company’s size and industry, applicable laws in its state of headquarters, and its overall

governance profile.

State Laws on Diversity

Several states have begun to encourage board diversity through legislation. Some state laws have imposed

mandatory board composition requirements, while other states have enacted legislation that encourages

companies to diversify their boards, but does not mandate board composition requirements. Furthermore,

several states have enacted or considered enacting certain disclosure or reporting requirements in filings made

with each respective state annually.

The Benchmark Policy will recommend in accordance with mandatory board composition requirements set forth

in applicable state laws when they come into effect. It will generally refrain from recommending shareholder

opposition to directors on this basis when applicable state laws do not mandate board composition

requirements, are non-binding, or solely impose disclosure or reporting requirements.

Disclosure of Director Diversity and Skills

Company disclosure is critical to allow shareholders to measure the mix of diverse attributes and skills of

directors. Accordingly, at companies in the Russell 1000 index, the Benchmark Policy analysis includes a review

of how a company’s proxy statement presents: (i) the board’s current percentage of racial/ethnic diversity; (ii)

whether the board’s definition of diversity explicitly includes gender and/or race/ethnicity; (iii) whether the

board has adopted a policy requiring women and minorities to be included in the initial pool of candidates when

selecting new director nominees (aka “Rooney Rule”); and (iv) board skills disclosure. Such ratings will help

inform the assessment of a company’s overall governance and may be a contributing factor in voting

recommendations when additional board-related concerns have been identified.

At companies in the Russell 1000 index that have not provided any disclosure in any of the above categories, the

Benchmark Policy will generally recommend voting against the chair of the nominating and/or governance


2026 Benchmark Policy Guidelines — United States	43

committee. Further, when companies in the Russell 1000 index have not provided any disclosure of individual or

aggregate racial/ethnic minority board demographic information, the Benchmark Policy will generally

recommend voting against the chair of the nominating and/or governance committee.

Proxy Access

In lieu of running their own contested election, proxy access not only allows certain shareholders to nominate

directors to company boards but also ensures that the shareholder nominees would be included on the

company’s ballot, significantly enhancing the ability of shareholders to play a meaningful role in selecting their

representatives. Market best practice generally supports affording shareholders the right to nominate director

candidates to management’s proxy as a means to ensure that significant, long-term shareholders have the ability

to nominate candidates to the board.

Companies generally seek shareholder approval to amend their bylaws to adopt proxy access in response to

shareholder engagement or pressure, usually in the form of a shareholder proposal requesting proxy access,

although some companies may adopt some elements of proxy access without prompting. The Benchmark Policy

considers several factors when evaluating whether to support proposals for companies to adopt proxy access,

including the specified minimum ownership and holding requirement for shareholders to nominate one or more

directors, as well as company size, performance and responsiveness to shareholders.

For a discussion of Benchmark Policy approach to shareholder proposals regarding proxy access, refer to Glass

Lewis’ Benchmark Policy Guidelines for Shareholder Proposals & ESG-Related Issues, available at

www.glasslewis.com.

Majority Vote for Election of Directors

To promote a basic level of director accountability, investors broadly agree that companies should require that

directors must receive a majority of votes cast to be elected. Unlike a plurality vote standard, a majority voting

standard allows shareholders to collectively vote to reject a director they believe will not pursue and protect

their best interests, which many investors view as leading to more attentive directors. For a detailed overview of

voting standards for director elections in the U.S., please refer to the Market Overview – U.S. Election of

Directors Voting Standards.

Majority Voting Standards

In line with CII’s Policies on Corporate Governance and ICGN’s Global Governance Principles and in accordance

with broad investor sentiment, directors should generally be elected by a majority of votes cast in uncontested

elections. Further, many investors expect that directors who fail to receive the support of a majority of votes

cast in an uncontested election step down from the board as soon as practicable and not be reappointed.

Majority voting standards have been adopted by most large cap and S&P 500 companies. Under a majority

voting standard, uncontested nominees are elected to the board when they receive a higher number of votes

cast "for" than the number of votes cast "against".

Most, though not all, majority voting policies contain resignation clauses, whereby nominees who fail to receive

a majority of shareholder votes must submit their conditional resignation to the board. The board may opt to

44 Spencer Stuart Board Index, 2025, p. 46.


2026 Benchmark Policy Guidelines — United States	44

either accept or reject the nominee's resignation, which gives the board final authority over whether to accept

the outcome of the shareholders' vote.

However, majority voting alongside a resignation policy may be viewed by investors as insufficient, because

requiring a director to resign is not the same as requiring a majority vote to elect a director. As such, this

modified approach does not allow shareholders to have a definitive voice in the election process. As of 2025,

88% of the S&P 500 Index has implemented a resignation policy for directors failing to receive majority

shareholder support, compared to 65% in 2009.44

Although shareholders only rarely fail to support directors, the occasional majority vote against a director’s

election will likely deter the election of directors with a record of ignoring shareholder interests. The Benchmark

Policy will, therefore, generally support proposals calling for the election of directors by a majority vote, except

in cases of contested director elections. Further, most directors who fail to receive a majority shareholder vote

in favor of their election do not step down, underscoring the need for true majority voting.

Plurality Voting Standards

Plurality voting remains the default voting standard for uncontested elections of directors at most mid- and

small-cap companies. Under a plurality voting standard, director nominees receiving the most “for” votes are

elected to office until all available board seats are filled, regardless of whether those nominees receive a

majority of votes cast in favor of their election (i.e., more than 50% of the total votes). As a result, in an

uncontested election, where the number of director nominees is equal to the number of available board seats, it

is possible for a nominee to secure their election by receiving a single “for” vote.

Generally, in a plurality election shareholders who wish to oppose a nominee can only “withhold” their vote,

rather than vote “against”. While withholding a vote provides shareholders with a symbolic means of

communicating their disapproval of a candidate, it has no legal effect on the outcome of the election and is thus

equivalent to an abstention. Though it is rare, this means that in some cases directors receiving a greater

number of “withhold” votes than “for” votes can be elected to office.

Conflicting and Excluded Proposals

SEC Rule 14a-8(i)(9) allows companies to exclude shareholder proposals “if the proposal directly conflicts with

one of the company’s own proposals to be submitted to shareholders at the same meeting.” On October 22,

2015, the SEC issued Staff Legal Bulletin No. 14H (SLB 14H) clarifying its rule concerning the exclusion of certain

shareholder proposals when similar items are also on the ballot. SLB 14H increased the burden on companies to

prove to SEC staff that a conflict exists; therefore, many companies still chose to place management proposals

alongside similar shareholder proposals in many cases.

During the 2018 proxy season, a new trend in the SEC’s interpretation of this rule emerged. Upon submission of

shareholder proposals requesting that companies adopt a lower special meeting threshold, several companies

petitioned the SEC for no-action relief under the premise that the shareholder proposals conflicted with

management’s own special meeting proposals, even though the management proposals set a higher threshold

than those requested by the proponent. No-action relief was granted to these companies; however, the SEC

stipulated that the companies must state in the rationale for the management proposals that a vote in favor of


2026 Benchmark Policy Guidelines — United States	45

management’s proposal was tantamount to a vote against the adoption of a lower special meeting threshold. In

certain instances, shareholder proposals to lower an existing special meeting right threshold were excluded on

the basis that they conflicted with management proposals seeking to ratify the existing special meeting rights.

The exclusion of these shareholder proposals can be problematic as, in these instances, shareholders are not

offered any enhanced shareholder right, nor would the approval (or rejection) of the ratification proposal

initiate any type of meaningful change to shareholders’ rights.

In instances where companies have excluded shareholder proposals, such as those instances where special

meeting shareholder proposals are excluded as a result of “conflicting” management proposals, the Benchmark

Policy will take a case-by-case approach, taking into account the following issues:

•The threshold proposed by the shareholder resolution;

•The threshold proposed or established by management and the attendant rationale for the threshold;

•Whether management’s proposal is seeking to ratify an existing special meeting right or adopt a bylaw

that would establish a special meeting right; and

•The company’s overall governance profile, including its overall responsiveness to and engagement with

shareholders.

The Benchmark Policy generally favors a 10-15% special meeting right. Accordingly, it will generally recommend

voting for management or shareholder proposals that fall within this range. When faced with conflicting

proposals, the Benchmark Policy will generally recommend in favor of the lower special meeting right and will

recommend voting against the proposal with the higher threshold.

However, in instances where there are conflicting management and shareholder proposals and a company has

not established a special meeting right, the Benchmark Policy may recommend that shareholders vote in favor

of the shareholder proposal and that they abstain from a management-proposed bylaw amendment seeking to

establish a special meeting right. An abstention can ensure that shareholders are sending a clear signal regarding

their preference for the appropriate threshold for a special meeting right, while not directly opposing the

establishment of such a right.

In cases where the company excludes a shareholder proposal seeking a reduced special meeting right by means

of ratifying a management proposal that is materially different from the shareholder proposal, the Benchmark

Policy will generally recommend voting against the chair or members of the governance committee. In other

instances of conflicting management and shareholder proposals, the Benchmark Policy will consider the

following:

•The nature of the underlying issue;

•The benefit to shareholders of implementing the proposal;

•The materiality of the differences between the terms of the shareholder proposal and management

proposal;

•The context of a company’s shareholder base, corporate structure and other relevant circumstances;

and

45 Colleen Honigsberg, Robert Jackson. “Exxon’s Suit Against its Own Shareholders Threatens Valuable Bargaining.”

Promarket. July 16, 2024.


2026 Benchmark Policy Guidelines — United States	46

•A company’s overall governance profile and, specifically, its responsiveness to shareholders as

evidenced by a company’s response to previous shareholder proposals and its adoption of progressive

shareholder rights provisions.

In recent years, the considerations given by the SEC when determining whether companies may exclude certain

shareholder proposals have been dynamic. As of Fall 2025, these changes have accelerated as the SEC has

announced a series of current and planned measures that may significantly change the number and type of

shareholder proposals that come to a vote at U.S. companies.

While the impact of these changes and how investors respond to them is uncertain at this time, the Benchmark

Policy will generally approach these matters with the basic premise that shareholders should be afforded the

opportunity to vote on matters of material importance. To be sure, the Benchmark Policy respects the

limitations placed on shareholder proponents, as certain shareholder proposals can unduly burden companies or

cross the line between the purview of shareholders and that of the board. It also recognizes that not all

shareholder proposals serve the long-term interests of shareholders.

Nonetheless, the Benchmark Policy views the basic right of shareholders to file proposals as critical to the proper

functioning of our system of corporate governance and in the best economic interest of all shareholders. A

number of important corporate governance reforms, such as declassified boards and majority voting, would not

have been achieved without shareholders' willingness and ability to submit proposals, for which they bear the

costs and only realize a portion of the benefits. Empirical evidence has shown that even withdrawn shareholder

proposals, such as those on executive compensation, can encourage beneficial corporate practices, thereby

benefiting all shareholders.45

The SEC’s ongoing changes and their ramifications will be closely monitored as the 2026 proxy season in the

United States approaches. The Benchmark Policy may be updated prior to or during the 2026 proxy season

should its approach to these matters change or regulatory developments warrant such an update.

46 “Final Report of the Advisory Committee on the Auditing Profession to the U.S. Department of the Treasury.” p. VIII:20,

October 6, 2008.


2026 Benchmark Policy Guidelines — United States	47

Transparency and Integrity in Financial

Reporting

Auditor Ratification

The auditor’s role as gatekeeper is crucial in ensuring the integrity and transparency of the financial information

necessary for protecting shareholder value. Shareholders rely on the auditor to ask tough questions and to do a

thorough analysis of a company’s books to ensure that the information provided to shareholders is complete,

accurate, fair, and that it is a reasonable representation of a company’s financial position. The only way

shareholders can make rational investment decisions is if the market is equipped with accurate information

about a company’s fiscal health. As stated in the October 6, 2008 Final Report of the Advisory Committee on the

Auditing Profession to the U.S. Department of the Treasury:

“The auditor is expected to offer critical and objective judgment on the financial matters under

consideration, and actual and perceived absence of conflicts is critical to that expectation. The

Committee believes that auditors, investors, public companies, and other market participants must

understand the independence requirements and their objectives, and that auditors must adopt a mindset

of skepticism when facing situations that may compromise their independence.”

As such, shareholders should demand an objective, competent and diligent auditor who performs at or above

professional standards at every company in which the investors hold an interest. Like directors, auditors should

be free from conflicts of interest and should avoid situations requiring a choice between the auditor’s interests

and those of the shareholders they serve. Almost without exception, shareholders should be able to annually

review an auditor’s performance and to annually ratify a board’s auditor selection. Moreover, in October 2008,

the Advisory Committee on the Auditing Profession recommended that “to further enhance audit committee

oversight and auditor accountability ... disclosure in the company proxy statement regarding shareholder

ratification [should] include the name(s) of the senior auditing partner(s) staffed on the engagement.”46

On August 16, 2011, the PCAOB issued a Concept Release seeking public comment on ways that auditor

independence, objectivity and professional skepticism could be enhanced, with a specific emphasis on

mandatory audit firm rotation. The PCAOB convened several public roundtable meetings during 2012 to further

discuss such matters. Auditor rotation can ensure both the independence of the auditor and the integrity of the

audit. Accordingly, the Benchmark Policy will typically recommend that shareholders support proposals to

require auditor rotation when the proposal uses a reasonable period of time (usually not less than 5-7 years),

particularly at companies with a history of accounting problems.

On June 1, 2017, the PCAOB adopted new standards to enhance auditor reports by providing additional

important information to investors. For companies with fiscal year end dates on or after December 15, 2017,

reports were required to include the year in which the auditor began serving consecutively as the company’s

auditor. For large accelerated filers with fiscal year ends of June 30, 2019 or later, and for all other companies

with fiscal year ends of December 15, 2020 or later, communication of critical audit matters (CAMs) are also

47 An auditor does not audit interim financial statements. Thus, the Benchmark Policy generally will not oppose auditor

ratification due to a restatement of interim financial statements unless the nature of the misstatement is clear from a

reading of the incorrect financial statements.


2026 Benchmark Policy Guidelines — United States	48

required. CAMs are matters that have been communicated to the audit committee, are related to accounts or

disclosures that are material to the financial statements, and involve especially challenging, subjective, or

complex auditor judgment.

The additional reporting requirements are beneficial for investors as they can provide investors with information

that is critical to making an informed judgment about an auditor’s independence and performance.

Furthermore, the additional requirements are an important step toward enhancing the relevance and usefulness

of auditor reports, which too often are seen as boilerplate compliance documents that lack the relevant details

to provide meaningful insight into a particular audit.

Voting Recommendations on Auditor Ratification

The Benchmark Policy will generally recommend support for a company’s choice of auditor, except when there

are credible indications that the auditor’s independence or audit integrity may have been compromised. Where

a board has not allowed shareholders to review and ratify an auditor, the Benchmark Policy will typically

recommend voting against the audit committee chair. When there have been material restatements of annual

financial statements or material weaknesses in internal controls, the Benchmark Policy will typically recommend

voting against the entire audit committee.

Reasons why the Benchmark Policy may not recommend ratification of an auditor include:

•When audit fees plus audit-related fees total less than the tax fees and/or other non-audit fees.

•Recent material restatements of annual financial statements, including those resulting in the reporting

of material weaknesses in internal controls and including late filings by the company where the auditor

bears some responsibility for the restatement or late filing.47

•When the auditor performs prohibited services such as tax-shelter work, tax services for the CEO or CFO,

or contingent-fee work, such as a fee based on a percentage of economic benefit to the company.

•When audit fees are excessively low, especially when compared with other companies in the same

industry.

•When the company has aggressive accounting policies.

•When the company has poor disclosure or lack of transparency in its financial statements.

•Where the auditor limited its liability through its contract with the company or the audit contract

requires the corporation to use alternative dispute resolution procedures without adequate justification.

•Presence of other relationships or concerns with the auditor that might suggest a conflict between the

auditor’s interests and shareholder interests.

•In determining whether shareholders would benefit from rotating the company’s auditor, where

relevant, the Benchmark Policy will consider factors that may call into question an auditor’s

effectiveness, including auditor tenure, a pattern of inaccurate audits, and any ongoing litigation or

significant controversies. When considering ongoing litigation and significant controversies, the


2026 Benchmark Policy Guidelines — United States	49

Benchmark Policy is mindful that such matters may involve unadjudicated allegations and does not

assume the truth of such allegations or that the law has been violated. Instead, the Benchmark Policy

focuses more broadly on whether, under the particular facts and circumstances presented, the nature

and number of such lawsuits or other significant controversies reflects on the risk profile of the company

or suggests that appropriate risk mitigation measures may be warranted.

Pension Accounting Issues

A pension accounting question occasionally raised in proxy proposals is what effect, if any, projected returns on

employee pension assets should have on a company’s net income. This issue often arises in the context of

executive-compensation and the extent to which pension accounting should be reflected in business

performance for purposes of calculating payments to executives.

In accordance with prevailing market practice, pension credits should generally not be included in measuring

income that is used to award performance-based compensation. Because many of the assumptions used in

accounting for retirement plans are subject to the company’s discretion, management would have an obvious

conflict of interest if pay were tied to pension income, as projected income from pensions does not truly reflect

a company’s performance.


2026 Benchmark Policy Guidelines — United States	50

The Link Between Compensation and

Performance

The compensation awarded to senior executives is an important area in which the board's priorities are

revealed. Executive compensation should be linked directly with the performance of the business the executive

is charged with managing. Market best practice indicates that the most effective compensation arrangements

provide for an appropriate mix of performance-based short- and long-term incentives in addition to fixed pay

elements while promoting a prudent and sustainable level of risk-taking.

Comprehensive, timely and transparent disclosure of executive pay is critical to allowing shareholders to

evaluate the extent to which pay is aligned with company performance. The disclosure of performance metrics

and goals is an important component in assessing executive compensation. Performance metrics must vary

depending on the company and industry, among other factors, and may include a wide variety of financial

measures as well as industry-specific performance indicators. However, companies should disclose why the

specific performance metrics were selected and how the actions they are designed to incentivize will lead to

better corporate performance.

It is rarely in shareholders’ interests to disclose competitive data about individual salaries below the

senior executive level. Such disclosure could create internal personnel discord that would be counterproductive

for the company and its shareholders. Shareholders likely do not need nor would they benefit from detailed

reports about individual management employees other than the most senior executives.

Advisory Vote on Executive Compensation

(Say-on-Pay)

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) required most

companies to hold an advisory vote on executive compensation at the first shareholder meeting that occurs six

months after enactment of the bill (January 21, 2011).

This practice of allowing shareholders a non-binding vote on a company’s compensation report is standard

practice in many non-U.S. countries and has been a requirement for most companies in the United Kingdom

since 2003 and in Australia since 2005. Although say-on-pay proposals are non-binding, a high level of “against”

or “abstain” votes indicates substantial shareholder concern about a company’s compensation policies and

procedures.

Given the complexity of most companies’ compensation programs, the Benchmark Policy applies a highly

nuanced approach when analyzing advisory votes on executive compensation. Each company’s compensation is

reviewed on a case-by-case basis, recognizing that each company must be examined in the context of industry,

size, maturity, performance, financial condition, its historic pay for performance practices, and any other

relevant internal or external factors.

Companies should design and apply specific compensation policies and practices that are appropriate to the

circumstances of the company and, in particular, will attract and retain competent executives and other staff,

while motivating them to grow the company’s long-term shareholder value.


2026 Benchmark Policy Guidelines — United States	51

Where specific policies and practices serve to reasonably align compensation with performance, and such

practices are adequately disclosed, the Benchmark Policy will typically recommend that shareholders support

the company’s approach. If, however, those specific policies and practices fail to demonstrably link

compensation with performance, additional scrutiny is applied and the Benchmark Policy may recommend a

vote against the say-on-pay proposal.

Say-on-pay proposals are reviewed on both a qualitative and quantitative basis, with a focus on

several main areas:

•The overall design and structure of the company’s executive compensation programs including selection

and challenging nature of performance metrics;

•The implementation and effectiveness of the company’s executive compensation programs, including

pay mix and use of performance metrics in determining pay levels;

•The quality and content of the company’s disclosure;

•The quantum paid to executives; and

•The link between compensation and performance, as indicated by the company’s current and past pay-

for-performance scores.

Significant changes or modifications are reviewed, including post fiscal year-end changes and one-time awards,

particularly where the changes touch upon issues that are material to the alignment between pay and

shareholder interests. Additionally, while generally rare in the U.S. market, beneficial features such as, but not

limited to, post-vesting and/or post-retirement holding requirements may be viewed positively in the holistic

analysis.

Say-on-Pay Voting Recommendations

There are many elements that may drive voting recommendations. Informed by market best practices and

widespread investor sentiment, the following factors have been identified as particularly important in

Benchmark Policy voting recommendations:

•Evidence of a pattern of poor pay-for-performance practices (e.g., deficient or failing pay-for-

performance scores or a misalignment between incentive payouts and the shareholder experience),

•Unclear or questionable disclosure regarding the overall compensation structure (e.g., limited

information regarding benchmarking processes, limited rationale for bonus performance metrics and

targets, etc.),

•Questionable adjustments to certain aspects of the overall compensation structure (e.g., limited

rationale for significant changes to performance targets or metrics, the payout of guaranteed bonuses or

sizable retention grants, etc.), and/or

•Other egregious compensation practices.

The analysis of executive compensation programs is approached on a case-by-case basis. All factors related to

named executive officer compensation are reviewed, including quantitative analyses, structural features, the

presence of effective best practice policies, disclosure quality and trajectory-related factors. Except for

particularly egregious pay decisions and practices, no one factor would ordinarily lead to an unfavorable


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recommendation under the Benchmark Policy without a review of the company’s rationale and/or the influence

of such decisions or practices on other aspects of the pay program, most notably the company’s ability to align

executive pay with performance and the shareholder experience.

Although not an exhaustive list, the following factors are generally viewed negatively under the Benchmark

Policy:

•Inappropriate or outsized self-selected peer groups and/or benchmarking issues such as compensation

targets set well above the median without adequate justification;

•Egregious or excessive bonuses, equity awards, perquisites or severance payments, including golden

handshakes and golden parachutes;

•Insufficient response to low shareholder support on prior say-on-pay and/or other related compensation

proposals;

•Problematic contractual payments, such as guaranteed bonuses;

•Adjustments to performance results that lead to problematic pay outcomes;

•Insufficiently challenging performance targets and/or high potential payout opportunities;

•Performance targets that are lowered without justification;

•Discretionary bonuses paid when short- or long-term incentive plan targets were not met;

•High executive pay relative to peers that is not justified by outstanding company performance; and

•Inappropriate terms for the long-term incentive plans (please see “Long-Term Incentives” for more

information).

The aforementioned issues influence the assessment of the structure of a company’s compensation program.

Structure is evaluated on a “Good, Fair, Poor” rating scale whereby a “Good” rating represents a compensation

program with little to no concerns and market-leading practices, a “Fair” rating represents a compensation

program with some concerns but general adherence to best practices and a “Poor” rating represents a

compensation program that deviates significantly from best practice or contains one or more egregious

compensation practices. However, it should be noted that this rating is independent of any qualitative

assessment used in Glass Lewis’s proprietary pay-for-performance model.

It is important for companies to provide investors with clear and complete disclosure of all the significant terms

of compensation arrangements. Similar to structure, disclosure is evaluated on a “Good, Fair, Poor” rating scale.

A “Good” rating represents a thorough discussion of all elements of compensation with rationale. A “Fair” rating

represents an adequate discussion of all or most elements of compensation with rationale. A “Poor” rating

represents an incomplete or absent discussion of compensation. In instances where a company has simply failed

to provide sufficient disclosure of its policies, the Benchmark Policy may recommend that shareholders oppose

this proposal solely on this basis, regardless of the appropriateness of compensation levels. Regulatory

disclosure rules such as smaller reporting company disclosure standards may condone the omission of key

executive compensation information. However, companies should provide sufficient information in the proxy

statement to enable shareholders to vote in an informed manner.


2026 Benchmark Policy Guidelines — United States	53

In general, most companies will fall within the “Fair” range for both structure and disclosure, and the “Good”

and “Poor” ratings to highlight outliers.

Where egregious compensation practices are identified, shareholder opposition to the compensation committee

may be recommended under the Benchmark Policy based on the practices or actions of its members during the

year. Such practices may include approving large one-off payments, the inappropriate, unjustified use of

discretion, or sustained poor pay for performance practices. (Refer to the section on "Compensation Committee

Performance" for more information.)

Company Responsiveness

When companies receive a significant level of shareholder opposition to a say-on-pay proposal, defined as

when more than 20% of votes on the proposal are cast as “against” and/or “abstain”, it is considered best

practice for the board to demonstrate a commensurate level of engagement and responsiveness to the concerns

behind the disapproval, with a particular focus on responding to shareholder feedback. When assessing the level

of opposition to say-on-pay proposals, the level of opposition among disinterested shareholders as an

independent group may also be examined. While sweeping changes may not be made to a compensation

program without due consideration, the Benchmark Policy is of the view that the compensation committee

should demonstrate its responsiveness to significant opposition in its proxy statement. Although a majority of

shareholders may still have voted in favor of the proposal, the average approval rate for say-on-pay proposals is

typically above 90%, and support levels substantially below this level are outside of the norm. In general, market

expectations regarding the minimum appropriate levels of responsiveness will correspond to the level of

shareholder opposition, as expressed both through the magnitude of opposition in a single year, and whether

shareholder disapproval continues over a sustained period.

Appropriate responses to significant opposition to compensation plans include engagement with shareholders,

especially those that dissented to the proposal, to identify their concerns where possible, and, where

reasonable, implementing changes and/or making commitments that directly address those concerns within the

company’s compensation program. In cases where particularly egregious pay decisions caused a say-on-pay

proposal to fail, any changes made that directly address structural concerns about the pay decision are

considered. In the absence of any evidence in the disclosure that the board is actively engaging shareholders on

these issues and responding accordingly, the Benchmark Policy may hold compensation committee members

accountable for failing to adequately respond to shareholder opposition. Regarding such recommendations,

careful consideration will be given to the level of shareholder opposition, the severity of the issue, and the

company’s historical compensation practices.

Pay for Performance

An integral part of a well-structured compensation package is a successful link between pay and performance.

The Glass Lewis proprietary pay-for-performance model, which serves as the primary quantitative analysis, was

developed to better evaluate the link between pay and performance. Generally, compensation and performance

are measured against a peer group of appropriate companies that may overlap, to a certain extent, with a

company’s self-disclosed peers. This quantitative analysis provides a consistent framework and historical context

for clients to determine how well companies link executive compensation to relative performance. The

methodology takes a scorecard-based approach in evaluating pay-and-performance alignment. Final alignment


2026 Benchmark Policy Guidelines — United States	54

scores are determined by the weighted sum of up to six tests, each with their own severity rating. Overall scores

and ratings 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

The individual tests are as follows:

•Granted CEO Pay vs. TSR

•Granted CEO Pay vs. Financial Performance

•CEO STI Payouts vs. TSR

•Total Granted NEO Pay vs. Financial Performance

•CEO Compensation-Actually-Paid (“CAP”) vs. TSR

•Qualitative Factors (Downward Modifier)

Separately, a specific comparison between the company’s executive pay levels and its peers’ executive pay levels

may be discussed in the analysis for additional insight into the score. Likewise, a specific comparison between

the company’s performance and its peers’ performance may be reflected in the analysis for further context.

Companies that demonstrate a weaker link (an overall rating of “Severe Concern” or “High Concern”) are more

likely to receive a negative recommendation under the Benchmark Policy; however, other qualitative factors are

considered in developing recommendations, as each company is reviewed on a case-by-case basis. These

additional factors include, but are not limited to: (i) the overall incentive structure; (ii) the trajectory of the

program and any disclosed future changes; (iii) the operational, economic and business context for the year in

review; (iv) the relevance of selected performance metrics; and (v) reasonable long-term payout levels. These

factors may provide sufficient rationale for the Benchmark Policy to recommend in favor of a proposal even if

there is an identified disconnect between pay and performance.

In determining the peer groups used in Glass Lewis’s pay-for-performance scores, a proprietary methodology is

utilized that considers both market and industry peers, along with each company’s self-disclosed peers and

peers of those company-disclosed peers. Each component is considered on a weighted basis and is subject to

size-based ranking and screening. Since the peer group is based on an independent, proprietary technique, it will

often differ from the one used by the company which, in turn, could affect the resulting analyses. While Glass

Lewis’s independent, rigorous methodology provides a valuable perspective on the company’s compensation

program, the company’s self-selected peer group may also be presented in the Proxy Paper for comparative

purposes and for supplemental analyses.


2026 Benchmark Policy Guidelines — United States	55

Short-Term Incentives

A short-term bonus or incentive (STI) should be demonstrably tied to performance. Whenever possible, a mix of

corporate and individual performance measures is appropriate. Based on prevailing market practice, it is

generally expected that performance measures for STI plans are based on company-wide or divisional financial

measures as well as non-financial, qualitative or non-formulaic factors, such as those related to safety,

environmental issues, and customer satisfaction, when such metrics are material to the company’s overall

health. While companies operating in different sectors or markets may seek to utilize a wide range of metrics,

these measures should be appropriately tied to a company’s business drivers.

The Benchmark Policy also looks for the disclosure of the threshold, target and maximum performance goals and

corresponding payout levels that can be achieved under STI plans and expects stretching performance targets

for the maximum award to be achieved. Any increase in the potential target and maximum award should be

clearly justified to shareholders, as should any decrease in target and maximum performance goals from the

previous year.

Disclosure of some measures or performance targets may include commercially confidential information.

Therefore, in some cases, it may be reasonable to exclude such information, as long as the company provides

sufficient justification for non-disclosure. However, where a short-term bonus has been paid, companies are

generally expected to disclose the extent to which performance has been achieved against relevant targets,

including disclosure of the actual target achieved.

Where management has received significant short-term incentive payments but overall performance and/or the

shareholder experience over the measurement year prima facie appears to be poor or negative, the Benchmark

Policy looks to companies to provide a clear explanation of why these significant short-term payments were

made. Also, it is generally expected that any significant changes to the program structure should be

accompanied by rationalizing disclosure. Further, where a company has applied upward discretion, which

includes lowering goals mid-year, increasing calculated payouts or retroactively pro-rating performance periods,

a robust discussion of why the decision was necessary is warranted.

Adjustments to GAAP figures may be considered in assessing the effectiveness of the incentive at tying executive

pay with performance. Where companies use non-GAAP or bespoke metrics, clear reconciliations between these

figures and GAAP figures in audited financial statements should be provided. Moreover, in circumstances where

significant adjustments were applied to performance results, thorough, detailed discussion of adjustments akin

to a GAAP-to-non-GAAP reconciliation and their impact on payouts within the proxy statement could be

warranted. The absence of such enhanced disclosure for significant adjustments will impact the assessment of

the quality of disclosure and, in turn, may play a role in the Benchmark Policy’s recommendation on a company’s

the advisory vote on executive compensation.

The Benchmark Policy recognizes the importance of the compensation committee’s prudent and responsible

exercise of discretion over incentive pay outcomes to account for significant, material events that would

otherwise be excluded from performance results of selected metrics of incentive programs. For instance,

litigation settlement charges are typically removed from non-GAAP results before the determination of

formulaic incentive payouts, or health and safety failures may not be reflected in performance results where

companies do not expressly include health and safety metrics in incentive plans. Such events may nevertheless

be consequential to corporate performance results, impact the shareholder experience, and, in some cases,

present financially material risks. Conversely, certain events may adversely impact formulaic payout results

despite being outside executives' control. The Benchmark Policy looks to companies to provide thorough


2026 Benchmark Policy Guidelines — United States	56

discussion of how such events were considered in the committee’s decisions to exercise discretion over

incentive payouts.

The use of a non-formulaic plan, alone, does not generally result in a recommendation against a pay program

under the Benchmark Policy. If a company has chosen to rely primarily on a subjective assessment or the board’s

discretion in determining short-term bonuses, a meaningful discussion of the board’s rationale in determining

the bonuses paid as well as a rationale for the use of a non-formulaic mechanism is reviewed within the proxy

statement. Particularly where the aforementioned disclosures are substantial and satisfactory, such a structure

will not provoke serious concern in the analysis on its own. However, in conjunction with other significant issues

in a program’s design or operation, such as a disconnect between pay and performance, the absence of a cap on

payouts, or a lack of performance-based long-term awards, the use of a non-formulaic bonus may contribute to

a negative recommendation under the Benchmark Policy.

Long-Term Incentives

Equity-based incentive programs, which are often the primary long-term incentive (LTI) for executives, are

generally the most significant portion of the overall compensation program. When used appropriately, these

programs can provide a vehicle for linking an executive’s pay to company performance, thereby aligning an

executive’s interests with those of shareholders. In addition, equity-based compensation can be an effective way

to attract, retain and motivate key employees.

There are certain elements that are common to most well-structured LTI plans. These include:

•No re-testing or lowering of performance conditions;

•Performance metrics that cannot be easily manipulated by management;

•Two or more performance metrics;

•At least one relative performance metric that compares the company’s performance to a relevant peer

group or index;

•Vesting and/or performance periods of at least three years;

•Stretching metrics that incentivize executives to strive for outstanding performance while not

encouraging excessive risk-taking;

•Reasonable individual award limits;

•Equity granting practices that are clearly disclosed; and

•Additional post-vesting holding periods to encourage long-term executive share ownership.

In evaluating long-term incentive grants, prevailing market practice generally indicates that at least half of the

grant should consist of performance-based awards, putting a material portion of executive compensation at-risk

and that the award should be demonstrably linked to the performance of the company. While LTI program

structures that do not meet this criterion are noted, such concerns are unlikely to result in negative

recommendations under the Benchmark Policy in the absence of other significant issues with program design or

operation. Changes to program structure which result in significant reductions or elimination of performance-

based vesting conditions will be assessed on a case-by-case basis. Given the resultant reduction in rigor, if


2026 Benchmark Policy Guidelines — United States	57

changes are not paired with meaningful revisions to other aspects of the program, such as pay quantum and

vesting periods, and/or lack a cogent rationale, they are likely to be viewed negatively by many investors.

As with the short-term incentive, many investors recognize the importance of the compensation committee’s

judicious and responsible exercise of discretion over incentive pay outcomes to account for significant events

that would otherwise be excluded from performance results of selected metrics of incentive programs.

Companies should provide thorough discussion of how such events were considered in the committee’s

decisions to exercise discretion or refrain from applying discretion over incentive pay outcomes. Furthermore,

considerations related to the use of non-GAAP metrics under the STI plan similarly apply to the long-term

incentive program.

Performance measures should be carefully selected and should relate to the specific business/industry in which

the company operates and, especially, to the key value drivers of the company’s business. As with the short-

term incentive plans, the basis for any adjustments to metrics or results should be clearly explained, as should

the company’s judgment on the use of discretion and any significant changes to the performance program

structure.

While the Benchmark Policy recognizes the inherent complexity of certain performance metrics, measuring a

company’s performance with multiple metrics can provide a more complete picture of the company’s

performance than a single metric. Further, reliance on just one metric may focus too much management

attention on a single target and is, therefore, more susceptible to manipulation. When utilized for relative

measurements, external benchmarks such as a sector index or peer group should be disclosed, as should the

rationale for the selection of a specific index or peer group. Internal performance benchmarks should also be

disclosed, unless a reasonable case for confidentiality is made and fully explained. Similarly, actual performance

and vesting levels for previous grants earned during the fiscal year should be disclosed.

When evaluating potential changes to LTI plans and determining the impact of additional stock awards, the

Benchmark Policy will evaluate the relative success of a company’s compensation programs, particularly with

regard to existing equity-based incentive plans, in linking pay and performance. Within this context, the pay-for-

performance analyses for the company (see above for more information) and specifically the proportion of total

compensation that is stock-based is also reviewed.

Grants of Front-Loaded Awards

Many U.S. companies have chosen to provide large grants, usually in the form of equity awards, that are

intended to serve as compensation for multiple years. This practice, often called front-loading, is taken up either

in the regular course of business or as a response to specific business conditions and with a predetermined

objective. The so-called “mega-grant” (an outsized award to one individual sometimes valued at over $100

million) is sometimes, but not always, provided as a front-loaded award. The Benchmark Policy is generally wary

of this granting approach, and, accordingly, may weigh these grants with particular scrutiny.

While the use of front-loaded awards is intended to lock in executive service and incentives, the same rigidity

also raises the risk of effectively tying the hands of the compensation committee. As compared with a more

responsive annual granting schedule program, front-loaded awards may preclude improvements or changes that

reflect evolving business strategies or to respond to other unforeseen factors. Additionally, if structured poorly,

early vesting of such awards may reduce or eliminate the retentive power at great cost to shareholders. The

considerable emphasis on a single grant can place intense pressure on every facet of its design, amplifying any

potential perverse incentives and creating greater room for unintended consequences. In particular, provisions


2026 Benchmark Policy Guidelines — United States	58

around changes of control or separations of service must ensure that executives do not receive excessive

payouts that do not reflect shareholder experience or company performance.

A company’s rationale for granting awards under this structure is considered in the analysis, and market

expectations are such that any front-loaded awards also include a firm commitment not to grant additional

awards for a defined period, as is commonly associated with this practice. Even when such a commitment is

provided, unexpected circumstances may lead the board to make additional payments or awards for retention

purposes, or to incentivize management towards more realistic goals or a revised strategy. Many investors take

a negative view if a company breaks its commitment not to grant further awards, particularly if a convincing

rationale is not provided. The multi-year nature of these awards generally lends itself to significantly higher

compensation figures in the year of grant than might otherwise be expected. In the qualitative analysis of the

grants of front-loaded awards to executives, the Benchmark Policy will consider the quantum of the award on an

annualized basis and it may be compared to prior practice and peer data, among other benchmarks.

Additionally, for awards that are granted in the form of equity, the total potential dilutive effect of such award

on shareholders is considered.

In situations where the front-loaded award was meant to cover a certain portion of the regular long-term

incentive grant for each year during the covered period, analysis of the value of the remaining portion of the

regular long-term incentives granted during the period covered by the award will account for the annualized

value of the front-loaded portion. Further, the general expectation is that no supplemental grant is awarded

during the vesting period of the front-loaded portion.

Linking Executive Pay to Environmental and Social Criteria

Explicit environmental and/or social (E&S) criteria in executive incentive plans, when used appropriately, can

serve to provide both executives and shareholders a clear line of sight into a company’s ESG strategy, ambitions,

and targets. The inclusion of E&S metrics in compensation programs should be predicated on each company’s

unique circumstances. In order to establish a meaningful link between pay and performance, companies must

consider factors including their industry, size, risk profile, maturity, performance, financial condition, and any

other relevant internal or external factors.

When a company is introducing E&S criteria into executive incentive plans, it is important that shareholders are

provided with sufficient disclosure to allow them to understand how these criteria align with the company’s

strategies. Additionally, there may be situations where certain E&S performance criteria are reasonably viewed

as prerequisites for executive performance, as opposed to behaviors and conditions that need to be

incentivized, such as the use of metrics that award executives for ethical behavior or compliance with policies

and regulations. Companies should generally provide shareholders with disclosures that clearly lay out the

rationale for selecting specific E&S metrics, the target-setting process, and corresponding payout opportunities.

Particularly in the case of qualitative metrics, shareholders should be provided with a clear understanding of the

basis on which the criteria will be assessed. Where quantitative targets have been set, shareholders are best

served when these are disclosed on an ex-ante basis, or the board should outline why it believes it is unable to

do so.

The Benchmark Policy is mindful that not all compensation schemes lend themselves to the inclusion of E&S

metrics and is of the view that companies should retain flexibility in not only choosing to incorporate E&S

metrics in their compensation plans, but also in the placement of these metrics. For example, some companies

may determine that including E&S criteria in the annual bonus may help to incentivize the achievement of short-


2026 Benchmark Policy Guidelines — United States	59

term milestones and allow for more maneuverability in strategic adjustments to long-term goals. Other

companies may determine that their long-term sustainability targets are best achieved by incentivizing

executives through metrics included in their long-term incentive plans.

One-Time Awards

Shareholders have shown a general wariness of awards granted outside of the standard incentive schemes, as

such awards have the potential to undermine the integrity of a company’s regular incentive plans and/or the link

between pay and performance. If the existing incentive programs fail to provide adequate incentives to

executives, companies should redesign their compensation programs rather than make additional grants.

However, the Benchmark Policy reviews grants of supplemental awards on a case-by-case and company-by-

company basis to give adequate consideration for unique circumstances. Companies should provide a thorough

description of the awards, including a cogent and convincing explanation of their necessity and why existing

awards do not provide sufficient motivation and a discussion of how the quantum of the award and its structure

were determined. Further, such awards should be tied to future service and performance whenever possible.

Additionally, the Benchmark Policy looks to companies making supplemental or one-time awards to describe if

and how the regular compensation arrangements will be affected by these additional grants. In reviewing a

company’s use of supplemental awards, the terms and size of the grants in the context of the company’s overall

incentive strategy and granting practices are evaluated, as well as the current operating environment.

Contractual Payments and Arrangements

Beyond the quantum of contractual payments, the design of any entitlement is considered. Certain executive

employment terms that may help to drive a negative recommendation under the Benchmark Policy, include, but

are not limited to:

•Excessively broad change in control triggers;

•Inappropriate severance entitlements;

•Inadequately explained or excessive sign-on arrangements;

•Guaranteed bonuses (especially as a multiyear occurrence); and

•Failure to address any concerning practices in amended employment agreements.

In general, shareholders are wary of terms that are excessively restrictive in favor of the executive, or that could

potentially incentivize behaviors that are not in a company’s best interest.

Sign-on Awards and Severance Benefits

There may be certain costs associated with transitions at the executive level. In evaluating the size of severance

and sign-on arrangements, the Benchmark Policy considers the executive’s regular target compensation

level, or the sums paid to other executives (including the recipient’s predecessor, where applicable).


2026 Benchmark Policy Guidelines — United States	60

Sign-on arrangements should be clearly disclosed and accompanied by a meaningful explanation of the

payments and the process by which the amounts were reached. Further, the details of and basis for any “make-

whole” payments (paid as compensation for awards forfeited from a previous employer) should be provided.

With respect to severance, companies should abide by predetermined payouts in most circumstances. While in

limited circumstances some deviations may not be inappropriate, shareholders should be provided with a

meaningful explanation of any additional or increased benefits agreed upon outside of regular arrangements.

However, where such predetermined payouts are considered particularly problematic or unfavorable to

shareholders, the execution of such payments may result in a negative recommendation under the Benchmark

Policy for the advisory vote on executive compensation.

In the U.S. market, most companies maintain severance entitlements based on a multiple of salary and, in many

cases, bonus. Prevailing market practice indicates that a multiple of three or less is reasonable, even in the case

of a change in control. The basis and total value of severance should be reasonable and should not exceed the

upper limit of general market practice. The inclusion of long-term incentives in cash severance calculations is

generally considered inappropriate, particularly given the commonality of accelerated vesting of outstanding

long-term incentives and the proportional weight of long-term incentives as a component of total pay. However,

the Benchmark Policy will account for additional considerations when reviewing atypically structured

compensation approaches.

Change in Control

Double-trigger change in control arrangements, which require both a change in control and termination or

constructive termination, are widely regarded as best practice. Any arrangement that is not explicitly double-

trigger may be considered a single-trigger or modified single-trigger arrangement. Companies that allow for

committee discretion over the treatment of unvested awards should commit to providing clear rationale for the

committee’s ultimate decision as to how such awards will be treated in the event a change in control occurs.

Further, excessively broad definitions of change in control are potentially problematic as they may lead to

situations where executives receive additional compensation where no meaningful change in status or duties

has occurred.

Excise Tax Gross-ups

Among other entitlements, many investors are strongly opposed to excise tax gross-ups related to IRC § 4999

and their expansion, especially where no consideration is given to the safe harbor limit. The inclusion of excise

tax gross-up provisions in new agreements or the addition of such provisions to amended agreements is not

acceptable under normal circumstances. In consideration of the fact that minor increases in change-in-control

payments can lead to disproportionately large excise taxes, the potential negative impact of tax gross-ups could

far outweigh any retentive benefit.

Depending on the circumstances, the addition of new gross-ups around this excise tax may lead the Benchmark

Policy to recommend against a company’s say-on-pay proposal, the chair of the compensation committee, or the

entire committee, particularly in cases where a company had previously committed not to provide any such

entitlements. For situations in which the addition of new excise tax gross-ups will be provided in connection with

a specific change-in-control transaction, this policy may be applied to the say-on-pay proposal, the golden


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parachute proposal and recommendations related to the compensation committee for all involved corporate

parties, as appropriate.

Amended Employment Agreements

The Benchmark Policy may view any contractual arrangements providing for problematic pay practices that are

not addressed in materially amended employment agreements as a missed opportunity on the part of the

company to align its policies with current best practices. Such problematic pay practices include, but are not

limited to, excessive change in control entitlements, modified single-trigger change in control entitlements,

excise tax gross-ups, and multi-year guaranteed awards.

Recoupment Provisions (Clawbacks)

On October 26, 2022, the SEC adopted Rule 10D-1 under the Securities Exchange Act of 1934. The rule mandates

national securities exchanges and associations to promulgate new listing standards requiring companies to

maintain recoupment policies (“clawback provisions”). The final clawback listing standards were approved by the

SEC, effective October 2, 2023, and required listed companies to adopt a compliant policy by December 1, 2023.

Clawback provisions play an important role in mitigating excessive risk-taking that may be encouraged by poorly

structured variable incentive programs. Current listing standards require recoupment of erroneously awarded

payouts to current and former executive officers in the event of an accounting restatement or correction to

previous financial statements that is material to the current period, regardless of fault or misconduct.

Excessive risk-taking that can materially and adversely impact shareholders may not necessarily result in such

restatements. As such, clawback policies should allow recovery from current and former executive officers in the

event of a restatement of financial results or similar revision of performance indicators upon which the awards

were based. Additionally, recoupment policies should provide companies with the ability to claw back variable

incentive payments (whether time-based or performance-based) when there is evidence of problematic

decisions or actions, such as material misconduct, a material reputational failure, material risk management

failure, or a material operational failure, the consequences of which have not already been reflected in incentive

payments and where recovery is warranted.

In situations where the company ultimately determines not to follow through with recovery, the Benchmark

Policy will determine the appropriateness of such determination on a case-by-case basis. In particular, it will

carefully evaluate whether the company has provided a thorough, detailed discussion of the company's decision

to not pursue recoupment and, if applicable, how the company has otherwise rectified the disconnect between

executive pay outcomes and negative impacts of their actions on the company and the shareholder experience.

The absence of such enhanced disclosure may impact the assessment of the quality of disclosure and, in turn,

may play a role in the overall Benchmark Policy recommendation for the advisory vote on executive

compensation. The clawback policy should provide recoupment authority regardless of whether the

employment of the executive officer was terminated with or without cause.

Hedging of Stock

The hedging of shares of the companies where executives are employed can sever the alignment of interests of

the executive with shareholders. In line with market best practice, companies should adopt strict policies to

prohibit executives from hedging the economic risk associated with their share ownership in the company.


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Pledging of Stock

Shareholders should examine the facts and circumstances of each company, rather than apply a one-size-fits-all

policy regarding employee stock pledging. Shareholders benefit when employees, particularly senior executives,

have meaningful financial interest in the success of the company under their management. As such, there can be

benefits to measures designed to encourage employees to both buy shares out of their own pocket and to retain

shares they have been granted; blanket policies prohibiting stock pledging may discourage executives and

employees from doing either.

However, depending on a host of factors, the pledging of shares can present a risk that an executive with a

significant number of pledged shares and limited other assets may have an incentive to take steps to avoid a

forced sale of shares in the face of a rapid stock price decline. Therefore, to avoid substantial losses from a

forced sale to meet the terms of the loan, the executive may have an incentive to boost the stock price in the

short term in a manner that is unsustainable, thus hurting shareholders in the long term. Concerns regarding

pledging may not apply to less senior employees, given the latter group’s significantly more limited influence

over a company’s stock price. Therefore, the issue of pledging shares should be reviewed in that context, as

should policies that distinguish between the two groups.

The benefits of stock ownership by executives and employees may outweigh the risks of stock pledging,

depending on many factors. As such, the Benchmark Policy may consider all relevant factors in evaluating

proposed policies, limitations and prohibitions on pledging stock, including:

•The number of shares pledged;

•The percentage executives’ pledged shares are of outstanding shares;

•The percentage executives’ pledged shares are of each executive’s shares and total assets;

•Whether the pledged shares were purchased by the employee or granted by the company;

•Whether there are different policies for purchased and granted shares;

•Whether the granted shares are time-based or performance-based;

•The overall governance profile of the company;

•The volatility of the company’s stock (in order to determine the likelihood of a sudden stock price drop);

•The nature and cyclicality, if applicable, of the company’s industry;

•The participation and eligibility of executives and employees in pledging;

•The company’s current policies regarding pledging and any waiver from these policies for employees and

executives; and

•Disclosure of the extent of any pledging, particularly among senior executives.

Executive Ownership Guidelines

The alignment between shareholder interests and those of executives helps to ensure that executives are acting

in the best long-term interests of disinterested shareholders. Companies should facilitate this relationship

through the adoption and enforcement of meaningful minimum executive share ownership requirements. They


2026 Benchmark Policy Guidelines — United States	63

should clearly disclose their executive ownership requirements in their CD&A, as well as how the various types

of outstanding equity awards are counted or excluded from the ownership level calculation.

In determining whether executives have met the requirements or not, the inclusion of unearned performance-

based full value awards and/or unexercised stock options without cogent rationale may be viewed as

problematic. While the inclusion of unearned performance-based equity in the ownership determination

renders executive share ownership policies somewhat less effective, performance-based equity compensation

still can play an important role in the separate issue of aligning executive pay with performance.

Compensation Consultant Independence

As mandated by Section 952 of the Dodd-Frank Act, as of January 11, 2013, the SEC approved listing

requirements for both the NYSE and NASDAQ which require compensation committees to consider six factors in

assessing compensation advisor independence. According to the SEC, “no one factor should be viewed as a

determinative factor.” This six-factor assessment is an important process for every compensation committee to

undertake but companies employing a consultant for board compensation, consulting and other corporate

services should provide clear disclosure beyond just a reference to examining the six points, in order to allow

shareholders to review the specific aspects of the various consultant relationships.

Compensation consultants are engaged to provide objective, disinterested, and expert advice to the

compensation committee. When the consultant or its affiliates receive substantial income from providing other

services to the company, the potential for a conflict of interest arises and the independence of the consultant

may be jeopardized. Therefore, Benchmark Policy may note the potential for a conflict of interest when the fees

paid to the advisor or its affiliates for other services exceed those paid for compensation consulting.

CEO Pay Ratio

As mandated by Section 953(b) of the Dodd-Frank Wall Street Consumer and Protection Act, beginning in 2018,

issuers are required to disclose the median annual total compensation of all employees except the CEO, the total

annual compensation of the CEO or equivalent position, and the ratio between the two amounts. The pay ratio

is displayed as a data point in Proxy Papers, as available. While the pay ratio has the potential to provide

additional insight when assessing a company’s pay practices, at this time it is not a determinative factor in the

Benchmark Policy’s voting recommendations. However, the underlying data may help shareholders evaluate the

rationale for certain executive pay decisions such as increases in fixed pay levels.

Frequency of Say-on-Pay

The Dodd-Frank Act requires companies to allow shareholders a non-binding vote on the frequency of say-

on-pay votes (i.e., every one, two or three years). Additionally, Dodd-Frank requires companies to hold such

votes on the frequency of say-on-pay votes at least once every six years.

The submission of say-on-pay votes to shareholders every year is widely regarded as market best practice. The

time and financial burdens to a company regarding an annual vote are relatively small and incremental and are

outweighed by the benefits to shareholders through more frequent accountability. Implementing biannual or

triennial votes on executive compensation limits shareholders’ ability to hold the board accountable for its

compensation practices through means other than voting against the compensation committee. Unless a


2026 Benchmark Policy Guidelines — United States	64

company provides a compelling rationale or unique circumstances for say-on-pay votes less frequent than

annually, the Benchmark Policy will generally recommend that shareholders support annual votes on

compensation.

Vote on Golden Parachute Arrangements

The Dodd-Frank Act requires companies to provide shareholders with a separate non-binding vote on approval

of golden parachute compensation arrangements in connection with certain change-in-control transactions.

However, if the golden parachute arrangements have previously been subject to a say-on-pay vote which

shareholders approved, then this required vote is waived.

The narrative and tabular disclosure of golden parachute arrangements benefits shareholders. The Benchmark

Policy analyzes each golden parachute arrangement on a case-by-case basis, taking into account, among other

items: the nature of the change-in-control transaction, the ultimate value of the payments particularly

compared to the value of the transaction, any excise tax gross-up obligations, the tenure and position of the

executives in question before and after the transaction, any new or amended employment agreements entered

into in connection with the transaction, and the type of triggers involved (i.e., single vs. double). In cases where

new problematic features, such as excise tax gross-up obligations or new and excessive single-trigger

entitlements, are introduced in a golden parachute proposal, such features may contribute to a negative

recommendation under the Benchmark Policy. This does not only apply to the golden parachute proposal under

review, but may also apply to the next say-on-pay proposal or the reelection of members of the compensation

committee of any involved corporate parties.

Equity-Based Compensation Proposals

Equity compensation awards, when not abused, can be useful for retaining employees and providing an

incentive for them to act in a way that will improve company performance. Equity-based compensation plans

are critical components of a company’s overall compensation program, and the Benchmark Policy assesses such

plans accordingly based on both quantitative and qualitative factors.

Quantitative analyses assess the plan’s cost and the company’s pace of granting utilizing a number of different

tests, comparing the program with absolute limits that are key to equity value creation and with a carefully

chosen peer group. In general, the analysis seeks to determine whether the proposed plan is either absolutely

excessive or is more than one standard deviation away from the average plan for the peer group on a range of

criteria, including dilution to shareholders and the projected annual cost relative to the company’s financial

performance. Each of the analyses (and their constituent parts) are weighted and the plan is scored in

accordance with that weight.

The program’s expected annual expense is compared with the business’s operating metrics to help determine

whether the plan is excessive in light of company performance. The plan’s expected annual cost is also

compared to the enterprise value of the firm rather than to market capitalization because the employees,

managers and directors of the firm contribute to the creation of enterprise value but not necessarily market

capitalization (the biggest difference is seen where cash represents the vast majority of market capitalization).

Finally, relative comparisons with averages are not relied on exclusively because, in addition to creeping

averages serving to inflate compensation, some absolute limits are warranted.


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Qualitative aspects of the plan such as plan administration, the method and terms of exercise, repricing history,

express or implied rights to reprice, and the presence of evergreen provisions are also considered in the

Benchmark Policy evaluation of equity plans. The choice and use of, and difficulty in meeting, the awards’

performance metrics and targets, if any, are closely reviewed. Significant changes to the terms of a plan should

be clearly indicated explained for shareholders. Other factors, such as a company’s size and operating

environment, may also be relevant in assessing the severity of concerns or the benefits of certain changes.

Finally, a company’s executive compensation practices in certain situations may be considered as applicable.

The Benchmark Policy evaluates equity plans based on certain overarching principles:

•Companies should seek more shares only when needed;

•Requested share amounts or share reserves should be conservative in size so that companies must seek

shareholder approval every three to four years (or more frequently);

•If a plan is relatively expensive, it should not grant options solely to senior executives and board

members;

•Dilution of annual net share count or voting power, along with the “overhang” of incentive plans, should

be limited;

•Annual cost of the plan (especially if not shown on the income statement) should be reasonable as a

percentage of financial results and should be in line with the peer group;

•The expected annual cost of the plan should be proportional to the business’s value;

•The intrinsic value that option grantees received in the past should be reasonable compared with the

business’s financial results;

•Plans should not permit repricing of stock options without shareholder approval;

•Plans should not contain excessively liberal administrative or payment terms;

•Plans should not count shares in ways that understate the potential dilution, or cost, to common

shareholders. This refers to “inverse” full-value award multipliers;

•Selected performance metrics should be challenging and appropriate, and should be subject to relative

performance measurements; and

•Stock grants should be subject to minimum vesting and/or holding periods sufficient to ensure

sustainable performance and promote retention.

Meanwhile, for individual equity award proposals where the recipient of the proposed grant is also a large

shareholder of the company whose vote can materially affect the passage of the proposal, the company should

strongly consider the level of approval from disinterested shareholders before proceeding with the proposed

grant. Potential conflicts of interests are noted when vote outcomes can be heavily influenced by the recipient

of the grant. A required abstention vote or non-vote from the recipient for an equity award proposal in these

situations can help to avoid such conflicts and reflects broad investor sentiment. This favorable feature will be

weighed alongside the structure, disclosure, dilution, provided rationale, and other provisions related to the

individual award to assess the award’s alignment with long-term shareholder interests.


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Option Exchanges and Repricing

The Benchmark Policy generally opposes the repricing of employee and director options regardless of how it is

accomplished. Employees should have some downside risk in their equity-based compensation program and

repricing eliminates any such risk. As shareholders have substantial risk in owning stock, the equity

compensation of employees and directors should be similarly situated to align their interests with those of

shareholders. This will facilitate appropriate risk- and opportunity-taking for the company by employees.

Option grantees who believe they will be “rescued” from underwater options may be more inclined to take

unjustifiable risks. Moreover, a predictable pattern of repricing or exchanges substantially alters a stock option’s

value because options that will practically never expire deeply out of the money are worth far more than options

that carry a risk of expiration.

In short, repricings and option exchange programs change the bargain between shareholders and employees

after the bargain has been struck.

There is one circumstance in which a repricing or option exchange program may be acceptable: if

macroeconomic or industry trends, rather than specific company issues, cause a stock’s value to decline

dramatically and the repricing is necessary to motivate and retain employees. In viewing the company’s stock

decline as part of a larger trend, it is generally expected that the impact approximately reflects the market or

industry price decline in terms of timing and magnitude. In this circumstance, it is fair to conclude that option

grantees may be suffering from a risk that was not foreseeable when the original “bargain” was struck. In such a

scenario, the Benchmark Policy may recommend support for a repricing or option exchange program only if

sufficient conditions are met.

The following features are viewed positively when assessing a repricing or exchange proposal:

•Officers and board members are not able to participate in the program; and

•The exchange is value-neutral or value-creative to shareholders using very conservative assumptions.

In evaluating the appropriateness of the program design, the Benchmark Policy considers the inclusion of the

following features:

•The vesting requirements on exchanged or repriced options are extended beyond one year;

•Shares reserved for options that are reacquired in an option exchange will permanently retire (i.e., will

not be available for future grants) so as to prevent additional shareholder dilution in the future; and

•Management and the board make a cogent case for needing to motivate and retain existing employees,

such as being in a competitive employment market.

Option Backdating, Spring-Loading and Bullet-Dodging

Option backdating, and the related practices of spring-loading and bullet-dodging, are generally viewed as

egregious actions that warrant holding the appropriate management and board members responsible. These

practices are similar to repricing options and eliminate much of the downside risk inherent in an option grant

that is designed to induce recipients to maximize shareholder return.

48 Lucian Bebchuk, Yaniv Grinstein and Urs Peyer. “LUCKY CEOs.” (2006).


2026 Benchmark Policy Guidelines — United States	67

Backdating an option is the act of changing an option’s grant date from the actual grant date to an earlier date

when the market price of the underlying stock was lower, resulting in a lower exercise price for the option. In

past studies, over 270 companies were identified which have disclosed internal or government investigations

into their past stock-option grants.

Spring-loading is granting stock options while in possession of material, positive information that has not been

disclosed publicly, whereas bullet-dodging is delaying the grants of stock options until after the release of

material, negative information. This can allow option grants to be made at a lower price either before the

release of positive news or following the release of negative news, assuming the stock’s price will move up or

down in response to the information. This raises a concern similar to that of insider trading, or the trading on

material non-public information.

The exercise price for an option is determined on the day of grant, providing the recipient with the same market

risk as an investor who bought shares on that date. However, where options were backdated, the executive or

the board (or the compensation committee) changed the grant date retroactively. The new date may be at or

near the lowest price for the year or period. This would be like allowing an investor to look back and select the

lowest price of the year at which to buy shares.

A 2006 study of option grants made between 1996 and 2005 at 8,000 companies found that option backdating

can be an indication of poor internal controls. The study found that option backdating was more likely to occur

at companies without a majority independent board and with a long-serving CEO; both factors, the study

concluded, were associated with greater CEO influence on the company’s compensation and governance

practices.48

Where a company granted backdated options to an executive who is also a director, the Benchmark Policy may

recommend voting against that individual, regardless of who decided to make the award. In addition, it may

recommend voting against those directors who either approved or allowed backdating. Executives and directors

who either benefited from backdated options or authorized the practice have failed to act in the best interests

of shareholders.

Given the severe tax and legal liabilities to the company from backdating, the Benchmark Policy will consider

recommending shareholders oppose members of the audit committee who served when options were

backdated, a restatement occurs, material weaknesses in internal controls exist, and disclosures indicate there

was a lack of documentation. These committee members failed in their responsibility to ensure the integrity of

the company’s financial reports.

When a company has engaged in spring-loading or bullet-dodging, the Benchmark Policy will consider

recommending against members of the compensation committee where there has been a pattern of granting

options at or near historic lows. In those instances, the Benchmark Policy will also recommend voting against

executives serving on the board who benefited from the spring-loading or bullet-dodging.

Director Compensation Plans

Non-employee directors should receive reasonable and appropriate compensation for the time and effort they

spend serving on the board and its committees. However, a balance is required. Fees should be competitive in

order to retain and attract qualified individuals, but excessive fees represent a financial cost to the company and


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potentially compromise the objectivity and independence of non-employee directors. The Benchmark Policy will

consider supporting compensation plans that include option grants or other equity-based awards that help to

align the interests of outside directors with those of shareholders. However, to ensure directors are not

incentivized in the same manner as executives but rather serve as a check on imprudent risk-taking in executive

compensation plan design, equity grants to directors should not be performance-based. Where an equity plan

exclusively or primarily covers non-employee directors as participants, the plan should not provide for

performance-based awards in any capacity.

When non-employee director equity grants are covered by the same equity plan that applies to a company’s

broader employee base, Glass Lewis’ propriety equity model may be used, alongside analyst review, to guide the

Benchmark Policy’s voting recommendations. If such a plan broadly allows for performance-based awards to

directors or explicitly provides for such grants, the Benchmark Policy may recommend against the overall plan

on this basis, particularly if the company has granted performance-based awards to directors in past.

Employee Stock Purchase Plans

Employee stock purchase plans (ESPPs) can provide employees with a sense of ownership in their company and

help strengthen the alignment between the interests of employees and shareholders. ESPPs are evaluated by

assessing the expected discount, purchase period, expected purchase activity (if previous activity has been

disclosed) and whether the plan has a “lookback” feature. Except for the most extreme cases, the Benchmark

Policy will generally support these plans given the regulatory purchase limit of $25,000 per employee per year.

The number of shares requested for an ESPP will also be assessed to see if it significantly contributes to overall

shareholder dilution or result in shareholders not having a chance to approve the program for an excessive

period of time. The Benchmark Policy will generally recommend against ESPPs that contain “evergreen”

provisions that automatically increase the number of shares available under the ESPP each year.

Executive Compensation Tax Deductibility — Amendment to

IRC 162(M)

The “Tax Cut and Jobs Act” of 2017 had significant implications for Section 162(m) of the Internal Revenue Code,

a provision that allowed companies to deduct compensation in excess of $1 million for the CEO and the next

three most highly compensated executive officers, excluding the CFO, if the compensation is performance-

based and is paid under shareholder-approved plans. Amendments to equity plans and changes to

compensation programs in response to the elimination of tax deductions under 162(m) are generally not

problematic. This specifically holds true if such modifications contribute to the maintenance of a sound

performance-based compensation program.

As grandfathered contracts may continue to be eligible for tax deductions under the transition rule for Section

162(m), companies may therefore submit incentive plans for shareholder approval to take advantage of the

tax deductibility afforded under 162(m) for certain types of compensation.

Best practice for companies is to provide robust disclosure to shareholders so that they can make fully informed

judgments about the reasonableness of the proposed compensation plan. To allow for meaningful shareholder

review, disclosure should include specific performance metrics, a maximum award pool, and a maximum award


2026 Benchmark Policy Guidelines — United States	69

amount per employee. It is also important to analyze the estimated grants to see if they are reasonable and in

line with the company’s peers.

The Benchmark Policy typically recommends voting against a 162(m) proposal where: (i) a company fails to

provide at least a list of performance targets; (ii) a company fails to provide one of either a total maximum or an

individual maximum; or (iii) the proposed plan or individual maximum award limit is excessive when compared

with the plans of the company’s peers.

The company’s record of aligning pay with performance (as evaluated using Glass Lewis’s proprietary pay-for

performance model) also plays a role in recommendations. Where a company has a record of setting reasonable

pay relative to business performance, the Benchmark Policy generally recommends voting in favor of a plan even

if the plan caps seem large relative to peers, because there may be value in special pay arrangements for

continued exceptional performance.

Overall, the Benchmark Policy is of the view that it is generally not in shareholders’ best interests to vote against

such a plan and forgo the potential tax benefit, since shareholder rejection of such plans will not curtail the

awards; it will only prevent the tax deduction associated with them.


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Governance Structure and the Shareholder

Franchise

Amendments to the Certificate of Incorporation and/or

Bylaws

The Benchmark Policy evaluates proposed amendments to a company's certificate of incorporation and/or

bylaws on a case-by-case basis. In general, it will recommend voting for amendments that are unlikely to have a

material negative impact on shareholders' interests. Accordingly, the Benchmark Policy generally recommends

voting for proposed technical amendments to a company’s certificate of incorporation and/or bylaws, such as

editorial amendments or the necessary reflection of changes to corporate law.

The Benchmark Policy is strongly opposed to the practice of bundling several amendments under a single

proposal because it prevents shareholders from reviewing each amendment on its own merit. In such cases,

each proposed change will be analyzed on an individual basis, and the Benchmark Policy will recommend voting

for the proposal only when, on balance, the amendments are in the best interests of shareholders. Material

concerns with a single proposed amendment may lead to a recommendation that shareholders oppose all

proposed amendments where these are bundled into a single proposal.

Anti-Takeover Measures

Poison Pills (Shareholder Rights Plans)

Many investors view poison pill plans unfavorably. They can reduce management accountability by substantially

limiting opportunities for corporate takeovers. Rights plans can, thus, prevent shareholders from receiving a

buy-out premium for their stock. The Benchmark Policy typically recommends that shareholders vote against

these plans to protect their financial interests and ensure that they have an opportunity to consider any offer for

their shares, especially those at a premium.

Generally, boards should be given wide latitude in directing company activities and in charting a company’s

course. However, on an issue such as this, where the link between the shareholders’ financial interests and their

right to consider and accept buyout offers is substantial, shareholders should be allowed to vote on whether

they support such a plan’s implementation. This issue is different from other matters that are typically left to

board discretion. Its potential impact on, and relation to, shareholders is direct and substantial. It is also an issue

in which management interests may be different from those of shareholders; thus, ensuring that shareholders

have a voice in this matter is the only way to safeguard their interests.

In certain circumstances, the Benchmark Policy will support a poison pill plan that is limited in scope to

accomplish a particular objective, such as the closing of an important merger, or a plan that contains a

reasonable qualifying offer clause. The Benchmark Policy will consider supporting a poison pill plan if the

qualifying offer clause includes each of the following attributes:

49 Section 382 of the Internal Revenue Code refers to a “change of ownership” of more than 50 percentage points by one or

more 5% shareholders within a three-year period. The statute is intended to deter the “trafficking” of net operating losses.


2026 Benchmark Policy Guidelines — United States	71

•The form of offer is not required to be an all-cash transaction;

•The offer is not required to remain open for more than 90 business days;

•The offeror is permitted to amend the offer, reduce the offer, or otherwise change the terms;

•There is no fairness opinion requirement; and

•There is a low to no premium requirement.

Where these requirements are met, it is generally accepted that shareholders will have the opportunity to voice

their opinion on any legitimate offer.

NOL Poison Pills

The Benchmark Policy may consider supporting a limited poison pill in the event that a company seeks

shareholder approval of a rights plan for the express purpose of preserving Net Operating Losses (NOLs). While

companies with NOLs can generally carry these losses forward to offset future taxable income, Section 382 of

the Internal Revenue Code limits companies’ ability to use NOLs in the event of a “change of ownership.”49 In

this case, a company may adopt or amend a poison pill (NOL pill) in order to prevent an inadvertent change of

ownership by multiple investors purchasing small chunks of stock at the same time, and thereby preserve the

ability to carry the NOLs forward. Often such NOL pills have trigger thresholds much lower than the common

15% or 20% thresholds, with some NOL pill triggers as low as 5%.

In many cases, companies will propose the adoption of bylaw amendments that specifically restrict certain share

transfers, in addition to proposing the adoption of a NOL pill. In general, if the Benchmark Policy supports the

terms of a particular NOL pill, it will generally support the additional protective amendment in the absence of

significant concerns with the specific terms of that proposal.

As with traditional poison pills, NOL pills may deter shareholders from accumulating a position and submitting

buyout offers, and potentially serve as entrenchment mechanisms. Certain features, such as low thresholds

combined with acting in concert provisions, among other concerning terms, may disempower shareholders and

insulate the board and management. When acting in concert provisions are present within the terms of a NOL

pill, concerns may be raised as to the true objective of the pill.

Acting in concert provisions broaden the definition of beneficial ownership to prohibit parallel conduct. Parallel

conduct includes instances when multiple shareholders who are party to a formal or informal agreement

collaborate to influence the board and management of a company. These provisions aggregate the ownership of

such shareholders towards the NOL pill’s triggering threshold. Acting in concert provisions broadly limit the voice

of shareholders and may diminish their ability to engage in a productive dialogue with the company and with

other shareholders. When a board adopts defensive measures without engaging with shareholders, the

Benchmark Policy generally raises concerns regarding the board’s decisions and the overall governance of the

company.

As such, NOL pills are evaluated on a strictly case-by-case basis, taking into consideration, among other factors:

(i) the value of the NOLs to the company; (ii) the likelihood of a change of ownership based on the size of the

holdings and the nature of the larger shareholders; (iii) the trigger threshold; (iv) the duration of the plan (i.e.,


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whether it contains a reasonable “sunset” provision, generally one year or less); (v) the inclusion of an acting in

concert provision; (vi) whether the pill is implemented following the filing of a Schedule 13D by a shareholder or

there is evidence of hostile activity or shareholder activism; and (vii) if the pill is subject to periodic board review

and/or shareholder ratification.

Shareholders should be offered the opportunity to vote on any adoption or renewal of a NOL pill regardless of

any potential tax benefit that it offers a company. As such, the Benchmark Policy may recommend voting against

those members of the board who served at the time when an NOL pill was adopted without shareholder

approval within the prior twelve months and where the NOL pill is not subject to shareholder ratification.

Fair Price Provisions

Fair price provisions, which are rare, require that certain minimum price and procedural requirements be

observed by any party that acquires more than a specified percentage of a corporation’s common stock. The

provision is intended to protect minority shareholders when an acquirer seeks to accomplish a merger or other

transaction which would eliminate or change the interests of these shareholders. The provision is generally

applied against the acquirer unless the takeover is approved by a majority of “continuing directors” and holders

of a majority, in some cases a supermajority as high as 80%, of the combined voting power of all stock entitled to

vote to alter, amend, or repeal the above provisions.

The effect of a fair price provision is to require approval of any merger or business combination with an

“interested shareholder” by 51% of the voting stock of the company, excluding the shares held by an interested

shareholder. An interested shareholder is generally considered to be a holder of 10% or more of the company’s

outstanding stock, but the trigger can vary.

Generally, provisions are put in place for the ostensible purpose of preventing a back-end merger where the

interested shareholder would be able to pay a lower price for the remaining shares of the company than they

paid to gain control. The effect of a fair price provision on shareholders, however, is to limit their ability to gain a

premium for their shares through a partial tender offer or open market acquisition, which typically raise the

share price, often significantly. A fair price provision discourages such transactions because of the potential costs

of seeking shareholder approval and because of the restrictions on purchase price for completing a merger or

other transaction at a later time.

Fair price provisions, while sometimes protecting shareholders from abuse in a takeover situation, more often

act as an impediment to takeovers, potentially limiting gains to shareholders from a variety of transactions that

could significantly increase share price. In some cases, the independent directors of the board cannot make

exceptions even when such exceptions may be in the best interests of shareholders. Given the existence of state

law protections for minority shareholders, such as Section 203 of the Delaware Corporations Code, it is generally

accepted that it is in the best interests of shareholders to remove fair price provisions.

Control Share Statutes

Certain states, including Delaware, have adopted control share acquisition statutes as an anti-takeover defense

for certain closed-end investment companies and business development companies. Control share statutes may

prevent changes in control by limiting voting rights of a person that acquires the ownership of “control shares.”

Control shares are shares of stock equal to or exceeding specified percentages of company voting power, and a

control share statute prevents shares in excess of the specified percentage from being voted, unless: (i) the


2026 Benchmark Policy Guidelines — United States	73

board approves them to be voted; or (ii) the holder of the “control shares” receives approval from a

supermajority of “non-interested” shareholders.

Depending on the state of incorporation, companies may automatically rely on control share statutes unless the

fund’s board of trustees eliminates the application of the control share statute for any or all fund share

acquisitions, through adoption of a provision in the fund's governing instrument or by fund board action alone.

In certain other states, companies must adopt control share statutes.

Many investors view the adoption of control share statues as a problematic governance practice that

disenfranchises shareholders by reducing their voting power to a level less than their economic interest and that

effectively function as an anti-takeover device. Market expectations are such that all shareholders should have

an opportunity to vote all of their shares. Moreover, anti-takeover measures may prevent shareholders from

receiving a buy-out premium for their stock.

As such, the Benchmark Policy will generally recommend voting for proposals to opt out of control share

acquisition statutes, unless doing so would allow the completion of a takeover that is not in the best interests of

shareholders; and against proposals to amend the charter to include control share acquisition provisions.

Further, in cases where a closed-end fund or business development company has received a public buyout offer

and has relied on a control share statute as a defense mechanism in the prior year, the Benchmark Policy will

generally recommend shareholders vote against the chair of the nominating and governance committee, absent

a compelling rationale as to why a rejected acquisition was not in the best interests of shareholders.

Quorum Requirements

A company’s quorum requirement should be set at a level high enough to ensure that a broad range of

shareholders are represented in person or by proxy, but low enough that the company can transact necessary

business. Companies in the U.S. are generally subject to quorum requirements under the laws of their specific

state of incorporation. Additionally, those companies listed on the NASDAQ Stock Market are required to specify

a quorum in their bylaws, provided however that such quorum may not be less than one-third of outstanding

shares. Prior to 2013, the New York Stock Exchange required a quorum of 50% for listed companies, although

this requirement was dropped in recognition of individual state requirements and potential confusion for

issuers. Delaware, for example, requires companies to provide for a quorum of no less than one-third of

outstanding shares; otherwise, such quorum shall default to a majority.

Generally, a majority of outstanding shares entitled to vote is an appropriate quorum for the transaction of

business at shareholder meetings. However, should a company seek shareholder approval of a lower quorum

requirement the Benchmark Policy will consider supporting a reduced quorum of at least one-third of shares

entitled to vote, either in person or by proxy. When evaluating such proposals, the specific facts and

circumstances of the company, such as size and shareholder base, will also be considered.

Director and Officer Indemnification

While directors and officers should be held to the highest standard when carrying out their duties to

shareholders, some protection from liability is reasonable to protect them against certain suits so that these

officers feel comfortable taking measured risks that may benefit shareholders. As such, many investors take the


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view that it is appropriate for a company to provide indemnification and/or enroll in liability insurance to cover

its directors and officers so long as the terms of such agreements are reasonable.

Officer Exculpation

In August 2022, the Delaware General Assembly amended Section 102(b)(7) of the Delaware General

Corporation Law (DGCL) to authorize corporations to adopt a provision in their certificate of incorporation to

eliminate or limit monetary liability of certain corporate officers for breach of fiduciary duty of care. Previously,

the DGCL allowed only exculpation of corporate directors from breach of fiduciary duty of care claims if the

corporation’s certificate of incorporation includes an exculpation provision.

The amendment authorizes corporations to provide for exculpation of the following officers: (i) the corporation’s

president, chief executive officer, chief operating officer, chief financial officer, chief legal officer, controller,

treasurer or chief accounting officer, (ii) “named executive officers” identified in the corporation’s SEC filings,

and (iii) individuals who have agreed to be identified as officers of the corporation.

Corporate exculpation provisions under the DGCL only apply to claims for breach of the duty of care, and not to

breaches of the duty of loyalty. Exculpation provisions also do not apply to acts or omissions not in good faith or

that involve intentional misconduct, knowing violations of the law, or transactions involving the receipt of any

improper personal benefits. Furthermore, officers may not be exculpated from claims brought against them by,

or in the right of, the corporation (i.e., derivative actions).

Under Section 102(b)(7), a corporation must affirmatively elect to include an exculpation provision in its

certificate of incorporation. The Benchmark Policy closely evaluates proposals to adopt officer exculpation

provisions on a case-by-case basis. It will generally recommend voting against such proposals eliminating

monetary liability for breaches of the duty of care for certain corporate officers, unless compelling rationale for

the adoption is provided by the board, and the provisions are reasonable.

Reincorporation

The Benchmark Policy is generally of the view that the board is in the best position to determine the appropriate

jurisdiction of incorporation for the company. However, all proposals to reincorporate to a different state or

country are reviewed on a case-by-case basis. This review includes the changes in corporate governance

provisions, especially those relating to shareholder rights, material differences in corporate statutes and legal

precedents, and relevant financial benefits, among other factors, resulting from the change in domicile.

Reincorporation proposals are closely examined for their impact on shareholder rights arising from a change in

domicile and governing law, including the following:

•Will shareholders gain/retain certain rights (i.e. the right to call special meetings, the right to act by

written consent, the ability to remove directors)?

•Does the proposed new jurisdiction allow for director and officer exculpation and/or exclusive forum

provisions?

•What are the fiduciary duties (if any) of directors, officers, and majority shareholders under the new

jurisdiction’s statutes?

•What are the material differences in corporate statutes, case law, and judicial systems?

•Is the company proposing to reincorporate to a jurisdiction considered to be a “tax haven”?

50 In cases where a controlled company is seeking to change its domicile, the Benchmark policy will closely evaluate how the

independent members of the board came to its recommendation, if the controlling shareholder had any ability to influence

the board, and if the proposal is also put to a vote of disinterested shareholders.


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In addition, when examining a proposal to reincorporate, the overall governance of the company will also be

considered, including, but not limited to, the following:

•Does the company have anti-takeover protections such as a poison pill or classified board in place?

•Does the company have a significant shareholder or is the company otherwise considered controlled?50

•Has the board been previously unresponsive to shareholders (such as failing to implement a shareholder

proposal that received majority shareholder support)?

•Does the company have an independent chair and is the board sufficiently independent?

•Are there other material governance issues of concern at the company? Has the company’s performance

matched or exceeded its peers in the past one and three years?

•How has the company ranked in Glass Lewis’ pay-for-performance analysis during the last three years?

Where there is a decline in shareholder rights, the financial benefits are de minimis, and the proposed

jurisdiction has significantly worse shareholder protections, the Benchmark Policy will generally recommend

voting against the transaction.

In addition, costly, shareholder-initiated reincorporations are typically not the best route to achieve the

furtherance of shareholder rights. Shareholders are generally better served by proposing specific shareholder

resolutions addressing pertinent issues which may be implemented at a lower cost, and perhaps even with

board approval. However, when shareholders propose a shift into a jurisdiction with enhanced shareholder

rights, the proposal is examined to determine the significant ways the company would benefit from shifting

jurisdictions, including an evaluation of the criteria listed above. However, the Benchmark Policy will only

support shareholder proposals to change a company’s place of incorporation in exceptional circumstances.

Exclusive Forum and Fee-Shifting Bylaw Provisions

Companies may be subject to frivolous and opportunistic lawsuits, particularly in conjunction with a merger or

acquisition, that are expensive and distracting. In response, companies have sought ways to prevent or limit the

risk of such suits by adopting bylaws regarding where the suits must be brought or shifting the burden of the

legal expenses to the plaintiff, if unsuccessful at trial.

Some investors and groups, including CII, are of the view that companies should not attempt to restrict the

venue for shareowner claims by adopting charter or bylaw provisions that seek to establish an exclusive forum.

Charter or bylaw provisions that limit a shareholder’s choice of legal venue are generally not in the best interests

of shareholders and could effectively discourage the use of shareholder claims by increasing their associated

costs and making them more difficult to pursue. As such, shareholders may be wary about approving any

limitation on their legal recourse including limiting themselves to a single jurisdiction (e.g., Delaware or federal

courts for matters arising under the Securities Act of 1933) without compelling evidence that it will benefit

shareholders.


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For this reason, the Benchmark Policy will generally recommend that shareholders vote against any bylaw or

charter amendment seeking to adopt an exclusive forum provision unless the company: (i) provides a compelling

argument on why the provision would directly benefit shareholders; (ii) provides evidence of abuse of legal

process in other, non-favored jurisdictions; (iii) narrowly tailors such provision to the risks involved; and (iv)

maintains a strong record of good corporate governance practices.

Moreover, in the event a board seeks shareholder approval of a forum selection clause pursuant to a bundled

bylaw amendment rather than as a separate proposal, the importance of the other bundled provisions will be

considered when determining the vote recommendation on the proposal. The Benchmark Policy will

nonetheless recommend voting against the chair of the governance committee for bundling disparate proposals

into a single proposal (refer to the discussion of nominating and governance committee performance in the

section of the guidelines “A Board of Directors that Serves Shareholder Interests”).

Similarly, some companies have adopted bylaws requiring plaintiffs who sue the company and fail to receive a

judgment in their favor pay the legal expenses of the company. These bylaws, also known as “fee-shifting” or

“loser pays” bylaws, will likely have a chilling effect on even meritorious shareholder lawsuits as shareholders

would face a strong financial disincentive not to sue a company. Therefore, the Benchmark Policy strongly

opposes the adoption of such fee-shifting bylaws and, if adopted without shareholder approval, will recommend

voting against the governance committee. It is worth noting that in June of 2015 the State of Delaware banned

the adoption of fee-shifting bylaws; however, such provisions could still be adopted by companies incorporated

in other states.

Mandatory Arbitration Provisions

In September 2025, the SEC issued a policy statement noting that the presence of a provision requiring

arbitration of investor claims arising under the federal securities laws would not impact decisions regarding

whether to accelerate the effectiveness of a registration statement, thus facilitating companies’ ability to include

these provisions in their governing documents if consistent with state law, when contemplating an IPO. Instead,

the SEC stated it would focus on the adequacy of the company’s disclosures.

A mandatory arbitration provision requires an investor to arbitrate its claims arising under federal securities laws

with the issuer of the securities. Many investors view mandatory arbitration provisions as a governance practice

that is generally not in their best interests. Arbitration, while a valid alternative dispute resolution mechanism,

may restrict shareholder rights, including the right to initiate legal action in court, participate in court

proceedings, and initiate class-action lawsuits, which may be the only practical vehicle for many federal

securities law claims.

In addition, this practice keeps proceedings and decisions confidential, unlike public court rulings, thereby

limiting transparency and the legal certainty that public court cases provide. As such, shareholders may be wary

about approving any restrictions on their legal recourse.

For this reason, in the event that the board has approved highly restrictive governing documents containing

mandatory arbitration provisions, among other restrictive provisions, upon completion of a company’s IPO, spin-

off, or direct listing, the Benchmark Policy may recommend voting against members of the governance

committee. Furthermore, the Benchmark Policy will generally recommend that shareholders vote against any

bylaw or charter amendment seeking to adopt a mandatory arbitration provision unless the company: (i)

provides a compelling argument on why the provision would directly benefit shareholders; (ii) provides evidence


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of abuse of legal processes; (iii) narrowly tailors such provision to the risks involved; and (iv) maintains a strong

record of good corporate governance practices.

Authorized Shares

Adequate capital stock is important to a company’s operation. When analyzing a request for additional shares,

the Benchmark Policy will typically review four common reasons why a company might need additional capital

stock:

1.Stock Split —Typically three metrics are considered when evaluating whether a stock split is likely or

necessary: The historical stock pre-split price, if any; the current price relative to the company’s most

common trading price over the past 52 weeks; and some absolute limits on stock price that either

always make a stock split appropriate if desired by management or would almost never be a reasonable

price at which to split a stock.

2.Shareholder Defenses — Additional authorized shares could be used to bolster takeover defenses such

as a poison pill. Proxy filings often discuss the usefulness of additional shares in defending against or

discouraging a hostile takeover as a reason for a requested increase. The Benchmark Policy is typically

against such defenses and will oppose actions intended to bolster such defenses.

3.Financing for Acquisitions — A company’s history of using stock for acquisitions is reviewed and, if it can

be determined, what levels of stock have typically been required to accomplish such transactions is

considered. The proxy statement is also reviewed to see whether this is discussed as a reason for the

additional shares.

4.Financing for Operations — The company’s cash position and its ability to secure financing through

borrowing or other means is reviewed. This review looks at the company’s history of capitalization and

whether the company has had to use stock in the recent past as a means of raising capital.

Issuing additional shares generally dilutes existing holders in most circumstances. Further, the availability of

additional shares, where the board has discretion to implement a poison pill, can often serve as a deterrent to

interested suitors. Accordingly, if the company has not detailed a plan for use of the proposed shares, or if the

number of shares far exceeds those needed to accomplish a detailed plan, the Benchmark Policy typically

recommends against the authorization of additional shares. Similar concerns may also lead the Benchmark

Policy to recommend against a proposal to conduct a reverse stock split if the board does not state that it will

reduce the number of authorized common shares in a ratio proportionate to the split.

The Benchmark Policy generally recommends voting against authorizations and/or increases in preferred shares,

which allow the board to determine the preferences, limitations and rights of the preferred shares (known as

“blank-check preferred stock”). Granting such broad discretion should be of concern to common shareholders,

since blank-check preferred stock could be used as an anti-takeover device or in some other fashion that

adversely affects the voting power or financial interests of common shareholders. Therefore, the Benchmark

Policy will generally recommend voting against such requests, unless the company discloses a commitment to

not use such shares as an anti-takeover defense or in a shareholder rights plan, or a commitment to submit any

shareholder rights plan to a shareholder vote prior to its adoption.

While having adequate shares to allow management to make quick decisions and effectively operate the

business is critical, it is generally preferred that, for significant transactions, management requests shareholder


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approval for justification of their use of additional shares rather than providing a blank check in the form of a

large pool of unallocated shares available for any purpose.

Advance Notice Requirements

The Benchmark Policy typically recommends that shareholders vote against proposals that would require

advance notice of shareholder proposals or of director nominees.

These proposals typically attempt to require a certain amount of notice before shareholders are allowed to place

proposals on the ballot. Notice requirements typically range between three to six months prior to the annual

meeting. Advance notice requirements can make it impossible for a shareholder who misses the deadline to

present a shareholder proposal or a director nominee that might be in the best interests of the company and its

shareholders.

Shareholders should be able to review and vote on all proposals and director nominees. Shareholders can always

vote against proposals that appear with little prior notice. Shareholders, as owners of a business, can identify

issues on which they have sufficient information and ignoring issues on which they have insufficient information.

Setting arbitrary notice restrictions limits the opportunity for shareholders to raise issues that may come up

after the window closes.

Virtual Shareholder Meetings

A growing contingent of companies have elected to hold shareholder meetings by virtual means only. Virtual

meeting technology can be a useful complement to a traditional, in-person shareholder meeting by expanding

participation of shareholders who are unable to attend a shareholder meeting in person (i.e., a “hybrid

meeting”). However, virtual-only meetings also have the potential to curb the ability of shareholders to

meaningfully communicate with the company’s management.

Prominent shareholder rights advocates, including CII, have expressed concerns that such virtual-only meetings

do not approximate an in-person experience and may serve to reduce the board’s accountability to

shareholders. When analyzing the governance profile of companies that choose to hold virtual-only meetings,

the Benchmark Policy looks for robust disclosure in a company’s proxy statement that assures shareholders they

will be afforded the same rights and opportunities to participate as they would at an in-person meeting.

Examples of effective disclosure include: (i) addressing the ability of shareholders to ask questions during the

meeting, including time guidelines for shareholder questions, rules around what types of questions are allowed,

and rules for how questions and comments will be recognized and disclosed to meeting participants; (ii)

procedures, if any, for posting appropriate questions received during the meeting and the company’s answers,

on the investor page of their website as soon as is practical after the meeting; (iii) addressing technical and

logistical issues related to accessing the virtual meeting platform; and (iv) procedures for accessing technical

support to assist in the event of any difficulties accessing the virtual meeting.

The Benchmark Policy will generally recommend voting against members of the governance committee where

the board is planning to hold a virtual-only shareholder meeting and the company does not provide such

disclosure.


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Voting Structure

Multi-Class Share Structures

In line with CII’s Policies on Corporate Governance, ICGN’s Global Governance Principles and broad investor

sentiment, each share of a company’s common stock should have one vote, companies should not have share

classes with unequal voting rights, and certain shareholders should not have power or control disproportionate

to their economic interests. Allowing one vote per share generally operates as a safeguard for common

shareholders by ensuring that those who hold a significant minority of shares are able to weigh in on issues set

forth by the board.

Furthermore, many investors agree that the economic stake of each shareholder should match their voting

power and that no small group of shareholders, family or otherwise, should have voting rights different from

those of other shareholders. On matters of governance and shareholder rights, shareholders should have the

power to speak and the opportunity to effect change. That power should not be concentrated in the hands of a

few for reasons other than economic stake.

Generally, a multi-class share structure reflects negatively on a company’s overall corporate governance.

Because it is widely expected that companies have share capital structures that protect the interests of non-

controlling shareholders as well as any controlling entity, the Benchmark Policy typically recommends that

shareholders vote in favor of proposals that would eliminate multi-class share structures. Similarly, the

Benchmark Policy will generally recommend against proposals to adopt a new class of common stock.

Additionally, the Benchmark Policy will generally recommend voting against the chair of the governance

committee at companies with a multi-class share structure and unequal voting rights when the company does

not provide for a reasonable sunset of the multi-class share structure (generally seven years or less).

In the case of a board that adopts a multi-class share structure in connection with an IPO, spin-off, or direct

listing within the past year, the Benchmark Policy will generally recommend voting against all members of the

board who served at the time of the IPO if the board: (i) did not also commit to submitting the multi-class

structure to a shareholder vote at the company’s first shareholder meeting following the IPO; or (ii) did not

provide for a reasonable sunset of the multi-class structure (generally seven years or less). If the multi-class

share structure is put to a shareholder vote, the level of approval or disapproval attributed to unaffiliated

shareholders will be examined when determining the vote outcome.

At companies that have multi-class share structures with unequal voting rights, the level of approval or

disapproval attributed to unaffiliated shareholders will be considered when determining whether board

responsiveness is warranted. In the case of companies that have multi-class share structures with unequal voting

rights, the level of approval or disapproval attributed to unaffiliated shareholders will generally be examined on

a “one share, one vote” basis. At controlled and multi-class companies, when at least 20% or more of

unaffiliated shareholders vote contrary to management, many investors expect boards to engage with

shareholders and demonstrate some initial level of responsiveness, and when a majority or more of unaffiliated

shareholders vote contrary to management, boards should engage with unaffiliated shareholders and provide a

more robust response to fully address shareholder concerns.


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Cumulative Voting

Cumulative voting increases the ability of minority shareholders to elect a director by allowing shareholders to

cast as many shares of the stock they own multiplied by the number of directors to be elected. As companies

generally have multiple nominees up for election, cumulative voting allows shareholders to cast all of their votes

for a single nominee, or a smaller number of nominees than up for election, thereby raising the likelihood of

electing one or more of their preferred nominees to the board. It can be important when a board is controlled

by insiders or affiliates and where the company’s ownership structure includes one or more shareholders who

control a majority-voting block of company stock.

Cumulative voting generally acts as a safeguard for shareholders by ensuring that those who hold a significant

minority of shares can elect a candidate of their choosing to the board. This allows the creation of boards that

are responsive to the interests of all shareholders rather than just a small group of large holders.

Cumulative voting proposals are reviewed on a case-by-case basis, factoring in the independence of the board

and the status of the company’s governance structure. However, these proposals are typically found on ballots

at companies where independence is lacking and where the appropriate checks and balances favoring

shareholders are not in place. In those instances, the Benchmark Policy typically recommends in favor of

cumulative voting.

Where a company has adopted a true majority vote standard (i.e., where a director must receive a majority of

votes cast to be elected, as opposed to a modified policy indicated by a resignation policy only), the Benchmark

Policy will recommend voting against cumulative voting proposals due to the incompatibility of the two election

methods. For companies that have not adopted a true majority voting standard but have adopted some form of

majority voting, the Benchmark Policy will also generally recommend voting against cumulative voting proposals

if the company has not adopted anti-takeover protections and has been responsive to shareholders.

Where a company has not adopted a majority voting standard and is facing both a shareholder proposal to

adopt majority voting and a shareholder proposal to adopt cumulative voting, the Benchmark Policy will support

only the majority voting proposal. When a company has both majority voting and cumulative voting in place,

there is a higher likelihood of one or more directors not being elected as a result of not receiving a majority vote.

This is because shareholders exercising the right to cumulate their votes could unintentionally cause the failed

election of one or more directors for whom shareholders do not cumulate votes.

Supermajority Vote Requirements

Supermajority vote requirements may impede shareholder action on ballot items critical to shareholder

interests. One key example is in the takeover context, where supermajority vote requirements can severely limit

the voice of shareholders in making decisions on such crucial matters as selling the business. This, in turn,

degrades share value and can limit the possibility of buyout premiums to shareholders. Moreover, a

supermajority vote requirement can enable a small group of shareholders to overrule the will of the majority

shareholders. In most cases, the Benchmark Policy is of the view that a simple majority is appropriate to approve

all matters presented to shareholders.

In cases where a company seeks to abolish supermajority voting requirements, the Benchmark Policy will

evaluate such proposals on a case-by-case basis. In certain instances, such as at companies with large or

controlling shareholders, supermajority vote requirements may serve to protect the interests of minority

shareholders. Therefore, in analyzing such proposals, the Benchmark Policy will take into account additional


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factors including: shareholder structure; quorum requirements; impending transactions – involving the company

or a major shareholder – and any internal conflicts within the company.

Transaction of Other Business

The Benchmark Policy typically recommends that shareholders not give their proxy to management to vote on

any other business items that may properly come before an annual or special meeting because granting

unfettered discretion is unwise.

Anti-Greenmail Proposals

The Benchmark Policy will support proposals to adopt a provision preventing the payment of greenmail, which

would prevent companies from buying back company stock at significant premiums from a certain shareholder.

Since a large or majority shareholder could attempt to compel a board into purchasing its shares at a large

premium, the anti-greenmail provision generally requires that a majority of shareholders other than the majority

shareholder approve the buyback.

Mutual Funds: Investment Policies and Advisory Agreements

The Benchmark Policy takes the view that decisions about a fund’s structure and/or a fund’s relationship with its

investment advisor or sub-advisors are generally best left to management and the members of the board,

absent a showing of egregious or illegal conduct that might threaten shareholder value. As such, analyses of

such proposals are focused on the following main areas:

•The terms of any amended advisory or sub-advisory agreement;

•Any changes in the fee structure paid to the investment advisor; and

•Any material changes to the fund’s investment objective or strategy.

The Benchmark Policy generally supports amendments to a fund’s investment advisory agreement, absent a

material change that is not in the best interests of shareholders. A significant increase in the fees paid to an

investment advisor would be reason for the Benchmark Policy to consider recommending voting against a

proposed amendment to an investment advisory agreement or fund reorganization. However, in certain cases,

the Benchmark Policy is more inclined to support an increase in advisory fees if such increases result from being

performance-based rather than asset-based. Furthermore, the Benchmark Policy generally supports sub-

advisory agreements between a fund’s advisor and sub-advisor, primarily because the fees received by the sub-

advisor are paid by the advisor, and not by the fund.

In matters pertaining to a fund’s investment objective or strategy, shareholders are generally best served when

a fund’s objective or strategy closely resembles the investment discipline shareholders understood and selected

when they initially bought into the fund. As such, the Benchmark Policy generally recommends voting against

amendments to a fund’s investment objective or strategy when the proposed changes would leave shareholders

with stakes in a fund that are noticeably different than when originally purchased, and which could, therefore,

potentially negatively impact some investors’ diversification strategies.


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Real Estate Investment Trusts

The complex organizational, operational, tax and compliance requirements of Real Estate Investment Trusts

(REITs) provide for a unique shareholder evaluation. In simple terms, a REIT must have a minimum of 100

shareholders (the “100 Shareholder Test”) and no more than 50% of the value of its shares can be held by five or

fewer individuals (the “5/50 Test”). At least 75% of a REITs’ assets must be in real estate, it must derive 75% of

its gross income from rents or mortgage interest, and it must pay out 90% of its taxable earnings as dividends. In

addition, as a publicly traded security listed on a stock exchange, a REIT must comply with the same general

listing requirements as a publicly traded equity.

In order to comply with such requirements, REITs typically include percentage ownership limitations in their

organizational documents, usually in the range of 5% to 10% of the REITs outstanding shares. Given the

complexities of REITs as an asset class, the Benchmark Policy applies a highly nuanced approach in the

evaluation of REIT proposals, especially regarding changes in authorized share capital, including preferred stock.

Preferred Stock Issuances at REITs

The Benchmark Policy generally recommends against the authorization of "blank-check preferred stock."

However, given the requirement that a REIT must distribute 90% of its net income annually, it is inhibited from

retaining capital to make investments in its business. As such, equity financing likely plays a key role in a REIT’s

growth and creation of shareholder value. Moreover, shareholder concern regarding the use of preferred stock

as an anti-takeover mechanism may be allayed by the fact that most REITs maintain ownership limitations in

their certificates of incorporation. For these reasons, along with the fact that REITs typically do not engage in

private placements of preferred stock (which results in the rights of common shareholders being adversely

impacted), the Benchmark Policy may support requests to authorize shares of blank-check preferred stock at

REITs.

Business Development Companies

Business Development Companies (BDCs) were created by the U.S. Congress in 1980; they are regulated under

the Investment Company Act of 1940 and are taxed as regulated investment companies (RICs) under the Internal

Revenue Code. BDCs typically operate as publicly traded private equity firms that invest in early stage to mature

private companies as well as small public companies. BDCs realize operating income when their investments are

sold off, and, therefore, maintain complex organizational, operational, tax and compliance requirements that

are similar to those of REITs—the most evident of which is that BDCs must distribute at least 90% of their

taxable earnings as dividends.

Authorization to Sell Shares at a Price Below Net Asset Value

Considering that BDCs are required to distribute nearly all their earnings to shareholders, they sometimes need

to offer additional shares of common stock in the public markets to finance operations and acquisitions.

However, shareholder approval is required in order for a BDC to sell shares of common stock at a price below

Net Asset Value (NAV). These proposals are evaluated using a case-by-case approach. The Benchmark Policy will

recommend supporting such requests if the following conditions are met:


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•The authorization to allow share issuances below NAV has an expiration date of one year or less from

the date that shareholders approve the underlying proposal (i.e., the meeting date);

•The proposed discount below NAV is minimal (ideally no greater than 20%);

•The board specifies that the issuance will have a minimal or modest dilutive effect (ideally no greater

than 25% of the company’s then-outstanding common stock prior to the issuance); and

•A majority of the company’s independent directors who do not have a financial interest in the issuance

approve the sale.

In short, BDCs should demonstrate a responsible approach to issuing shares below NAV, by proactively

addressing shareholder concerns regarding the potential dilution of the requested share issuance, and by

explaining if and how the company’s past below-NAV share issuances have benefited the company.

Auditor Ratification and Below-NAV Issuances

When a BDC submits a below-NAV issuance for shareholder approval, the Benchmark Policy will refrain from

recommending against the audit committee chair for not including auditor ratification on the same ballot.

Because of the unique way these proposals interact, votes may be tabulated in a manner that is not in

shareholders’ interests. In cases where these proposals appear on the same ballot, auditor ratification is

generally the only “routine proposal,” the presence of which triggers a scenario where broker non-votes may be

counted toward shareholder quorum, with unintended consequences.

Under the 1940 Act, below-NAV issuance proposals require relatively high shareholder approval. Specifically,

these proposals must be approved by the lesser of: (i) 67% of votes cast if a majority of shares are represented

at the meeting; or (ii) a majority of outstanding shares. Meanwhile, any broker non-votes counted toward

quorum will automatically be registered as “against” votes for purposes of this proposal. The unintended result

can be a case where the issuance proposal is not approved, despite sufficient voting shares being cast in favor.

Because broker non-votes result from a lack of voting instruction by the shareholder, shareholders’ ability to

weigh in on the selection of auditor does not outweigh the consequences of failing to approve an issuance

proposal due to such technicality.

Special Purpose Acquisition Companies

Special Purpose Acquisition Companies (SPACs), also known as “blank check companies,” are publicly traded

entities with no commercial operations and are formed specifically to pool funds in order to complete a merger

or acquisition within a set time frame. In general, the acquisition target of a SPAC is either not yet identified or

otherwise not explicitly disclosed to the public even when the founders of the SPAC may have at least one target

in mind. Consequently, IPO investors often do not know what company they will ultimately be investing in.

SPACs are therefore very different from typical operating companies. Shareholders do not have the same

expectations associated with an ordinary publicly traded company and executive officers of a SPAC typically do

not continue in employment roles with an acquired company.


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Extension of Business Combination Deadline

Governing documents of SPACs typically provide for the return of IPO proceeds to common shareholders if no

qualifying business combination is consummated before a certain date. Because the time frames for the

consummation of such transactions are relatively short, SPACs will sometimes hold special shareholder meetings

at which shareholders are asked to extend the business combination deadline. In such cases, an acquisition

target will typically have been identified, but additional time is required to allow management of the SPAC to

finalize the terms of the deal.

The Benchmark Policy generally views management and the board as being in the best position to determine

when the extension of a business combination deadline is needed. As such, it generally supports reasonable

extension requests.

SPAC Board Independence

The board of directors of a SPAC’s acquisition target is, in many cases, already established prior to the business

combination. In some cases, however, the board’s composition may change in connection with the business

combination, including the potential addition of individuals who served in management roles with the SPAC. The

role of a SPAC executive is unlike that of a typical operating company executive. Because the SPAC’s only

business is identifying and executing an acquisition deal, the interests of a former SPAC executive are also

different.

The Benchmark Policy does not automatically consider a former SPAC executive to be affiliated with the

acquired operating entity when their only position on the board of the combined entity is that of an otherwise

independent director. Absent any evidence of an employment relationship or continuing material financial

interest in the combined entity, the Benchmark Policy will, therefore, consider such directors to be independent.

Director Commitments of SPAC Executives

The primary role of executive officers at SPACs is identifying acquisition targets for the SPAC and consummating

a business combination. Given the nature of these executive roles and the limited business operations of SPACs,

when a directors’ only executive role is at a SPAC, the Benchmark Policy will generally apply the higher limit for

company directorships (see “Director Commitments”). As a result, the Benchmark Policy generally recommends

that shareholders vote against a director who serves in an executive role only at a SPAC while serving on more

than five public company boards.

Shareholder Proposals

The Benchmark Policy looks for governance structures that protect shareholders, support effective ESG

oversight and reporting, and encourage director accountability. Accordingly, it places a significant emphasis on

promoting transparency, robust governance structures and companies’ responsiveness to and engagement with

shareholders. As such it generally supports proposals that encourage transparency in how companies are

mitigating material ESG risks, including those related to climate change, human capital management, and

stakeholder relations.


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To that end, the Benchmark Policy evaluates all shareholder proposals on a case-by-case basis with a view to

protecting long-term shareholder value. While it is generally supportive of those that promote board

accountability, shareholder rights, and transparency, it considers all proposals in the context of a company’s

unique operations and risk profile.

For a detailed review of the Glass Lewis benchmark policies concerning compensation, environmental, social,

and governance shareholder proposals, please refer to Benchmark Policy Guidelines for Shareholder Proposals &

ESG-Related Issues, available at www.glasslewis.com/voting-policies-current/.


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Overall Approach to Environmental, Social &

Governance Issues

The Benchmark Policy evaluates all environmental and social issues through the lens of long-term shareholder

value. Shareholders are best served when companies consider material environmental and social factors in all

aspects of their operations and when they are provided with disclosures that allow them to understand how

these factors are being considered and how attendant risks are being mitigated. Governance is a critical factor in

how companies manage environmental and social risks and opportunities and the Benchmark Policy is of the

view that a well-governed company will be generally managing these issues better than one without a

governance structure that promotes board independence and accountability.

Part of the board’s role is to ensure that management conducts a complete risk analysis of company operations,

including those that have financially material environmental and social implications. Companies can face

significant financial, legal and reputational risks resulting from poor environmental and social practices, or

negligent oversight thereof. Therefore, in cases where the board or management has neglected to take action

on a pressing issue that could negatively impact shareholder value, the Benchmark Policy expects companies to

take necessary actions in order to effect changes that will safeguard shareholders’ financial interests.

Given the importance of the role of the board in executing a sustainable business strategy that allows for the

realization of environmental and social opportunities and the mitigation of related risks, relating to

environmental risks and opportunities, the Benchmark Policy looks for governance structures that protect

shareholders and promote director accountability. When management and the board have displayed disregard

for environmental or social risks, have engaged in egregious or illegal conduct, or have failed to adequately

respond to current or imminent environmental and social risks that threaten shareholder value, the Benchmark

Policy will consider holding directors accountable. In such instances, it will generally recommend against

responsible members of the board that are specifically charged with oversight of the issue in question.

When evaluating environmental and social factors that may be relevant to a given company, the Benchmark

Policy does so in the context of the financial materiality of the issue to the company’s operations. Companies in

all industries face risks associated with environmental and social issues. However, these risks manifest

themselves differently at each company as a result of its operations, workforce, structure, and geography,

among other factors. Accordingly, the Benchmark Policy places a significant emphasis on the financial

implications of a company’s actions with regard to impacts on its stakeholders and the environment.

When evaluating environmental and social issues, the Benchmark Policy examines companies’:

Direct environmental and social risk — Companies should evaluate financial exposure to direct environmental

risks associated with their operations. Examples of direct environmental risks include those associated with oil or

gas spills, contamination, hazardous leakages, explosions, or reduced water or air quality, among others. Social

risks may include non-inclusive employment policies, inadequate human rights policies, or issues that adversely

affect the company’s stakeholders. Further, firms should consider their exposure to risks emanating from a

broad range of issues, over which they may have no or only limited control, such as insurance companies being

affected by increased storm severity and frequency resulting from climate change

Risk due to legislation and regulation — Companies should evaluate their exposure to changes or potential

changes in regulation that affect current and planned operations. Regulation should be carefully monitored in all


2026 Benchmark Policy Guidelines — United States	87

jurisdictions in which the company operates. The Benchmark Policy looks closely at relevant and proposed

legislation and evaluates whether the company has responded proactively.

Legal and reputational risk — Failure to take action on important environmental or social issues may carry the

risk of inciting negative publicity and potentially costly litigation. While the effect of high-profile campaigns on

shareholder value may not be directly measurable, it is prudent for companies to carefully evaluate the potential

impacts of the public perception of their impacts on stakeholders and the environment. When considering

investigations and lawsuits, the Benchmark Policy is mindful that such matters may involve unadjudicated

allegations or other charges that have not been resolved. The Benchmark Policy will not assume the truth of

such allegations or charges or that the law has been violated. Instead, it focuses more broadly on whether,

under the particular facts and circumstances presented, the nature and number of such concerns, lawsuits or

investigations reflects on the risk profile of the company or suggests that appropriate risk mitigation measures

may be warranted.

Governance risk — Inadequate oversight of environmental and social issues carries significant risks to

companies. When leadership is ineffective or fails to thoroughly consider potential risks, such risks are likely

unmitigated and could thus present substantial risks to the company, ultimately leading to loss of shareholder

value.


2026 Benchmark Policy Guidelines — United States	88

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2026 Benchmark Policy Guidelines — United States	89

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International


	GLASS LEWIS

2026 Benchmark Policy Guidelines

An Overview of Glass Lewis’ Approach to Proxy Advice

www.glasslewis.com

2026 International Benchmark Policy Guidelines

Table of Contents

Summary of Changes for 20265

Clarifying Amendments6

Election of Directors8

Board and Committee Composition and Performance8

Board Composition and Performance8

Committee Composition and Performance9

Board Diversity10

Board Tenure and Refreshment10

Separation of the Roles of Chair and CEO11

Board Responsiveness11

Election Procedures12

Slate Elections12

Classified Boards12

Board Oversight of Material Issues12

Board Oversight of Risk Management Controls12

Board Oversight of Environmental and Social Issues13

Board Accountability for Climate-Related Issues13

Board Oversight of Technology14

Financial Reporting17

Accounts and Reports17

Income Allocation (Distribution of Dividends)17

Appointment of Auditors and Authority to Set Fees17

2026 International Benchmark Policy Guidelines

Compensation19

Compensation Report/Compensation Policy19

Equity-Based Incentive Plans20

Pay for Performance21

Non-Executive Director Compensation22

Retirement Benefits for Non-Executive Directors22

Governance Structure23

Amendments to the Articles of Association23

Virtual Meetings23

Anti-Takeover Measures24

Multi-Class Share Structures24

Poison Pills (Shareholder Rights Plans)24

Supermajority Vote Requirements25

Increase in Authorized Shares25

Issuance of Shares25

Repurchase of Shares26

Shareholder Proposals26

Overall Approach to Environmental, Social & Governance27

About Glass Lewis29

Connect with Glass Lewis30

2026 International Benchmark Policy Guidelines

Introduction

The purpose of Benchmark Policy proxy research and advice is to serve as a framework that facilitates

shareholder voting in favor of governance structures that will drive performance and promote and maintain

long-term shareholder value.

These guidelines provide a general overview of Glass Lewis’ Benchmark Policy approach to proxy advice globally.

Glass Lewis publishes separate, detailed Benchmark Policy guidelines for all major global markets, which are

publicly available on the Glass Lewis website. Glass Lewis' regional Benchmark Policy guidelines are largely based

on the regulations, listing rules, codes of best practice and other relevant standards set in each country. While

these guidelines provide a high-level overview of the general Benchmark Policy approach, implementation varies

in accordance with relevant requirements or best practices in each market. For detailed information on the

implementation of the policy approach described below, refer to the Glass Lewis Benchmark Policy guidelines

for the relevant country.

Summary of Changes for 2026

For 2026, the language in this document has been updated to clarify that these guidelines contain the views of

the Benchmark Policy. The Benchmark Policy reflects broad investor opinion and widely accepted governance

principles and is intended to provide clients with nuanced analysis informed by market best practice, regulation,

and prevailing investor sentiment. This change better conveys Glass Lewis’ role as a service provider to a diverse,

global client base with a wide spectrum of viewpoints and objectives. The Benchmark Policy represents just one

of Glass Lewis’ policy offerings.

Furthermore, the language in multiple sections of these guidelines has been updated and expanded to more

closely align with other regional Benchmark Policy guideline sets.

In addition, the following noteworthy revisions have been made to the Benchmark Policy, which are summarized

below and discussed in greater detail in the relevant section of this document.

Pay for Performance

A new section of these guidelines has been added in order to describe Glass Lewis’ new proprietary pay-for-

performance model, which is included in Proxy Papers covering the annual meetings of companies in the Russell

3000 in the U.S., the S&P/TSX Composite in Canada, and large- and mid-cap companies in Australia and major

European markets. Further, it is clarified that while the outcome of this assessment may impact the analysis of a

company’s executive remuneration practices, Benchmark Policy recommendations on remuneration report and

policy proposals will continue to be derived from a holistic assessment of a company’s remuneration structure,

disclosure and practices, as well as other relevant external factors.

Please refer to the “Pay for Performance” section of these guidelines for further information.

2026 International Benchmark Policy Guidelines

Clarifying Amendments

The following clarifications of our existing policies are included this year:

Equity-Based and Long-Term Incentive Plans

Amendments have been made to these sections of these guidelines in order to more clearly differentiate

between the Benchmark Policy approach to assessing long-term incentive plans for top management, and

equity-based incentive or retention plans that may also include below-level executives and other employees.

Please refer to the “Equity-Based Incentive Plans” and “Long-Term Incentive Plans” sections of these guidelines

for further information.

Committee Composition and Performance

This section of the guidelines has been expanded to clarify that the Benchmark Policy sets the general

expectation that the majority of shareholder representatives on key board committees are independent,

although higher or lower thresholds are set in some markets based on local best practice recommendations and

prevailing market practice.

Please refer to the “Committee Composition and Performance” section of these guidelines for further

information.

Board Diversity

This section of the guidelines has been expanded to clarify that the Benchmark Policy approach to providing

voting guidance considering diversity factors at U.S. companies and its display in Proxy Papers was modified in

March 2025.

Please refer to the “Board Diversity” section of these guidelines and the 2025 “Supplemental Statement on

Diversity Considerations at U.S. Companies” for further information.

Board Responsiveness

The Benchmark Policy’s discussion on board responsiveness has been amended to clarify that, when assessing

the level of unaffiliated shareholder dissent expressed at a previous shareholder meeting, a company’s

ownership structure and the meeting quorum are taken into account.

Please refer to the “Board Responsiveness” section of these guidelines for further information.

Supermajority Vote Requirements

The Benchmark Policy’s discussion on supermajority vote requirements has been updated to clarify that, in cases

where a company seeks to abolish supermajority voting requirements, the Benchmark Policy will evaluate such

proposals on a case-by-case basis. The Benchmark Policy has also been updated to reflect that when companies

have a large or controlling shareholder, supermajority vote requirements may be appropriate to protect the

2026 International Benchmark Policy Guidelines

interests of minority shareholders and that, in such cases, the Benchmark Policy may oppose the elimination of

these requirements.

Please refer to the “Supermajority Vote Requirements” section of these guidelines for further information.

2026 International Benchmark Policy Guidelines

Election of Directors

Board and Committee Composition and Performance

The Benchmark Policy looks for talented boards with a record of protecting shareholders and delivering value

over the medium- and long-term. It takes the view that a board can best protect and enhance the interests of

shareholders if it is sufficiently independent, has a record of positive performance, and consists of individuals

with diverse backgrounds and a breadth and depth of relevant experience.

Board Composition and Performance

The relationships between each member of, and nominee for election to, the board and the company, the

company’s executives, other board members, and other major shareholders and stakeholders are closely

examined as part of the assessment of director elections. The purpose of this inquiry is to determine whether

pre-existing personal, familial, or financial relationships are likely to impact the decisions of that board member.

Where the company does not disclose the names or backgrounds of director nominees with sufficient time in

advance of the shareholder meeting to evaluate their independence, performance or skills the Benchmark Policy

will generally recommend voting against or abstaining from voting on the election.

The Benchmark Policy recommends voting in favor of governance structures that will drive positive performance

and enhance shareholder value. The most crucial test of a board’s commitment to the company and to its

shareholders is the performance of the board and its members. The performance of directors in their capacity as

board members and as executives of the company, when applicable, and in their roles at other companies where

they serve is critical to this evaluation.

For the purpose of the Benchmark Policy analysis, a director is typically classified as independent if they have no

material financial, familial, or other current relationships with the company, its executives, other board

members, and other major shareholders and stakeholders except for service on the board and standard fees

paid for that service. Relationships that have existed within the three to five years, dependent on the nature of

the relationship, prior to the inquiry are usually considered to be “current” for purposes of this test.

A director is typically classified as affiliated if they have a material financial, familial or other current relationship

with the company, its executives, other board members, and other major shareholders and stakeholders, but

they are not an employee of the company. This includes directors whose employers have a material financial

relationship with the company. This also includes a director who owns or controls, directly or indirectly, 10% or

more of the company’s voting stock (except where local regulations or best practice set a different threshold).

A director is typically classified as an inside director, or “insider”, when they simultaneously serve as a director

and as an employee of the company. This category may include a board chair who acts as an employee of the

company or is paid as such.

1 In some cases, the Benchmark Policy will consider directors in leadership positions on the board to hold primary

accountability for an issue and recommend against their re-election to the board. Depending on this issue, this could apply

to the chair or vice chair of the board, the lead independent director (if applicable), or the chair of key board committees.

2026 International Benchmark Policy Guidelines

Voting Recommendations on the Basis of Board Independence

Many investors believe that a board will be most effective in protecting shareholders' interests when a majority

of shareholder representatives on the board are independent, although the Benchmark Policy sets higher and

lower thresholds in some markets based on local best practice recommendations and prevailing market practice.

Accordingly, the Benchmark Policy typically recommends voting against certain affiliated or insider members of

the board to satisfy the applicable independence threshold.

The Benchmark Policy analysis typically accepts the presence of representatives of a company's major

shareholder(s) on the board in line with their stake in a company's issued share capital or voting rights, so long

as there is a sufficient number of independent directors to represent free-float shareholders and allow for the

formation of sufficiently independent board committees.

Voting Recommendations on the Basis of Director Performance

Although the Benchmark Policy typically recommends that shareholders support the election of independent

directors, it will generally recommend voting against directors for the following reasons:

•A director who attends less than 75% of the board and applicable committee meetings.

•A Director who sits on a potentially excessive number of boards.

•A director who is also the CEO of a company where a serious restatement has occurred after the CEO

certified the pre-restatement financial statements.

•There are substantial concerns regarding the performance and/or skills and experience of a director.

•The director can be considered to hold primary accountability for an issue due to their leadership

position on the board.1

The Benchmark Policy also takes the position that the following conflicts of interest may hinder a director’s

performance. Accordingly, it will therefore generally recommend voting against a:

•Director who, or a director whose immediate family member, currently provides material professional

services to the company.

•Director who, or a director whose immediate family member, engages in airplane, real estate or other

similar deals, including perquisite type grants from the company.

•Director with an interlocking directorship.

Committee Composition and Performance

Many investors believe that independent directors should serve on a company’s audit, compensation,

nominating and governance committees. The Benchmark Policy sets the general expectation that the majority of

shareholder representatives on key board committees are independent, although higher or lower thresholds are

set in some markets based on local best practice recommendations and prevailing market practice. The

Benchmark Policy generally recommends that shareholders oppose the presence of executive directors on the

audit and compensation committee given the risks for conflicts of interest.

2 For instance, the Benchmark Policy will generally recommend a vote against the audit committee chair for ongoing

excessive non-audit fees or when a company fails to disclose audit fees, and may recommend a vote against all members of

the compensation committee for ongoing egregious compensation policies and practices. Please refer to local market

Benchmark Policy guidelines for further information on how the Benchmark Policy recommends that committee members

are held accountable for poor committee performance in each market.

2026 International Benchmark Policy Guidelines

The Benchmark Policy may recommend that shareholders vote against the chair, or all members, of key

committees when there are material performance concerns.2

Board Diversity

Many investors consider it important to ensure that the board is composed of directors who have a diversity of

skills, thought and experience, as such diversity benefits companies by providing a broad range of perspectives

and insights. Accordingly, the Benchmark Policy closely reviews the board’s composition for representation of

diverse director candidates. For further information on board diversity, please see In-Depth Report: Board

Gender Diversity.

If a board has failed to address material concerns regarding the mix of skills and experience of the non-executive

directors or when it fails to meet legal requirements or the best practice standard prevalent in the market for

gender quotas and has not disclosed any cogent explanation or plan regarding its approach to board diversity,

the Benchmark Policy will typically recommend against the chair of the nominating committee.

The Benchmark Policy sets the expectation that boards of main market companies listed in most major global

markets (e.g. Australia, Canada, Europe, Japan, United Kingdom and United States), comprise at least one

gender diverse director (women, or directors that identify with a gender other than male or female). For

European and North American companies listed on a blue-chip or mid-cap index (e.g. Russell 3000, TSX, FTSE

350, etc.), the Benchmark Policy looks for boards to be composed of at least 30% of gender diverse directors.. A

higher standard is applied by the Benchmark Policy where best practice recommendations or listing regulations

in a specific country set a higher target.

The Benchmark Policy analysis also monitors company disclosure on diversity of ethnicity and other

underrepresented communities at board level. Large companies in markets with legal requirements or best

practice recommendations in this area (e.g. United States; United Kingdom) are expected to provide clear

disclosure on the board's performance.

The Benchmark Policy’s approach to providing proxy voting guidance considering diversity factors at U.S.

companies and its display in Proxy Papers was modified in March 2025. For more information, please see the

2025 Supplemental Statement on Diversity Considerations at U.S. Companies.

Board Tenure and Refreshment

Many investors support routine director evaluation, including independent external reviews, and periodic board

refreshment to foster the sharing of diverse perspectives in the boardroom and the generation of new ideas and

business strategies. While a director’s experience can be a valuable asset to shareholders because of the

complex, critical issues that boards face, a lack of refreshment can contribute to a lack of board responsiveness

to poor company performance. The Benchmark Policy may consider recommending voting against directors with

a lengthy tenure (e.g. over 12 years) when significant performance or governance concerns indicate that a fresh

perspective would be beneficial, and recent or planned board refreshment is limited.

2026 International Benchmark Policy Guidelines

The Benchmark Policy is of the view that the board should evaluate the need for changes to board composition

based on an analysis of skills and experience necessary for the company, as well as the results of the director

evaluations, as opposed to relying solely on age or tenure limits. However, where a board has established an age

or term limit, it is the Benchmark Policy expectation that such limit should generally be applied equally for all

members of the board. If a board waives its age/term limits, the Benchmark Policy will consider recommending

shareholders vote against the chair of the nominating committee or equivalent, unless compelling rationale is

provided for why the board is proposing to waive this rule through an election/re-election.

Separation of the Roles of Chair and CEO

Many investors believe that the board should be chaired by an independent director. The Benchmark Policy is of

the view that separating the roles of CEO (or, more rarely, another executive position) and chair generally

creates a better governance structure than a combined CEO/chair position. An executive manages the business

according to a course the board charts. Executives should report to the board regarding their performance in

achieving goals set by the board. This is needlessly complicated when a CEO chairs the board, since a CEO/chair

presumably will have a significant influence over the board. The Benchmark Policy views an independent chair as

better able to oversee the executives of the company and set a pro-shareholder agenda without the

management conflicts that a CEO and other executive insiders often face. This, in turn, leads to a more proactive

and effective board of directors that is looking out for the interests of shareholders above all else.

In the absence of an independent chair, the Benchmark Policy supports the appointment of a presiding or lead

director with authority to set the agenda for the meetings and to lead sessions outside the presence of the

insider chair. In some markets, the Benchmark Policy will typically recommend voting against the chair of the

nominating committee when the chair and CEO roles are combined and the board has not appointed an

independent presiding or lead director.

Board Responsiveness

Many investors expect that when a significant proportion of votes cast on a proposal by unaffiliated

shareholders (e.g. 20% or more) are contrary to the board’s recommendation, the board should, depending on

the issue, demonstrate some level of responsiveness to address shareholder concerns. While the 20% threshold

alone will not automatically generate a negative vote recommendation from the Benchmark Policy on a future

proposal (e.g., to recommend against a director nominee, against a remuneration proposal, etc.), it will be a

contributing factor to recommend a vote against management's recommendation in the event the Benchmark

Policy analysis determines that the board did not respond appropriately. Additionally, when shareholder

proposals receive significant support (generally more than 30% of votes cast), the Benchmark Policy sets the

expectation that boards engage with shareholders on the issue and provide disclosure addressing shareholder

concerns and outreach initiatives.

In assessing the level of dissent, the company’s ownership structure and the meeting quorum are taken into

account. In the case of companies with a controlling shareholder and/or with a multi-class share structure, the

Benchmark Policy analysis will carefully examine the level of disapproval attributable to minority shareholders.

As a general framework, the evaluation of board responsiveness involves a review of the publicly available

disclosures released following the date of the company's last annual meeting up through the publication date of

the most current Proxy Paper.

2026 International Benchmark Policy Guidelines

Election Procedures

Slate Elections

In some countries, companies elect their board members as a slate, whereby shareholders are unable to vote on

the election of each individual director, but rather are limited to voting for or against the board as a whole. In

countries where slate elections are common market practice, the Benchmark Policy will not recommend that

shareholders oppose an election on the basis of this election method alone.

The Benchmark Policy will generally recommend that shareholders support a director slate, unless material

independence or performance concerns have been identified. When the proposed slate raises concerns

regarding board or committee independence, the Benchmark Policy will generally recommend that shareholders

vote against the slate. In egregious cases where concerns regarding the performance and/or experience of the

board, its committees, and/or individual directors have been identified, the Benchmark Policy will similarly

typically recommend that shareholders vote against the director slate.

Classified Boards

Investors broadly view the repeal of staggered boards in favor of the annual election of directors favorably.

Generally, staggered boards are less accountable to shareholders than boards that are elected annually.

Furthermore, the annual election of directors encourages board members to focus on protecting the interests of

shareholders.

Accordingly, the Benchmark Policy typically recommends supporting the declassification of boards and

introduction of the annual election of directors whenever that question is directly posed in a proxy (typically in

the form of a shareholder proposal).

Board Oversight of Material Issues

Board Oversight of Risk Management Controls

The Benchmark Policy evaluates the risk management function of a public company board on a strictly case-by-

case basis. Sound risk management, while necessary at all companies, is particularly important at financial firms,

which inherently maintain significant exposure to financial risk. Market best practice indicates that financial

firms should have a chief risk officer reporting directly to the board and a dedicated risk committee or a

committee of the board charged with risk oversight. Moreover, many non-financial firms maintain strategies

that involve a high level of exposure to financial risk. Similarly, since many non-financial firms have complex

hedging or trading strategies, those firms should also have a chief risk officer and a risk committee.

When analyzing the risk management practices of public companies, the Benchmark Policy will take note of

significant losses or write-downs on financial assets and/or structured transactions. In cases where a company

has disclosed a sizable loss or write-down, and where a reasonable analysis indicates that the company’s board

level risk committee should be held accountable for poor oversight, the Benchmark Policy may recommend that

shareholders vote against such committee members on that basis. In addition, in cases where a company

maintains a significant level of financial risk exposure but fails to disclose any explicit form of board-level risk

3 E.g., S&P 500, FTSE 100, Nikkei 225, etc.

2026 International Benchmark Policy Guidelines

oversight (via a dedicated committee or otherwise), the Benchmark Policy may recommend a vote against the

board chair on that basis.

Board Oversight of Environmental and Social Issues

Insufficient oversight of material environmental and social issues can present direct legal, financial, regulatory

and reputational risks that could serve to harm shareholder interests. Therefore, shareholders generally benefit

when such issues are carefully monitored and managed by companies, and when companies have an

appropriate oversight structure in place to ensure that they are mitigating attendant risks and capitalizing on

related opportunities to the best extent possible.

To that end, the Benchmark Policy looks to companies to ensure that boards maintain clear oversight of material

risks to their operations, including those that are environmental and social in nature. These risks could include,

but are not limited to, matters related to climate change, human capital management, diversity, stakeholder

relations, and health, safety & environment. Given the importance of the board’s role in overseeing

environmental and social risks, this responsibility should be formally designated and codified in the appropriate

committee charters or other governing documents.

While it is important that material environmental and social issues are overseen at the board level and that

shareholders are afforded meaningful disclosure of these oversight responsibilities, the Benchmark Policy is of

the view that that companies should determine the best structure for this oversight. This oversight can be

effectively conducted by specific directors, the entire board, a separate committee, or combined with the

responsibilities of a key committee.

The Benchmark Policy will generally recommend that shareholders vote against the chair of the governance

committee (or equivalent) of companies listed on a major blue-chip index in key global markets that do not

provide clear disclosure concerning the board-level oversight afforded to material environmental and/or social

issues.