On December 20, Institutional Shareholder Services released a paper outlining its new methodology for evaluating U.S. pay-for-performance in 2012. As we discussed in a November post, the new approach, which will consist of an initial quantitative assessment and, where appropriate, an in-depth qualitative assessment, was first introduced in ISS' updated proxy voting guidelines for the upcoming year.
The quantitative review will include a relative evaluation, which compares CEO pay and performance to peers and is designed to identify outlier companies that have demonstrated a significant misalignment between CEO pay and company performance, and an absolute evaluation that looks at CEO pay trends relative to shareholder return. Where a pay-performance disconnect is identified, a qualitative assessment will follow to determine either the likely cause or mitigating factors in the misalignment.
As we discussed in our blog post October 28, ISS has stated that the new methodology is being considered for Canada.