2026 Shareholder and Proxy Advisor Expectations on Executive Pay
February 12, 2026
Recent updates to shareholder and proxy advisor guidelines continue to encourage flexibility for companies to design executive pay arrangements which best suit their commercial circumstances – but with an increased focus on ensuring companies provide a clear, strategic rationale.
Common themes emerging from the policy updates for the 2026 AGM season include: some openness towards alternative incentive structures such as hybrid plans, emphasis on companies to provide well-considered rationale rather than boilerplate narrative for any proposed changes, and expectations around the operation of bonus deferral once executives have met their shareholding guidelines – with most shareholders expressing a preference for bonus deferral to not be removed entirely in these circumstances.
There is also a continued focus on the quality of remuneration report disclosures, with many shareholders expecting tailored rationales for pay decisions beyond market benchmarking alone, robust and justified benchmarking peer groups which are clearly disclosed, and evidence of how shareholder feedback has been considered in the decision-making process.
An overview of the key themes from institutional shareholder and proxy advisory guidelines is provided below.
| Topic | The Investment Association Principles of Remuneration |
ISS 2026 UK & Ireland Proxy Voting Guidelines and Benchmark Policy Recommendations |
Glass Lewis 2026 Benchmark Policy Guidelines |
Legal & General 2026 UK Executive Remuneration Principles |
Vanguard 2026 Proxy Voting Policy for UK and Europe |
BlackRock 2026 EMEA Proxy Voting Guidelines for Benchmark Policies |
Fidelity 2026 Sustainable Investing Voting Principles and Guidelines |
Aviva 2026 Global Voting Policy |
|---|---|---|---|---|---|---|---|---|
| Fixed pay | Increases should be supported by robust benchmarking. Generic justifications and market practice are insufficient.Explanation is expected when a new director is recruited at a higher salary than the current incumbent and any subsequent increases should be gradual. | Increases should ideally be below the workforce rate – “catch-up” and benchmarking-related increases are generally not supported.Roadmap for expected increases for new joiners should be disclosed on appointment. | Increases should be appropriate when compared to workforce. Rationale for exceptional increases should be fully disclosed. | Increases should generally be below workforce. Benchmarking should be used sparingly.Pay for new joiners should be set cautiously and increased gradually if justified.
Pensions should be aligned with workforce – for pay structures modelled to the US, the differing practices of pension contributions of the local market should be considered. |
Increases should be reasonable, well justified and supported by clear rationale and benchmarking. | Increases should be in line with the workforce rate and significant increases should be supported by strong rationale.Benchmarking should be used transparently, and details, including peer groups, should be disclosed. | Unsupportive where proposed level of pay increase is excessive or inappropriate. | Increases should be clearly justified and normally below the workforce rate.Pay packages for new joiners should generally be lower than their predecessors. |
| Annual bonus | Bonus deferral may reduce once shareholding guidelines are met, but full removal is discouraged. | Target payouts should not exceed 50% of maximum.Deferral is encouraged especially when there is no LTIP in place. | Deferral is expected but can be reduced when shareholding guidelines are met, provided awards remain subject to clawback and malus provisions. | Encourage deferral into shares of one-third or more of bonus earned.May allow for a smaller portion of a bonus to be deferred where directors have substantial shareholdings and mechanisms are in place to allow for clawback.
Increases to opportunity are discouraged and opportunity of 250% of salary is generally reserved for the largest global companies. |
Annual bonus that accounts for the majority of variable pay without a compelling rationale will not be supported. | Target payouts should not exceed 50% of maximum.Deferral is encouraged even once shareholding guidelines are met. | ||
| LTIP | An appropriate discount and performance underpins are expected to apply to restricted share awards.Hybrids are only supported in limited circumstances (significant US footprint, competing for global talent).
VCPs pose challenges and risks and should be supported by a compelling rationale and thorough assessment of the alternatives. LTIP opportunities should be reduced after significant share price falls and vesting outcomes should be assessed against windfall gains and reduced if appropriate. |
Hybrids should be supported by strong rationale instead of generic references to issues such as competitiveness. Expect a discount to reflect greater certainty.LTIP awards should be reduced to account for a material fall in share price. | An appropriate discount and performance underpins are expected to apply to restricted share awards.Hybrids are considered on a case-by-case basis, considering the specific rationale and whether there has been a reduction in opportunity vs. the previous LTIP. Where competing for talent in the US is cited as part of the rationale, relevant peers should be disclosed. | Discount of at least 50% should apply to restricted share awards.Hybrids may be supported if there is a strong, company specific justification (e.g. US market alignment).
Grants should be reduced after significant share price falls (>20%) or awards should be reduced on vesting. |
Majority of pay should be delivered through the LTIP.One-off awards should only be granted in exceptional circumstances. | Discount of at least 50% should apply to restricted share awards. Performance underpins should also apply.Hybrids are considered on a case-by-case basis. Companies should provide a clear explanation as to how the plan supports long-term value creation and aligns with strategy. If the move to a hybrid is accompanied by a material increase in overall quantum, companies should provide a compelling explanation.
One-off awards should only be granted in exceptional circumstances. |
Incentives which have no performance conditions, or where an insufficient portion of the incentive is tied to performance conditions, are opposed.VCPs and uncapped plans are generally not supported. | Supportive of companies departing from traditional LTIP arrangements, provided they can clearly demonstrate why the change is in shareholder interests.Yet to be convinced that hybrids are aligned with shareholder interests, given the win-win scenario for executives.
LTIP awards should be reduced after share price falls. |
| Performance metrics | Metrics and targets should be clearly linked to KPIs used and accompanied by how they relate to value creation.Adjustments to in-flight metrics and targets should be clearly justified and only apply in exceptional circumstances. | Targets should be disclosed in detail, preferably with full target range.Lowering of targets should be reflected in opportunity reduction and any increase in award size should be linked to more challenging targets. | Preference for the majority of the performance assessment to be based on financial measures. | Metrics should be clearly defined, measurable and aligned to strategy, avoiding double-dipping across schemes.Targets should be primarily financial, combined with meaningful non-financial measures.
Lowering targets without strong justification should be avoided. ESG targets should apply where companies are exposed to high risks in those areas. |
Rigorous metrics such as relative TSR should apply.Non-financial metrics, including ESG, should be equally rigorous, aligned to strategy and disclosed. | Supportive of input metrics and metrics related to financial value creation (for example economic profit, ROIC).Wary of companies using only output metrics such as EPS or TSR. If TSR is used it should be assessed on a relative basis.
Any sustainability metrics should be as rigorous as financial and operational targets. |
Incentives should be based on financial metrics that are realistic but ambitious, appropriate to strategy, and aligned with shareholder expectations. | TSR is a preferable metric for LTIPs.Variable pay should include robust and relevant ESG metrics when these are strategically material. |
| Shareholding guidelines | Guidelines should clearly state the minimum requirement and the time to achieve it, as well as consequences of not doing so.Post-employment guidelines should be enforceable and apply for 2 years post-exit. | Requirement should be at least 200% of salary, with an appropriate post-employment shareholding requirement in place for at least 2 years. | Minimum shareholding requirements should apply in- and typically two years post-employment. | Minimum requirement should be equal to annual LTIP awards or 2x face value of restricted share awards.Post-employment requirement should be no less than 80% of in-employment requirement. | Absence of shareholding guidelines or requirement out of line with peers is not supported. | Meaningful shareholding should be built within a reasonable time and apply preferably for two years post-employment. | Meaningful level of share ownership should be built within a reasonable timeframe.Post-employment requirement is expected in some markets. | Meaningful in-service and post-employment shareholdings are expected. |
| Malus and clawback | Triggers should be clearly disclosed. | Triggers should be clearly disclosed. | Circumstances, timing and any actual application of the provisions should be clearly disclosed. | Triggers should be clearly disclosed and not be too narrowly defined. | Provisions should be detailed in incentive plans and exercised when necessary. | Provisions should be built into incentive plans.Appropriate triggers should be considered in the context of the company. | Triggers should be clearly disclosed. | |
| Discretion | Discretion should be applied in a balanced and consistent manner (both positive and negative discretion).Companies are encouraged to consult with shareholders, especially in cases where discretion may have a material impact on outcomes.
The effectiveness and appropriateness of the discretion framework should be regularly reviewed. |
Any use of discretion should be clearly explained.Adjusted targets should not be any less challenging than the original targets set.
Disclosure is expected on how ESG matters were considered when determining outcomes. |
Scope and use of any discretion should be clearly disclosed and justified.Incentive outcomes should account for material events that would otherwise be excluded from performance outcomes. | Any use of discretion should be accompanied by detailed explanation of reasons, elements of pay affected, and impact on final pay outcome. | Discretion should apply when pay outcomes do not align with company and share-price performance or the shareholder experience.Excessive use of discretion is viewed negatively. | Clear disclosure is expected to explain how discretion was applied and how the adjustments align with performance and the stakeholder experience. | Discretion should ensure that pay outcomes closely reflect company and management performance and stakeholder outcomes.Scope and limits of discretion should be clearly outlined to shareholders beforehand. | |
| NED fees | Fees should reflect contribution.Performance-related pay is inappropriate, but part of fees can be paid in shares. | Additional pay other than fees (pension, share option scheme, performance-related pay) is not supported. | Pay should appropriately reflect time and effort.Any fees delivered as equity should not be performance-based.
Retirement benefits are not supported. |
Performance-related pay is not supported.Payment of part of fees in shares is encouraged. | Fees should be reasonable, peer-aligned and non-performance-related. | Fees can be paid in cash and/or shares. Variable pay elements are not supported.Minimum shareholding requirement is supported. | Pay should be appropriate for the role and not compromise duties or objectivity.Significant increases, share options or performance-related pay are not supported. |
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