Proxy advisers update their AGM vote resolution guidelines

August 11, 2025

Consistent with prior years, ISS and Glass Lewis (GL) have released updated benchmark voting guidelines for the 2025 AGM voting season after boards have signed off on their FY25 remuneration reports and are finalising the CEO’s FY26 equity grant requiring their support.

ACSI has also released its 2025 Stewardship Report hinting of issues for the forthcoming AGM season.

GL’s changes are the most comprehensive in regard to remuneration. They have upped the ante for the extent of CEO stock ownership.

ISS has made significant changes relating to the independence of Non-Executive Directors (NEDs) – in particular regarding tenure and concerns around audit firm relationships.

For a breakdown of the changes see below.

Glass Lewis (GL)

GL has made the following changes.

  • Expansion on Restricted Share Plans and Other Time-Based Awards: GL noted that since the introduction of APRA’s Prudential Standard CPS 511 in 2023, it has seen more companies implement restricted stock outside the financial services industry.
  • GL expands in its guidelines this year that companies should transparently disclose the rationale for the design (including benchmarks or strategic reasons), and that the overall incentive opportunity should be discounted to reflect the lower risk. Where there is no, or only a minimal discount, GL expects a detailed justification supported by relevant benchmarking.
  • Share ownership guidelines: GL introduced a quantitative guideline around a minimum shareholding requirement (MSR) for CEOs:
    • 3 x Fixed Remuneration (FR) for most CEOs. Most ASX 300 fail to meet this requirement. For GL, holdings of at least x 2 FR were deemed acceptable.
    • Where no MSR exists, Glass Lewis will assess whether executives hold an appropriate level of equity, taking into account CEO tenure.
    • If there is not a significant holding, GL expects incentive plans to be structured to accumulate shareholdings i.e. through STI deferral and LTI.
    • GL counts ordinary shares, vested equity and earned deferred rights (even if subject to time-based deferral or clawback), and does not count unvested time-based or performance-based equity towards the requirement.
    • GL is monitoring movements in CEO shareholdings, including significant share purchases and sales, to assess alignment – though no formal policy applies yet.
  • Board skills: GL has introduced new guidance on board skill expectations.
    • Noting that a lack of core industry experience on the board can lead to challenges, GL now expects at least one NED to have held a significant executive position in the company’s core industry.
    • It has also strengthened expectations regarding board skills disclosures, looking for clear attribution of each disclosed skill to individual directors and the criteria for these skills. Additionally, directors may be held accountable for capital allocation decisions that have led to material destruction of value where there is no credible plan to restore it.
  • Board oversight of AI and founder led company risks: New sections set out expectations for board oversight of AI-related risks, and governance risks in founder-led companies where the founder retains significant ownership and influence. It may vote against affiliated directors in founder led companies to support board refreshment and strengthen capacity for board oversight.

A number of housekeeping edits have also been made for clarity and consistency.

Below sets out the key changes in the guidelines in relation to remuneration.

  • Excessive Remuneration: clarified that it is a voting issue where remuneration is relatively high in comparison to “market and/or industry peers”.
  • Inadequate response to shareholder concerns: introduced as a voting issue where there is a “failure to address significant shareholder opposition to the prior year’s remuneration report.”
  • Material margin loans: GL has removed that companies should have policies on the extent to which directors and key executives can take out third party margin loans.

ISS

Remuneration

In contrast to the refinement from Glass Lewis, ISS has made just one change in relation to remuneration. For 2025, ISS has introduced that “plans should not allow for a dividend-equivalent amount to be paid or granted at the end of the performance period for LTIs that ultimately vest.” This makes more clear a stance ISS has been gravitating towards for some periods. No rationale is provided for why they would prefer LTIs to be unaligned with TSR, or why the Australian guidelines differ from their UK equivalent (see p. 20 HERE) or their US guidelines at p. 51 HERE).

NED independence

ISS has introduced stricter independence criteria for boards and directors.

  • Definition of independence for NEDs: introduced that will consider a NED as non-independent:
    • If a company is silent on whether a director is independent (in the annual report, ASX announcement or website).
    • If a director has served for 9 or more years concurrently with the CEO.
  • Wording on director voting has changed. Rather than listing “considerations” for a vote ISS has a more definitive, black letter “generally vote against” if certain factors are present. The factors added or tweaked include:
    • Voting against a board chair classified as non-independent for reasons other than tenure, with exceptions for company founders or material strategic shareholders on a case-by-case basis.
    • Voting against directors who are former partners and “other factors demonstrate a continuing relationship with the audit firm (i.e. retirement benefits)”. In effect, this means one of the big 4 audit firm’s ex-partners could disappear from boards entirely.
    • Voting against directors serving on the audit committee as a former partner or employee of the audit firm. ISS does not consider voting against ex-partner directors serving on other committees which receive services form their old firm, such as risk committees or remuneration committees.
  • Introduced new sections on committee independence and tenure:
    • ISS now states that if there is evidence of long term issues around committee composition which are not addressed it may vote against the board chair as they retain “overall responsibility for the board’s corporate governance arrangements”.
    • ISS will vote against any director who is a former executive now classified as not independent and who serves on the audit committee.
    • ISS will generally vote against any NED if during the next 3 year term the NED will reach 16 years of tenure or more, with exceptions as above for company founders or material strategic shareholders.

ACSI Stewardship Report

The 2025 Stewardship Report focussed less on executive remuneration than the 2024 report, which included commentary around the increase in shareholder concern on executive pay shown by the record 42 strikes against the ASX300 remuneration reports recorded.

Similar to GL, ACSI noted the increased adoption of “service-only” incentives. ACSI stated that this approach “commonly found in the US, diverges from the expectations of many Australian-based investors, and raises concerns about magnitude of remuneration and the risks of pay-for-failure.”

Preparing for the 2025 AGM Season

As the AGM season approaches and companies finalise remuneration reports, RemCos can reference the following resources, including our end of year checklist for Remco Chairs (see HERE).

See HERE to download the full GL Benchmark Policy Guidelines.

See HERE for the full ISS Proxy Voting Guidelines.

See HERE for the full ACSI 2025 Stewardship Report.