In the compensation area, ISS is proposing changes to both its management say-on-pay proposal guidelines and its say-on-golden parachute proposal guidelines. The key changes to the former are described as follows:

1.Use company’s selected peers as an input to its peer group methodology, while maintaining an approach that includes company size and market capitalization constraints.

2.Potentially incorporate a comparison of realizable pay to grant date pay as part of the qualitative evaluation of pay-for-performance alignment.

3. Add pledging of shares as a factor that may lead to negative recommendations under the existing problematic pay practices evaluation.

The first two changes are directed at modifying the way ISS analyzes pay-for-performance and are responsive to concerns that issuers receiving negative say-on-pay vote recommendations from ISS had frequently raised in supplemental proxy materials. ISS proposes to define “realizable pay” as follows:

Realizable pay will consist of the sum of relevant cash and equity-based grants and awards made during a specified performance period being measured, based on equity award values for actual earned awards, or target values for ongoing awards, calculated using the stock price at the end of the performance measurement period.

The notable fact about this definition is that it only takes into account awards made during a specified period (instead of all outstanding awards that an executive may hold).

The changes to the say-on-golden-parachute gudelines indicate increasing resistance to change in control agreements with “problematic” practices (including in particular tax gross-ups and “single trigger” payments). ISS is indicating that even legacy agreements with these features (as opposed to new or recently modified agreements) could result in a negative vote recommendation.