Institutional Shareholder Services (“ISS”) and Glass Lewis have published their Canadian benchmark policy guidelines for the 2026 proxy season. This year’s updates include clarifying changes to ISS’ guidelines relating to advance notice requirements, equity compensation plan amendment provisions, non-employee director deferred share unit (“DSU”) plans and the evaluation of environmental and social (“E&S”) shareholder proposals. Glass Lewis has updated its pay-for-performance model and its recommendations in connection with financial restatements. The modest changes to the 2026 Canadian voting guidelines may be reflective of the current U.S. political environment and the related increased scrutiny of proxy advisory firms.
ISS Updates for 2026
ISS has made the following clarifying changes to its proxy voting guidelines for 2026:
Advance notice provisions
ISS has confirmed that disclosure requests relating to the nominating shareholder(s) or shareholder nominee(s) under advance notice provisions that exceed the requirements under Canadian corporate or securities law may be considered problematic. Specifically, excessive disclosure requests pursuant to director questionnaires that have not been made publicly available may trigger a negative recommendation.
Equity compensation plan amendments
ISS has clarified that it will recommend against proposed equity compensation plan amendment procedures unless shareholder approval is explicitly required for both reductions in exercise price and the cancellation and reissuance of options or other entitlements.
Non-employee director DSU plans
ISS has noted that it will recommend in favour of non-employee director DSU plans if the plan explicitly states that DSUs may only be granted in lieu of cash fees on a value-for-value basis (no discretionary or other grants are permitted). Plans that permit discretionary grants may trigger a negative recommendation.
E&S shareholder proposals
ISS evaluates E&S shareholder proposals on a case-by-case basis. ISS has updated the existing list of factors that it will consider, to add whether the proposal addresses substantive matters that may impact shareholders’ interests, including how the proposal may impact shareholders’ rights.
Glass Lewis Updates for 2026
Glass Lewis has made the following changes to its benchmark policy guidelines for 2026:
Financial restatements
The benchmark policy has been updated to provide that when annual and/or multiple interim financial statements have been restated, it will generally recommend that shareholders withhold votes from all members of the audit committee who served at the time when the financial statements had to be restated if any of the following factors apply: (i) the restatement involves negligence, fraud or manipulation by insiders; (ii) the restatement is accompanied by an investigation by a provincial securities commission or a federal investigation; (iii) the restatement involves revenue recognition; (iv) the restatement results in a greater than 5% adjustment to cost of goods sold, operating expenses or operating cash flows; or (v) the 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.
Pay-for-performance methodology
The pay-for-performance guidelines have been updated to reflect changes to Glass Lewis’ pay-for-performance model. Glass Lewis is moving from a single letter grade (“A” through “F”) approach to a numerical score card that consists 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. The tests include: (i) chief executive officer (“CEO”) granted pay versus total shareholder return (“TSR”) performance; (ii) CEO granted pay versus financial performance; (iii) CEO short-term incentive payouts versus TSR performance; (iv) total named executive officer granted pay versus financial performance; (v) realized CEO pay versus TSR; and (vi) qualitative features. Glass Lewis is also extending the performance measurement period from three to five years.
U.S. Executive Order on Proxy Advisor Oversight
In December 2025, the Trump Administration issued an executive order titled “Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors” (the “Order”) that directs the U.S. Securities and Exchange Commission (the “SEC”), the Federal Trade Commission and the Department of Labor to take various actions to increase their oversight of proxy advisors.
Specifically, the Order directs the Chair of the SEC to: (i) review and revise or rescind all rules and guidance relating to proxy advisors and shareholder proposals that are inconsistent with the purpose of the Order, particularly those relating to diversity, equity and inclusion (DEI) and environmental, social and governance (ESG) policies; (ii) enforce federal securities laws with respect to material misstatements or omissions in proxy advisors’ voting recommendations; (iii) assess whether proxy advisors should register as registered investment advisers; (iv) consider requiring enhanced transparency on voting recommendations, methodology and conflicts of interest; (v) analyze whether proxy advisors serve as vehicles for investment advisers to coordinate their voting decisions and form a “group” under the U.S. Securities Exchange Act of 1934; and (vi) consider whether registered investment advisers’ reliance on proxy advisors’ advice on non-pecuniary factors in investing is inconsistent with their fiduciary duties.
While this is a U.S. development, the Order may impact future voting practices and shareholder engagement programs in Canada. Glass Lewis has announced that, commencing for the 2027 proxy season, it will replace its standard benchmark policy guidelines with customized voting policies. Glass Lewis stated that the change is driven by diverging investor priorities and advancements in technology, particularly artificial intelligence (“AI”), that will assist with customization, allowing institutional investors to better control their proxy decisions. While ISS has not indicated that it will take a similar approach, it has begun to introduce customized research tools.
J.P. Morgan Asset Management recently disclosed that it will no longer rely on voting recommendations or data from third-party proxy advisors and will instead rely on internal AI tools to conduct research and make voting decisions. Whether other institutional shareholders follow suit and the impact this may have on the predictability of shareholder votes and shareholder outreach efforts remain to be seen.
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