The 2026 ISS and Glass Lewis policies extended the Relative Degree of Alignment window from three years to five. Every legacy 2021 and 2022 pay decision is now a mathematical input to your current Say-on-Pay vote. The only proxy disclosure that survives the new framework is a written Long-Term Alignment narrative that explains the 5-year delta directly, on the comp committee’s record, before the proxy ships.
What Changed and When
ISS finalized its 2026 Benchmark Policy Updates in December 2025, with the updated Pay-for-Performance Mechanics document published in the same release cycle. Glass Lewis released its 2026 Benchmark Policy Guidelines on December 5, 2025. Both apply to the 2026 proxy season: Glass Lewis to meetings held after January 1, 2026, and ISS to meetings held on or after February 1, 2026.
The headline change is the same in both policies. The quantitative measurement window for the relative pay-and-performance screen moved from three years to five. Watson Towers Willis called the ISS update “the most consequential US compensation update since the advent of Say-on-Pay.” Compensation Advisory Partners flagged it as the central change of the 2026 cycle.
The Mathematical Anchor
The RDA computes one number from five years of CEO pay and five years of TSR. Each year contributes roughly 20 percent of the result. ISS treats the RDA as a single annualized 5-year TSR computed as the geometric mean of five 12-month returns. A bad year five years ago now contributes the same weight as a good year last year. The window is fixed; you cannot rotate the bad year out by waiting a quarter.
If your company granted a one-time retention award in 2021 or 2022 (which roughly half of S&P 500 companies did during the pandemic and post-pandemic volatility window), your CEO’s pay rank for those years is elevated. If your share price was depressed in 2021-2022 from sector dynamics, supply chain disruption, or interest rate changes, your TSR rank for those years is suppressed. The combination produces a bad year on the RDA, and the new 5-year window weights three more bad years into the screen than the prior 3-year window did.
The legacy decisions made under a 3-year window assumption (that pandemic-era pay actions would roll off the screen by 2024-2025) are now drag on 2026 and will continue dragging through 2027 and into 2028.
Glass Lewis Abandoned the Letter Grade
The familiar A-F pay-for-performance grade is gone. In its place is a 0-to-100 scorecard composed of up to six quantitative tests: CEO granted pay vs. TSR, CEO granted pay vs. financial performance, short-term incentive payouts vs. TSR, named executive officer granted pay vs. financial performance, CEO compensation-actually-paid vs. TSR, and a qualitative test covering one-time award grants and upward discretion. The qualitative test can only reduce the score, not raise it. Glass Lewis does not publicly disclose the weightings.
ISS also opened the door for time-based equity. For the first time in the Say-on-Pay era, ISS will view time-based equity awards with long vesting or holding periods favorably without requiring performance vesting conditions. ISS also expanded flexibility for Company Responsiveness disclosure when shareholders decline direct feedback (more common since SEC guidance on Schedule 13G versus 13D filing status).
The Long-Term Alignment Narrative
The Long-Term Alignment narrative is a written disclosure section in your 2026 CD&A that explains the 5-year delta directly. Five components must be present, in this order. First, an anchor statement of multi-year alignment philosophy stated up front in the CD&A. Second, a legacy decision review naming the 2021-2022 decisions now sitting inside the 5-year RDA window with rationale and outcomes. Third, a bridge year recalibration narrative covering 2023-2024 changes the comp committee made before ISS and Glass Lewis announced the 2026 changes. Fourth, current decision continuity. Fifth, forward commitment for 2027 and 2028.
Reverse the order and you are writing the legacy CD&A again. Under the new framework, that CD&A loses votes.
The 70 Percent Trap
ISS sets the Company Responsiveness threshold at 70 percent. Below that, ISS opens a formal responsiveness review for the next proxy cycle. Combine this threshold with the 5-year RDA window and a two-stage trap forms. A marginal 2026 SOP outcome between 50 and 70 percent triggers ISS responsiveness review for 2027. That 2027 review now sees a 5-year window running 2022-2026, the same legacy band plus one bridge year. The legacy drag is locked in for two more proxy cycles. The window does not begin to roll the legacy years off until the 2028 or 2029 proxy.
The intervention point is the 2026 proxy disclosure stage, not the 2027 responsiveness review.
The Three Documents That Must Exist on the Board Record
The CD&A is your public document. The board record is your evidence base. Three artifacts must exist on the comp committee’s written record before the 2026 proxy ships, dated before the proxy file date. The Multi-Year Alignment Philosophy Memo, two to three pages, capturing the comp committee’s stated philosophy. The Legacy-Award Disposition Log, naming each 2021-2022 compensation action now in the 5-year RDA window with decision rationale, alternatives considered, and outcome assessed. The Engagement-and-Disclosure Protocol, recording the named institutional holders engaged with, dates, topics, and feedback or noted absence.
These three artifacts are the evidence base for any future SEC review of the CD&A or any plaintiff-bar derivative theory. A CD&A that asserts a multi-year alignment philosophy with no comp committee minutes documenting it will be read as constructed for the proxy rather than reflecting actual governance.
What to Do This Week
If your 2026 annual meeting is in the next 60 days and your proxy is in final preparation: stop the proxy team. Convene a special comp committee session this week. Draft the Multi-Year Alignment Philosophy Memo. Reorder the CD&A around the five-component architecture. Build the Legacy-Award Disposition Log. File the Engagement-and-Disclosure Protocol on the board record before the proxy ships.
If your 2026 annual meeting is already past and your Say-on-Pay landed above 70 percent: begin the same work now for the 2027 proxy. The 5-year window in the 2027 proxy will run from 2023 through 2027.
If your 2026 annual meeting is past and your Say-on-Pay landed below 70 percent: ISS responsiveness review is open. Engage external comp counsel immediately. The 2027 proxy must include the formal responsiveness disclosure plus the full Long-Term Alignment narrative architecture, with explicit board-record references.
The full Executive Briefing covers the five failure modes, the Documentation Stack templates, and the recovery path for issuers in the 50-70 percent band. The companion Executive Lab walks comp committees through the diagnostic on their own peer group in two half-day sessions.
Sources: ISS Pay-for-Performance Mechanics v.2025.12, issgovernance.com. Glass Lewis 2026 Pay for Performance Update North America FAQs, glasslewis.com. Compensation Advisory Partners, ISS and Glass Lewis 2026 Policy Updates, capartners.com. Harvard Law School Forum on Corporate Governance, ISS and Glass Lewis 2026 Policy Updates, January 20, 2026. WTW, ISS Announces Its Most Consequential US Compensation Updates Since the Advent of Say-on-Pay, December 2025. Pay Governance, S&P 500 CEO Compensation Increase Trends. Semler Brossy, 2025 Say-on-Pay Reports.
Glenn E. Daniels II is the founder of Touch Stone Publishers. The full Executive Briefing and the companion Executive Playbook (May 2026) are available at touchstonepublishers.com/5-year-lookback.
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