ISS Releases Policy Changes for the 2018 Proxy Season | FTI Consulting

ISS Releases Policy Changes for the 2018 Proxy Season

Real Estate & Infrastructure | Corporate Finance & Restructuring

January 10, 2018

money

Institutional Shareholder Services (“ISS”) recently released its policy updates for its 2018 proxy voting guidelines, effective for meetings on or after February 1, 2018. Meaningful changes have been made to the ISS Pay-for-Performance Quantitative Evaluation of CEO pay, and a new policy was added to evaluate if non-employee director pay is “excessive.” Below is a summary of the key changes.

Key ISS Policy Changes

  • CEO Pay-for-Performance Evaluation – The quantitative evaluation by ISS will include a new financial assessment based upon return metrics and, depending on the industry, operational growth metrics. The Financial Performance Assessment (“FPA”), as it has been labeled, may modify the results generated under the historical total shareholder return (“TSR”)-based screening and may change a company’s concern level from a Medium to Low or from a Low to Medium (will not have any impact on the High concern level, positively or negatively).
  • Director Compensation – ISS will be identifying companies with non-employee director compensation near or at the top of their respective industry and may issue an Against voting recommendation for compensation committee members if non-employee director pay (as a group or by individual) is identified as “excessive” for multiple years in a row (i.e., two or more consecutive years; meaning the first Against recommendation could potentially occur in the 2019 proxy statement).

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