In November and December 2016, ISS, released its updated Frequently Asked Questions relating to U.S. Equity Compensation Plans, U.S. Executive Compensation Policies, and U.S. Peer Group Selection Methodology and Issuer Submission Process.
The new or materially revised equity plan-related topics covered by the updated FAQs discuss:
- how performance-based awards will be counted for the purposes of calculating burn rate;
- how ISS evaluates an equity plan proposal seeking approval of one or more plan amendments;
- how ISS evaluates proposals that include 162(m) reapproval along with plan amendments;
- how ISS views a plan amendment to increase the tax withholding rate applicable upon award settlement;
- changes made to the Equity Plan Scorecard, or EPSC, policy for 2017;
- how ISS evaluates equity plan proposals at newly public companies;
- what factors are considered in the EPSC, and why, including whether the factors are binary, or weighted equally; and
- how ISS assesses a plan's minimum vesting requirement for EPSC purposes.
The new or materially revised compensation-related topics covered by the updated FAQs discuss:
- how Total Compensation is calculated;
- what factors ISS considers in conducting its qualitative review of the pay for performance analysis;
- ISS’ Relative Pay and Financial Performance Assessment included in research reports;
- how ISS will use the Relative Pay & Financial Performance Assessment in its analysis;
- whether the relevant quantitative pay for performance evaluation still applies if a company has not been publicly traded for at least three or five years, and if this affects whether a company would be used as a peer;
- ISS' Problematic Pay Practices evaluation;
- ISS' policy on say-on-pay frequency;
- the vote recommendation implications in the event that a company does not present shareholders with a say-on-pay vote where one would otherwise be expected;
- how ISS evaluates the treatment of equity awards upon a change-in-control;
- how ISS evaluates management advisory proposals seeking shareholder approval of non-employee director pay; and
- how ISS approaches U.S.-listed companies with multiple executive compensation proposals on the ballot as a result of the company's incorporation in a foreign country.
The FAQs relating to U.S. Peer Group Selection Methodology and Issuer Submission Process generally cover topics relating to (i) the methodology that ISS uses to identify peer companies that are reasonably similar to the subject company in terms of industry profile, size, and market capitalization, and (ii) updates to the subject company’s peer group information, including means of communicating updated peer group to ISS.