Key Takeaways:

• In Asia-Pacific there is a focus on shared accountability for concerns about audit firms. Over half of investors surveyed would hold both audit companies and directors accountable during elections whenever external audit firms face severe regulatory sanctions or significant deficiencies.
• In North America, shareholder scrutiny over discretionary bonuses eases with transparent retrospective disclosures, while proposed say-on-pay exemptions redirect negative votes toward remuneration chairs.
• In the UK and Continental Europe, remuneration discussions continue to centre on regional competitiveness, with a desire to maintain pay-for-performance criteria if implementing an increasingly used hybrid incentive plan.

The 2026 ISS Global Benchmark Policy Survey

Each year, Institutional Shareholder Services (ISS) surveys hundreds of global institutional investors and issuers to establish its benchmark voting policies. Whilst the focus was primarily on US and European markets, there are some relevant takeaways for Australian companies.

Following the survey period, ISS released its draft Proposed ISS Benchmark Policy Changes for 2027 for comment. No changes were proposed for Australia. A key overseas change replaces the US ISS binomial option pricing model with Black-Scholes. The consultation period closed on 4 November. We will continue to monitor releases and provide updates on any changes.

Was there any focus on APAC in the survey?

APAC accounts for only 13 of the 253 respondents and it is not known how many of these are Australian companies. In short, the only area of focus for the APAC region was director accountability for audit firm concerns.

Recent years have seen increased scrutiny of audit firms with concerns including auditor conflicts of interest and breaches of confidentiality. This is a topic which Guerdon Associates has previously explored, and on which we submitted to the Treasury consultation .

Where there are significant concerns relating to an auditor itself (rather than the company’s situation), ISS explored where the accountability for their performance lies and how voting should be directed at the company’s AGM.

The responses varied by jurisdiction, depending on whether shareholders have a vote on auditor appointment and removal. While boards and audit committees select and recommend external auditors, Australian shareholders have the final vote on appointment and removal. The highest response (50.9% of investor respondents and 23.8% of non-investor respondents) opted for accountability lying with both the auditor and the directors responsible for their selection. This was followed by the audit company alone (39.7% of investor respondents and 38.1% of non-investor respondents) through voting against AGM resolutions to reappoint the auditor or approve their fees. While not part of the survey, we also note the recent impact of shareholder activism on auditor appointments.

ISS also examined which factors are considered most important when assessing a company that continues to engage an audit firm that is subject to significant regulatory findings or sanctions.

The majority of non-investor and investor respondents selected the severity and nature of findings or sanctions (86.4% of investors and 69.8% of non-investors), followed by whether there are continuing sanctions or restrictions (57.9% and 40.6%) and evidence of robust audit committee or board review disclosed to shareholders (57.1% and 34.9%).

Interestingly, changing the lead audit partner (a requirement in Australia every 5 to 7 years) was selected by less than 10% of both groups, indicating that respondents did not believe that audit issues can be resolved by shuffling the deck chairs.

What were the key findings in relation to remuneration?

The main findings on remuneration focussed on the US, Canada, the UK, and continental Europe.

What is happening in North America?

In the US, fully discretionary bonuses for financial services companies remain a structural concern for investor respondents (71%) but perhaps unsurprisingly not non-investors, with 85% deeming that given prevailing market practice and regulatory considerations for financial services companies, such bonuses are not a concern in isolation. Transparent disclosure of factor weightings and retrospective payout logic mitigates concern for over 80% of investors and non-investors.

On long-term incentive (LTI) performance measure disclosure, ISS note many do not disclose forward looking targets, stating that disclosure could result in competitive harm. Investors view this as reasonable but to be assessed on a case-by-case basis, and non-investors deemed this as reasonable. Majority (79%) of investors agree the rationale is less compelling for relative targets, with non-investors being divided.

In May 2026, the SEC proposed a rule that would exempt many US companies from say-on-pay voting requirements. Where say-on-pay votes are absent, the most common response from investors (50.4%) was to direct negative recommendations initially at the remuneration committee chair. Most non-investors (54.0%) felt adverse recommendations on directors were inappropriate if exempt from say-on-pay, while 23.8% favoured targeting the committee chair.

When evaluating board responsiveness to prior low support for those committee members, 67% of investors want boards held to the stricter say-on-pay dissent thresholds (under 70% support in the US and 80% in Canada) when committee members face re-election, whereas 46% of non-investors prefer the standard 50% majority hurdle.

What is happening in Europe and the UK?

As Guerdon Associates has summarised before, a number of UK and a lesser number of Continental European companies are adopting hybrid plans – where the LTI is made up of time based (restricted stock) and performance-based elements.

Investors support hybrid plans when the structure remains predominantly performance based and is supported by clear rationale (38% of investors). Of the remainder, 27% will assess on a case-by-case basis, 11% will consider in limited circumstances and 11% generally oppose them except in limited circumstances. Non-investor respondents were more supportive overall, with 23% expressing unconditional support, compared with 4% of investor respondents.

Rationales most likely to be accepted included significant US exposure or competition for international talent, evidence of meaningful shareholder consultation prior to implementing, and clear disclosure on why the structure is preferable to alternatives.

Interestingly, relatively few respondents in either group (4%) did not support hybrid at all.

Structural elements most likely to garner support were preserving pay for performance and retaining a substantial performance based component, substantial vesting and holding periods, robust malus and clawback provisions, and a reduction in maximum award opportunity relative to performance based awards.

A further focus in Continental Europe was on payment in equity for non-executive directors (NEDs). The most common response from investors was that fixed cash fees are generally preferable, but 38.1% of investors accepted time-based equity in lieu of cash fees. When asked which safeguards are important, these included reasonable overall remuneration, post-vesting holding periods, purely time-based and a clear rationale.

The takeaway for Australian RemCos

Overseas developments, such as in the UK, can flow into Australian annual general meetings given foreign institutional capital presence on the ASX. It is prudent for Australian companies to keep an eye on global developments and investor sentiment – especially if looking to attract or retain talent from overseas.

Global proxy voters are not anti-retention or anti-discretion; they are anti-opacity. Whether your board is rethinking incentive structures to attract offshore executives or deploying board discretion, your strongest defence at the AGM is documented rationale, formulaic transparency, and clear alignment with long-term shareholder value.

 

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