November 18, 2011
ISS Releases 2012 Proxy Voting Policies
– Broc Romanek, CompensationStandards.com
The new phone book is here! The new phone book is here! Yesterday, ISS released its 2012 updates for its US, Canadian, European and international proxy voting guidelines. Here is a description of some of the updates from ISS:
One of the most significant updates is ISS’ revised U.S. pay-for-performance policy. During the policy process, both clients and issuers indicated that pay-for-performance alignment should be viewed in a long-term context rather than the most recent year. In light of this guidance, ISS’ new approach will provide clients with a more robust view of the relationship between executive pay and company performance over a sustained time horizon. Specifically, ISS will consider: the relative alignment between the company’s total shareholder return and the CEO’s total pay rank within a peer group, as measured over one and three years; and absolute alignment (the alignment between CEO pay and a company’s share return over the prior five years). If alignment appears weak, further in-depth analysis will determine if there are mitigating factors.
ISS strives to make its policies as transparent as possible. ISS will provide additional guidance on its pay-for-performance methodology in December 2011. ISS also intends to disclose its peer group methodology and rationale, allowing investors and issuers to understand how peer groups are constructed by ISS.
In line with investor feedback, ISS will make recommendations on a case-by-case basis on compensation committee members and the management say-on-pay proposal if the company’s previous say-on-pay resolution received less than 70 percent support from all votes cast, taking into account the company’s response; disclosure of engagement with major investors; specific actions taken to address the compensation issue(s) that caused the significant dissent; whether the issue(s) raised is recurring or one-time; and the company’s ownership structure. Cases where support was less than 50 percent will warrant the highest degree of responsiveness.
I am posting memos analyzing the 2012 updates in our “ISS Policies & Ratings” Practice Area, including this Holme Roberts memo that has a nifty chart summarizing the compensation changes.