Companies in the Russell 3000 and Russell MicroCap Index with annual meetings scheduled between February 1, 2016 and September 15, 2016 may submit updates to their self-selected compensation benchmarking peer groups from 9:00 AM EST on Tuesday, November 24, 2015 through 8:00 PM EST on Friday, December 11, 2015. A separate peer group update process for eligible companies with 2016 annual meetings after September 15, 2016 will be held in mid-2016.
The submission of company-selected peers is voluntary, but is encouraged for any eligible company that has made changes to its peer group from the group disclosed in the company’s last proxy. If no changes are submitted, ISS will use the peers disclosed in the company’s last proxy when determining the company’s 2016 ISS peer group.
Participating companies should submit the peers used to set compensation for the fiscal year covered by their 2016 proxy (in most cases, FY2015). It is ISS’ expectation that the peers a company submits will be the peers disclosed by the company in its 2016 proxy. Significant differences between submitted peers and those disclosed may cause ISS to re-run the company’s peer group and may result in the company not being able to pre-submit peers in future years.
Submitting peer group information is a two-step process:
- Online – Participating companies should go to http://www.issgovernance.com/u-s-company-peer-group-feedback to submit their peer group through the online form provided by ISS.
- Verification Letter – Participating companies must also send a letter on company letterhead in PDF to firstname.lastname@example.org that contains the full list of peers submitted online, along with the name and email address of the company contact. The confirmation email must be from the email domain of the company contact. Without this verification, peers submitted online will not be factored into ISS’ peer group selection process.
Background on ISS’ Peer Group Selection Methodology:
ISS selects peer groups based on (1) the GICS industry classification of the subject company, (2) the GICS industry classifications of the subject company’s disclosed benchmarking peers and (3) size constraints for both revenue (or assets for certain financial companies) and market value. ISS prioritizes companies in the subject company’s 8-digit GICS group and companies within the subject company’s “first-degree” peer group or with numerous peer group connections to first-degree peers, while also including companies that push the subject company’s size closer to the median of the peer group. “First-degree” peers are those that are selected by the subject company or that have chosen the subject company as a peer. ISS peer groups generally contain between 14 and 24 companies.
To prepare for the 2016 annual meeting season, ISS will construct peer groups before companies’ 2016 proxy disclosures are available. This means that typically ISS will use company-selected peer groups disclosed in 2015 (generally peer groups used for FY2014 compensation decisions) to form the peer groups used by ISS during the 2016 annual meeting season for evaluation of FY2015 compensation. The company-selected peer group submission process is an effort to collect more accurate and up to date information for use by ISS in selecting 2016 peer groups.
For more detail on ISS’ 2016 policies regarding peer group selection, see its 2016 U.S. Proxy Voting Policies and Procedures, FAQs on Peer Group Selection Methodology.