On November 20, 2015, Institutional Shareholder Services (ISS) issued updated FAQs that discuss ISS's scorecard approach to evaluating equity compensation proposals at US companies. The policy has been updated for shareholder meetings held on or after February 1, 2016. ISS first adopted the policy in November 2014 and issued FAQs in December 2014. ISS issued updated FAQs in March 2015.

Under the US Equity Plan Scorecard, ISS considers a range of positive and negative factors, instead of a series of "pass/fail" tests, to evaluate equity incentive plan proposals. Factors are grouped under three "pillars" (Plan Cost, Plan Features and Grant Practices). Each factor has a maximum potential score, with 53 out of 100 total potential points required to "pass" the Equity Plan Scorecard.

The policy will continue to result in negative recommendations for equity plan proposals that contain problematic practices, such as authority to reprice stock options without shareholder approval. In addition, in cases where a proposal will not increase plan cost, and the positive aspects or changes being made outweigh any negative amendments, ISS may recommend that shareholders support the plan regardless of its score. However, typically a company's total score under the Equity Plan Scorecard determines whether ISS will recommend voting for or against the proposal.

The FAQs cover:

New questions include:

For more information on ISS's 2016 voting guidelines, see Legal Update, ISS Releases 2016 Proxy Voting Guideline Updates.