In December 2016, Institutional Shareholder Services, or ISS, released a white paper describing its quantitative and qualitative approach to pay-for-performance mechanics.

ISS has described its approach to evaluating pay-for-performance as consisting of two parts: an initial quantitative assessment and an in-depth qualitative review.

According to ISS, its initial quantitative screen is designed to identify outlier companies that have significant misalignment between CEO pay and company performance over time.

Following its quantitative screen, ISS performs qualitative evaluations, including a thorough review of the Compensation Discussion and Analysis (CD&A) section of a company's proxy statement, and highlights noteworthy issues to investors regardless of the results of the quantitative screen. If the quantitative screen results in an elevated concern level, the qualitative assessments are designed to uncover either the potential causes of a perceived long-term disconnect between pay and performance, or factors that mitigate the initial assessment. These in-depth qualitative evaluations are one of the most important parts of ISS’ analysis and subsequent vote recommendation. If ISS identifies problematic incentive features for a company (e.g., multi-year guaranteed payments, discretionary pay components, inappropriate perquisites (including tax gross-ups), or lack of rigorous goals) as part of its qualitative analysis, it may issue a negative recommendation despite a "low" quantitative concern.

https://www.issgovernance.com/file/policy/pay-for-performance-mechanics-dec-2016.pdf