Executive compensation remains a central focus for institutional investors when assessing the governance programs of their portfolio companies. Pay programs provide signals about the strength of board oversight, performance priorities, and alignment with long-term shareholder interests. For companies, meeting shareholder expectations means designing compensation structures that reflect sound governance, reward strong performance, and are accompanied by clear disclosures explaining plan design decisions.
As a trusted partner to institutional investors and companies, Glass Lewis believes it is our role to provide research and insights that enable our clients to act more effectively in accordance with their own principles and priorities. Through independent, data-driven research and transparent methodologies, we seek to support investors in making more informed voting decisions, while also supporting companies with valuable insights into current market practices, shareholder expectations and potential areas of external concern.
Our quantitative pay-for-performance (P4P) model is a cornerstone of this work, providing a standardized framework for assessing pay alignment and strengthening understanding between companies and shareholders. It is in this context that Glass Lewis has taken stock of shifting market expectations and gathered feedback from diverse stakeholders to inform the update and expansion of our pay-for-performance model to offer clearer, consistent insights across companies and regions.
Pay-for-Performance Updates Across Markets
While Legacy P4P provided meaningful analysis of pay alignment, practices and views have continued to develop and expand since Legacy P4P was first introduced. In January 2026, Glass Lewis’ existing pay-for-performance models (“Legacy P4P”) used in the North American and Australian markets will be refined and updated into a newly developed, multidimensional pay-for-performance model (“New P4P”). New P4P represents both an expansion of our prior quantitative analysis and a broadening of the coverage universe to include constituents of major Continental European and U.K. exchanges (hereafter referred to as Europe).
This evolution of our pay-for-performance model was undertaken based on extensive evaluation of market trends and ongoing dialogue with both shareholders and covered companies. Among other things, stakeholders expressed a desire for multiple views on pay outcomes, a better understanding of our underlying methodology, and greater clarity regarding the interplay between our quantitative analysis and analysts’ holistic review of pay programs.
Our updated approach applies a series of tests to companies in each covered region, yielding a concern rating for each test as well as an aggregated 0-100 numerical score. From the overall score, a final concern level is produced, ranging from Negligible to Severe. While specific tests vary according to regional market practices, all regional models evaluate pay and performance using diverse measures of compensation. Tests also incorporate comparator groups beyond Glass Lewis peers to remain responsive to the changing environment, including market cap bands and broad market benchmarks.
Another fundamental change in the New P4P methodology is the expansion from a 3-year assessment used in our Legacy models in North America and Australia to a 5-year window. This longer view offers a longer-term view of pay alignment that better serves evolving investor practices, and strengthens the model against the potentially noisy influence of external factors like macroeconomic volatility. While we note that company long-term incentives rarely include 5-year performance terms, the need for a longer measurement window was a consistent point of feedback from market participants, and better aligns our approach with prevailing market trends.
Finally, New P4P in all covered regions includes a test focused on qualitative design aspects of each company’s pay program. These tests account for divergences from commonly accepted best practices in each market, resulting in a downward score modifier for each. While a holistic, case-by-case assessment still informs our analysts’ ultimate recommendations, the addition of this qualitative assessment as part of the scoring framework offers additional transparency and closer alignment between our scores and final assessments.
Tailored Regional Models
One of the most important benefits of the New P4P model is the expansion of quantitative pay-for-performance coverage to new markets in Europe, allowing tighter alignment of our pay-for-performance approaches across global markets. While each region’s specific pay-for-performance analysis methodology differs to reflect market norms, disclosures and trends more specifically, there is commonality between certain tests, the qualitative modifier and the scorecard approach.
In North America, New P4P does away with A-F letter grades in favor of scores and concern levels as described above. The new model also splits the main components of our legacy analysis into three distinct tests, supplemented by qualitative considerations and new tests, including the addition of CAP in the U.S. and realized pay in Canada, among others.
The legacy Australian methodology utilized both market peers and industry peers to show comparisons against both groups, ultimately resulting in a final grade of “Good”, “Fair” or “Poor”. By contrast, the New P4P for Australia introduces a multi-test scorecard, a blended peer approach and the addition of a test focused on qualitative considerations regarding the structure of the pay program in line with North America and Europe.
With regard to European markets, the New P4P methodology allows far broader coverage and applicability than ever before, with companies entering coverage across Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the UK. The core tests of the legacy P4P methodology have been adapted to fit European disclosure norms, evaluating the alignment of vested CEO pay and financial performance using both TSR and an assortment of financial metrics, all relative to Glass Lewis peers. Other quantitative tests assess short- and long-term incentive payouts against TSR performance relative to broad regional benchmarks. As in other regions, a final qualitative test based on pay program features builds important considerations in our analysts’ ultimate holistic assessment directly into the numerical score output for each company.
Looking Ahead
The new P4P represents both continuity and change, retaining the strengths of our Legacy framework while addressing evolving practices, investor expectations, and direct market feedback. By expanding the scope of analysis, lengthening the measurement horizon, and introducing a transparent scorecard structure, Glass Lewis aims to provide investors and covered companies alike with a clearer, more comprehensive view of pay-for-performance alignment.
For more information about our regional models, visit our 2026 Pay for Performance Resources page, or request access to our methodology documentation for North America, Europe & the U.K. or Australia.
