- ISS Releases Primer regarding its Methodology for Evaluating Equity Compensation Plans in 2017
- January 17, 2017
- Law Firm: Greenberg Traurig LLP - New York Office
- On Dec. 21, 2016, ISS published an updated overview of ISS’s Equity Plan Scorecard methodology that will affect recommendations on proposals being voted on at meetings occurring on or after Feb. 1, 2017.
Although ISS continues to base its evaluation of a company’s equity plan proposal on three distinct “pillars” (Plan Cost, Plan Features, and Grant Practices), there are a few changes to the pillars including the following:
- ISS has formally introduced an additional qualitative review where an existing plan is being amended or restated.In this qualitative review, ISS will assess whether the proposed changes (on a collective basis) are detrimental to shareholders.If ISS determines that the proposed changes are sufficiently detrimental to shareholders, it may recommend against a plan that would have otherwise passed the more objective Equity Plan Scorecard;
- Under the Plan Features pillar, full credit will be earned if the plan expressly prohibits, for all award types, the payment of dividends before the vesting of the underlying award (however, accrual of dividends payable upon vesting is acceptable).No points will be earned if this prohibition is absent or incomplete (i.e. not applicable to all award types) in the plan document.
- There will be an increased emphasis on the granting of performance-based awards through slight reweighting of the CEO vesting and CEO equity pay mix factors.
- There is also a slight modification to the valuation methodology of full value awards, as ISS will now value the number of time-based full-value awards reported in the Grants of Plan-Based Awards table by using the closing stock price on the date of grant.