Last week, ISS announced or released four items important to public companies for the upcoming proxy season:
- Executive Summary of 2016 Proxy Voting Guidelines Updates
- Updated FAQs for application of the Equity Plan Scorecard (EPSC)
- Opening of the window for companies to update their executive compensation benchmarking peers
- Opening an Equity Plan Data Verification portal for U.S. companies receiving a proxy recommendation
EXECUTIVE SUMMARY OF 2016 PROXY VOTING GUIDELINES UPDATES
The primary changes in the 2016 Proxy Voting Guidelines in the area of executive compensation are (a) the addition of a section on “Insufficient Executive Compensation Disclosure by Externally Managed Issuers (EMIs)” (generally aimed at REITs), and (b) Enhanced scrutiny on policies requiring senior executives to retain a portion of net shares acquired through compensation plans. More to come on these issues in future blogs.
UPDATED FAQS FOR APPLICATION OF THE EQUITY PLAN SCORECARD
ISS made a few changes to its new EPSC tool (expect more), including: (a) renamed as “CIC Vesting,” the Plan Features factor formerly known as “Automatic Single-Trigger Vesting” and changed the scoring levels plan provisions on the accelerated vesting of outstanding awards on a change in control; (b) increased the period required for full points with respect to the Post-Vesting/Exercise Holding Period Plan Feature to 36 months (versus 12 months previously); (c) re-named the “IPO” model as “Special Cases” to analyze companies with less than three years of disclosed equity grant data (generally, IPOs and bankruptcy emergent companies); (d) added a new Special Cases model that includes Grant Practice factors other than Burn Rate and Duration will apply to Russell 3000/S&P 500 companies; and (e) adjusted certain factor scores in ISS’ proprietary scoring model. More to come on EPSC issues in future blogs.
WINDOW FOR COMPANIES TO UPDATE THEIR EXECUTIVE COMPENSATION BENCHMARKING PEERS
ISS announced that it will be accepting updates to companies’ self-selected compensation benchmarking peers beginning November 24. ISS invited all companies in the Russell 3000 or Russell MicroCap Index (collectively known as the “Russell 3000E”) with annual meetings set to occur between February 1 and September 15, 2016, to participate in this round of peer submission. ISS uses a company’s self-selected executive compensation benchmarking peers as a key input into the ISS peer group selection process. If the company has made changes to the compensation peers between its 2015 proxy and 2016 proxy, it should use this process to ensure that the most currently self-selected peers influence its ISS peer group.
OPENING THE EQUITY PLAN DATA VERIFICATION PORTAL
ISS encourages companies planning to seek shareholder approval of an equity plan in 2016 to register to receive notification of the availability of their data. Upon notification, companies will have two business days to verify the data and/or request modifications. Data will be available from 9:00 a.m. ET on the first business day after ISS collects and publishes the company’s data to the portal until 9:00 p.m. ET on the second business day.