Institutional Shareholder Services Issues FAQs on Revised Peer Group Selection Methodology | Practical Law

Institutional Shareholder Services Issues FAQs on Revised Peer Group Selection Methodology | Practical Law

Institutional Shareholder Services (ISS) released a set of FAQs regarding its revised peer group selection methodology.

Institutional Shareholder Services Issues FAQs on Revised Peer Group Selection Methodology

by PLC Employee Benefits & Executive Compensation
Published on 05 Dec 2012 • USA (National/Federal)
Institutional Shareholder Services (ISS) released a set of FAQs regarding its revised peer group selection methodology.
On December 4, 2012, Institutional Shareholder Services (ISS) released a set of Frequently Asked Questions (FAQs) setting out how it will determine a company's peer group for purposes of conducting its pay-for-performance analysis. The FAQs cover:
  • ISS's new peer group methodology.
  • Communicating updated peer group information to ISS.
Under its new methodology, ISS will generally select 14 to 24 peers based on:
  • The Global Industry Classification Standard (GICS) industry classification of the company.
  • The GICS industry classification of the company's self-selected peer group.
  • Size constraints for revenue (or assets for certain financial companies) and market capitalization.
ISS will construct company peer groups under its revised methodology in early January 2013. These will be effective for meetings occurring on or after February 1, 2013.
For companies that have changed their peer groups since their 2012 proxy statement filing, ISS is providing an opportunity to submit updated peer group information to ISS through a form that is available at www.issgovernance.com/PeerFeedbackUS. ISS will consider the information submitted when constructing the peer group to be used in its analysis. Companies that wish to provide peer group information used for benchmarking CEO compensation in 2012 must submit it to ISS by December 21, 2012.
It remains to be seen whether ISS's new peer group methodology will impact results. ISS's preliminary back-testing indicates that for over 95% of companies, the outcome would be the same.
The questions and answers covered by the FAQs are intended to provide high-level guidance regarding how ISS will analyze certain issues when preparing proxy analyses and vote recommendations for US companies. However, the FAQs are not a guarantee on how ISS will apply its benchmark policy in any particular situation.
For more information on ISS's 2013 updates to its proxy voting guidelines, see Legal Update, Institutional Shareholder Services Releases 2013 Updates to its Proxy Voting Guidelines.