Investors to ISS: Reconsider Time-Based Equity

Most investors now believe time-based equity is an appropriate equity vehicle, either in conjunction with performance shares or alone with extended vesting, according to ISS’s 2025 policy survey.

Why it matters: Only 21% of investors flatly rejected time-based equity in favor of performance-only awards. The majority expressed some level of comfort with blending the two:

• 38% said they prefer both performance-based and time-based equity be used, but only a minority of these think performance-based should be required to exceed 50% of the award.
  
  
• 31% said time-based alone could be fine with longer vesting – the most popular was 5 years total (could include vesting and post-vesting requirements).
  
  
• A small but notable 7% fully supported time-based awards, arguing that stock price should be the performance measure.

Meanwhile: The policy survey included several other comp-related questions.

• Shareholder Engagement: 64% of investors agreed companies shouldn’t be penalized if they disclose they sought investor feedback but couldn’t secure it.
  
  
• DEI Metrics: ISS frowns upon changes to in-flight awards, even amid strong anti-DEI pressure from the current administration - 73% of investors agreed with this view.
  
  
• Director Pay: ISS will typically vote against outlier director pay after 2 years. Investors flagged three pay practices as red flags—lack of disclosure around “unusual” payments, excessive perks and high pay magnitude.

What’s Next? ISS is set to release proposed policy updates in the coming weeks, with a public comment period to follow. Final changes typically drop in late November and take effect the following February.