Say on Pay

New Video Podcast!

I am happy to announce that on May 2, 2018, my new video podcast, The EC Minute, launched.  The first three episodes are all live now. New episodes will be posted weekly. You can see the video podcast episodes at:

The EC Minute

The first three episodes take a look at Say-on-Pay, with a focus on S&P 500 companies.

 

If you have an idea or suggestion for a topic for The EC Minute, just let me know by using my contact form:

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ISS Issues 2018 Policy Updates

On November 16, 2017, ISS released it policy updates for 2018.  These updated policies will apply to shareholder meeting on or after February 1, 2018.

For the U.S., there are several compensation-related policies that were updated:

  • Pay-for-Performance Policy — starting in 2018, ISS will add a new relative quantitative test that measures relative CEO against three to four relative financial performance metrics, which will vary by industry, all measured over a 3-year period similar to the RDA or Relative Degree of Alignment test which compares CEO pay and TSR over a 3-year period.

Note: ISS indicated that it will provide specific details around the mechanics of its updated quantitative P4P screening methodology in an updated P4P white paper. ISS did not give an estimated timeframe for the release of this updated white paper, but in the past, such P4P white papers have been released in late January or early February after policy updates. I will provide details on the P4P quantitative screening mechanics once the white paper becomes available.

  •  Advisory Votes on Executive Compensation: Compensation Committee Communications and Responsiveness–this policy looks at a company’s response to a say on pay (SOP) vote that received less than 70% support. ISS is now clarifying the information it wants companies to detail in their subsequent year proxy statements about their reaction to such a low SOP vote, including the timing and frequency of shareholder engagements, whether independent directors participated, the specific concerns raised by dissenting shareholders, and disclosure of specific and meaningful action to address shareholders’ concerns.
  • Board Accountability–ISS will generally vote against members of the board committee responsible for approving/setting non-employee director compensation if there is a pattern (i.e., two or more years) of awarding excessive non-employee director compensation without disclosing a compelling rationale or other mitigating factors.

The ISS policy updates can be found on ISS’ Latest Voting Policies page:

Latest Voting Policies

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ISS Posts P4P Methodology Whitepaper

ISS recently posted its whitepaper detailing its pay for performance (P4P) methodology:

The Evaluating Pay for Performance white paper provides an overview of ISS’ approach in evaluating Pay for Performance alignment. Originally published prior to the 2012 proxy season [Note: a revised version of the whitepaper was published in February 2012], the document incorporates further updates for 2013 that describe ISS’ new peer selection methodology and approach to measuring realizable pay.

Evaluating Pay for Performance: ISS’ Quantitative and Qualitative Approach

 

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Call for Glass Lewis/Equilar Peer Group Updates – Due 1/18/2013

As you are likely aware, Glass Lewis has adopted Equilar’s “Market Peers” for use in its Say on Pay quantitative analyses and are also used in Equilar’s Pay for Performance tool that can simulate the Glass Lewis quantitative tests. More information on Equilar’s Market Peers can be found at: http://www.equilar.com/peer-research/pdf/EquilarInsight-Market-Peers.pdf

US companies in the Russell 3000 index that plan on filing updated peer groups in their 2013 proxies can submit new peer groups here. Equilar asks that the updates be submitted by corporate issuers only. Companies will have until January 18, 2013 to update their peer groups.

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