ISS publishes FAQ regarding pay-for-performance

February 9, 2012

As discussed in a post of December 21, 2011, Institutional Shareholder Services (ISS) released a white paper last year entitled “Evaluating Pay-for-Performance Alignment: ISS’ Quantitative and Qualitative Approach”. The Paper introduced ISS’ new approach to evaluating pay-for-performance and represents the most current and thorough description of the approach ISS utilizes to evaluate pay-for-performance. A subsequent post of January 10, 2012 provided a summary of the paper.

More recently, ISS has added a Frequently Asked Questions (FAQ) section to their website on the issue. Specifically, the FAQ is intended to provide high-level guidance regarding the way in which ISS will generally analyze certain issues in the context of preparing proxy analysis and vote recommendations for U.S. companies. ISS does, however, indicate that the responses should not be construed as a guarantee as to how it will apply its benchmark policy in any particular situation.

By way of example, answers to the following questions are provided in the FAQ:

  1. “For pay-for-performance alignment, how will ISS treat CEOs who have not been in the position for three years?”
  2. “For companies with meetings early in 2012, whose peer CEO 2011 pay has not yet been released, what pay data does ISS use?”

As indicated in our post of January 10th, while the paper is primarily focused on pay practices of companies in the United States, ISS has indicated that the new methodology is being considered for Canada. Further, given the influence that ISS can have on Canadian capital market participants, the content of the paper and the FAQ may be of interest to Canadian readers.

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