Executive Compensation News and Views – 4Q 2014
ISS Policy Changes for the 2015
Institutional Shareholder Services (“ISS”) released its new proxy voting guidelines for meetings on or after February 1, 2015. The 2015 changes include the following:
- Quantitative Test Thresholds – ISS has adjusted the thresholds to trigger a concern under the pay-for-performance quantitative tests as follows:
- Relative Degree of Alignment – Increased the threshold to trigger a medium concern to -40 (from -30), while the threshold to trigger a higher concern remains at -50
- Pay-TSR Alignment – Decreased the threshold to trigger a medium concern to -20 (from -30) and decreased the threshold to trigger a higher concern to -35 (from -45).
- Multiple of Median – No changes.
- Equity Plan Scorecard – ISS is implementing a new equity plan evaluation methodology that will employ a balanced scorecard approach rather than a series of pass or fail tests (discussed in more detail on page 3).
- Independent Chair Proposals – ISS will employ a more holistic review, such that any single factor will not automatically result in a “For” or “Against” voting recommendation and added new factors for consideration, including absence/presence of an executive chair, recent board/executive leadership transitions, director/CEO tenure and a longer 5-year TSR performance period.
- Unilateral Bylaw/Charter Amendments – ISS adopted a stand-alone policy, under which an “Against” voting recommendation will be made for directors individually or for the entire board, if the board amends the company’s bylaws or charter without shareholder approval in a manner that materially diminishes shareholders’ rights or that could adversely impact shareholders.