Yesterday, ISS announced to clients its 2018 benchmark proxy voting policies, which will generally be applied for shareholder meetings on or after February 1, 2018. The “main event” will come in early December, when ISS will release a complete set of updated policies and updated FAQs on certain U.S. policies. In some years, these can provide a useful preview. This year, however, at least in the compensation area, they do not add much to what ISS has previous announced.

The two significant changes ISS has announced are related to (1) Non-Employee Director Pay, and (2) Gender Pay Equity, as we described in one of our October posts, ISS Changes for 2018?

Non-Employee Director (NED) Pay

ISS will adopt a policy that provides for adverse vote recommendations for board and Committee members who are responsible for approving/setting NED compensation when there is a recurring pattern (i.e., two or more consecutive years) of excessive NED pay magnitude without a compelling rationale or other mitigating factors. Importantly, this new policy will not impact vote recommendations in 2018. However, in future years, negative recommendations would be triggered only after a pattern of excessive NED pay is identified in consecutive years. ISS states that it has “identified some extreme outliers that pay directors substantially more than their peer companies without providing a clear explanation for these discrepancies.”

Gender Pay Gap

ISS is introducing a new policy to address shareholder proposals related to gender pay gaps. Under the policy, ISS will evaluate requests for reports on a company’s pay data by gender, or a report on a company’s policies and goals to reduce any existing gender pay gaps, on a case-by-case basis, taking into account a variety of factors, including whether the company has been the subject of recent controversies, litigation, or regulatory actions related to gender pay gap issues.