Over the last few years, a robust conversation has been brewing about the effectiveness of performance share units (PSUs) and whether shareholders would be better served by alternative equity approaches, including long-vesting equity awards. These debates have instigated fresh conversations in the boardroom about long-term incentive (LTI) strategy and which equity designs best serve the unique business and talent dynamics at individual companies, even if these designs don’t always align with pay-for-performance orthodoxy. With macroeconomic and geopolitical uncertainty now the norm, we expect these conversations to continue to gain steam, particularly as governance institutions have expressed openness to alternative LTI paths.

ISS’s 2026 policy guidelines and FAQs now recognize time-based programs as “performance-based,” provided they have at least a three-year vesting period and the overall vesting and holding period requirement exceeds five years. The change comes as recent investor surveys conducted by proxy services have begun to show a softening of support for LTI programs primarily composed of PSUs. While most investors and advisors still advocate for a weighting of 50% PSUs, the updated
policy leaves room for exploration in the coming years.

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