ISS Releases 2025 U.S. and Canadian Voting Policy Changes
By Shirley Westcott
Institutional Shareholder Services (ISS) has published its 2025 U.S. and Canadian benchmark policy updates which take effect for annual meetings on or after Feb. 1, 2025¹.
This year’s U.S. revisions are largely confined to poison pills, special purpose acquisition corporation (SPAC) extension proposals, natural capital/biodiversity shareholder proposals, and an adjustment to ISS’s qualitative review of performance-vesting equity awards. ISS is also seeking additional feedback on the use of performance-vesting versus time-vesting awards in executive compensation for a potential policy update in 2026.
In Canada, ISS has clarified its policies on the independence of former CEOs and on charter and bylaw amendments giving the board discretion to hold virtual-only shareholders’ meetings.
These changes are summarized below.
U.S. Policy Updates
Poison Pills
ISS has provided more detail on the case-by-case factors it considers in deciding whether to recommend against directors (other than new nominees) if the board adopts a short-term (one year or less) poison pill without shareholder approval. These include:
- The trigger threshold and other terms of the pill,
- The disclosed rationale for the adoption,
- The context in which the pill was adopted (e.g., the company’s size and stage of development, sudden changes in market capitalization, and extraordinary industry-wide or macroeconomic events),
- A commitment to put any renewal to a shareholder vote,
- The company’s overall track record on corporate governance and responsiveness to shareholders, and
- Other factors as relevant.
ISS notes that most poison pills in the U.S. are short term, with a duration of one year or less, and are rarely submitted for shareholder approval. The update clarifies two factors that it had previously included in the “other factors as relevant” category: the context in which the pill was adopted and the company’s overall track record on corporate governance and responsiveness to shareholders. ISS is maintaining its existing policy on the adoption of a long-term pill without shareholder approval or when a pill is put to a shareholder vote.
Shareholder Proposals on Natural Capital/Community Impact Assessments
In recent years, there has been an increase in the number and variety of shareholder proposals focused on nature-related and community impact risks, such as biodiversity loss, deforestation and water pollution.
ISS takes a case-by-case approach to such proposals, with one factor being the disclosure of applicable company policies, metrics, risk assessment reports, and risk management procedures. ISS has revised this factor to take into account the alignment of such disclosures with any relevant, broadly accepted reporting frameworks, such as the Taskforce on Nature-related Financial Disclosures (TNFD) and the Kunming-Montreal Global Biodiversity Framework (GGF). This reflects the evolving focus of the shareholder proposals.
Performance Versus Time-Based Equity Awards
Under its current pay-for-performance (PFP) assessment of executive compensation, ISS considers a predominance of time-vesting (as opposed to performance-vesting) equity awards to be a significant concern at companies that exhibit a quantitative PFP misalignment.
According to ISS, a growing number of investors have expressed concerns with performance equity programs that are poorly designed or poorly disclosed, are highly complex, or use non-rigorous performance measures. Some investors consider well-designed time-vesting awards to be preferable to performance-vesting awards.
In view of evolving investor views on this issue, ISS is adjusting its qualitative PFP analysis so that concerns with the design or disclosure of performance-vesting awards will carry greater weight. Significant concerns may drive an adverse say-on-pay (SOP) recommendation at companies with a PFP misalignment. ISS provided additional details on this change in a U.S. Executive Compensation Policies FAQ in mid-December².
ISS may adopt more significant policy changes in 2026 regarding the treatment of time-based equity awards and continues to welcome additional feedback on this topic. Feedback can be submitted through the ISS Help Center³.
SPAC Extensions
The main purpose of SPACs is to identify and acquire a viable target within a specified timeframe (up to the “termination date”). Failure to achieve this objective calls into question management’s ability to execute its primary objective.
This update codifies ISS’s current approach to SPAC extension recommendations. ISS will generally support extension requests of up to one year from the original termination date, inclusive of any built-in extension options that were included in the original governing documents. ISS will support multiple extension requests if they do not collectively exceed one year.
ISS notes that since the SPAC boom during the COVID-19 pandemic, there has been a proliferation of so-called “zombie SPACs”—namely, those that have experienced heavy shareholder redemptions that leave minimal funds in the trust account. These SPACs have failed to consummate a business combination and have sought extensions to their termination dates, sometimes on multiple occasions and for multiple years.
Canadian Policy Updates
Articles or Bylaws Amendments for Virtual-Only Meetings
Currently, ISS supports management proposals to adopt or amend the articles/bylaws unless the changes negatively impact shareholders or diminish board oversight. These include certain advance notice, quorum, alternate director and exclusive forum provisions; board authority to unilaterally alter the capital structure; and the ability of the board chair to break a deadlock in a director vote.
In the past, ISS has also opposed amendments that give the board discretion to hold shareholders’ meetings in a virtual-only format without a compelling rationale. This is now codified in the policy.
Comments: Glass Lewis has made a similar policy change for 2025 whereby it expects companies to disclose their reason for choosing to hold a virtual-only shareholders’ meeting. If a board fails to address legitimate, publicly expressed shareholder concerns regarding the meeting format, Glass Lewis may recommend against the chair of the governance committee or other accountable directors.
Independence of Former/Interim CEO
ISS has clarified its policy on director independence in the case of a director who served as CEO or interim CEO of the company or its affiliates in the past five years. After a five-year cooling off period, ISS may classify the director as non-independent based on certain circumstances. These include management/board turnover, current or recent involvement with the company, whether the former CEO was a company founder or executive chair, the length of service with the company, and any related-party transactions or consulting arrangements.
Former CEO on Audit Committee
Currently, ISS recommends against a director who sits on the audit or compensation committee if he has served as CEO of the company or its affiliates within the past five years or as CEO of a company acquired within the past five years. In conjunction with its policy update on former/interim CEO independence, ISS is clarifying it may consider such a director non-independent after the five-year cooling off period in certain circumstances.
Pay-for-Performance Evaluation
ISS has updated its PFP evaluation of S&P/TSX Composite Index companies and all management SOP proposals to indicate that it may elect to use the compensation of a non-CEO named executive officer, such as a former CEO or executive chair, if that individual’s compensation is regularly significantly higher than that of the CEO. This would provide a more appropriate assessment of PFP alignment.
Board Gender Diversity
Currently, ISS requires the disclosure and interpretation of the circumstances behind an issuer falling below the policy’s board gender diversity thresholds before a policy exemption may be applied. ISS believes the change to remove this requirement, provides greater transparency and predictability as to how the policy will be applied and harmonizes the Canadian approach with the US market.
Board Racial/Ethnic Diversity
ISS notified the Canadian market of the inclusion of a racial/ethnic diversity standard for all TSX Composite Index boards in 2023, implemented the policy for TSX composite companies in 2024, and for 2025 updated the policy to remove the transitory language associated with the initial implementation year and addition of conditional exemptions to the final policy language.
¹ See ISS’s Executive Summary of Key Updates and Policy Development Process here
² See ISS’s U.S. Executive Compensation Policies FAQ here
³To submit feedback, go here
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