On December 20, 2012, ISS posted its U.S. 2013 Compensation Policy Updates FAQs, available at: http://www.issgovernance.com/policy/2013/USCompensationFAQ. In these FAQs, ISS gives some additional color around its 2013 policies, including some insights into Realizable Pay.
According to the FAQs, the “large cap companies” that ISS will analyze CEO realizable pay for are S&P 500 companies. ISS also indicates that realizable pay will be measured over a three (3) year period and compared with granted pay (generally pay as disclosed in the Summary Compensation Table, but ISS will continue to value stock options using its own methodology).
“The total realizable value for these grants and payments will thus be the sum of the following:
- Base Salary reported for all years in the measurement period;
- Bonus reported for all years;
- Short-term (typically annual) awards reported as Non-equity Incentive Plan Compensation for all years;
- For all prospective long-term cash awards made during the measurement period, the earned value of the award (if earned during the same measurement period) or its target value in the case of on-going award cycles;
- For all share-based awards made during the measurement period, the value (based on stock price as of the end of the measurement period) of awards made during the period (less any shares/units forfeited due to failure to meet performance criteria); or, if awards remain on-going, the target level of such awards;
- For stock options granted during the measurement period, the net value realized with respect to such granted options which were also exercised during the period; for options granted but not exercised during the measurement period, ISS will re-calculate the option value, using the Black-Scholes option pricing model, as of the end of the measurement period;
- Change in Pension Value and Nonqualified Deferred Compensation Earnings reported for all years; and
- All Other Compensation reported for all years.
*Generally three fiscal years, based on the company’s fiscal year. For realizable pay calculated as part of ISS’ 2013 analyses, this will generally consist of fiscal years 2010 through 2012.”
The FAQs also address the revised ISS peer group methodology, Pay for Performance eveluations, and advisory votes on golden parachutes (say on golden parachutes).