ISS Publishes White Paper on Its Pay-for-Performance Methodology | Practical Law

ISS Publishes White Paper on Its Pay-for-Performance Methodology | Practical Law

Institutional Shareholder Services (ISS) published a white paper that sets out its pay-for-performance methodology for US companies.

ISS Publishes White Paper on Its Pay-for-Performance Methodology

Practical Law Legal Update w-005-0845 (Approx. 3 pages)

ISS Publishes White Paper on Its Pay-for-Performance Methodology

by Practical Law Corporate & Securities
Published on 22 Dec 2016 • USA (National/Federal)
Institutional Shareholder Services (ISS) published a white paper that sets out its pay-for-performance methodology for US companies.
Institutional Shareholder Services (ISS) recently published a white paper that sets out its pay-for-performance methodology for US companies. This methodology consists of both a quantitative and a qualitative review of executive pay and company performance.
As announced in November 2016 (see Legal Update, ISS Announces 2017 Updates to Its Pay-for-Performance Methodology), ISS is making certain changes to its pay-for-performance methodology for shareholder meetings taking place on or after February 1, 2017. These changes are discussed in the white paper and include:
  • When conducting its Relative Pay and Financial Performance Assessment (part of its qualitative assessment), ISS will include a review of the company's performance against up to six other financial metrics in addition to total shareholder return (TSR), relative to the same peer group used in the quantitative assessment.
  • In an effort to increase the focus on long-term alignment between pay and performance, the Relative Degree of Alignment (RDA) assessment will no longer be measured on a one-year basis (but rather will be measured over a three-year or two-year period).
The white paper states that the pay-for-performance methodology continues to evolve with investor expectations, and that ISS welcomes feedback on the methodology from all market participants.
For more information on proxy advisory firms and on ISS proxy voting recommendations, see Practice Note, Developing Relationships with Proxy Advisory Firms and Handling ISS Proxy Voting Recommendations Checklist.