Happy New Year! On December 22, 2014, Institutional Shareholder Services (ISS) released 20 FAQs on its New Equity Plan Scorecard (EPSC). The new EPSC will apply to stock incentive plans for which a company seeks shareholder approval on or after February 1, 2015. That may be you. Due to the importance of this, I waited until the new year when readers are likely to be back at work. Due to the complexity of the information in these FAQs, we will cover the key issues in a series of blog entries over the next several days.

Readers may recall that ISS announced its new EPSC policy as a “more nuanced consideration of equity incentive programs.” ISS points to that fact that only 60% of Russell 3000 equity plan proposals garnered support of 90% or more of votes cast in the 2014 proxy season, versus almost 80% of say-on-pay proposals that received that support level, as evidence that most investors are not fully satisfied with many companies’ stock plans.

The EPSC considers a range of positive and negative factors to evaluate equity incentive plan proposals rather than a series of “pass/fail” tests. A company’s total EPSC score generally will determine whether ISS makes a “For” or “Against” recommendation. However, the new policy will continue to result in an automatic negative recommendation for stock plan proposals that feature certain egregious characteristics (so-called “Deal Breakers”).

A Passing Score Under EPSC: An EPSC score of 53 or higher (out of a total 100 possible points) generally will result in a positive recommendation for the proposal (absent any overriding factors). EPSC factors are not equally weighted. Each factor is assigned a maximum number of potential points, which vary slightly depending on whether the S&P 500, Russell 3000, or Non-Russell 3000 model applies to the company. The FAQs include the following chart summarizing the scoring basis for each factor.

Click here to view table.