Certain ISS policies, procedures, and products rely on GICS classifications, including executive compensation peer group formation, equity compensation plan evaluation, and Environmental & Social QualityScore. ISS has issued FAQs designed to answer the most frequently asked questions regarding how the adjustment to GICS structure will impact ISS analyses, and when those changes will be effective.
The FAQs address the following questions:
– How will the new GICS code affect the evaluation of equity compensation plans under ISS’ U.S. Equity Plan Scorecard?
– How will the new GICS code affect the evaluation of equity plans under ISS’ burn rate policy for France?
– How will the new GICS code affect the evaluation of executive compensation?
– How will the new GICS code affect the evaluation of director compensation?
– How will the new GICS code affect Environmental & Social QualityScore?
– How will the new GICS code affect ISS policies, such as the director performance evaluation policy, that examine a company’s TSR performance relative to its industry?
– When will Question 130 in Governance QualityScore, which examines each covered company’s burn rate relative to its industry, be updated to reflect the new GICS structure?
At our two-day “Proxy Disclosure Conference,” we know how hard it is to sit through so much substance – so we like to mix in a little fun to keep you fresh & focused. This year, Morrison & Foerster’s Dave Lynn & Marty Dunn reprised their popular puppet show – so popular that we have decided to make it freely available, we’ll blog next week with that video archive – but for right now, here’s a teaser:
Today is the “Say-on-Pay Workshop: 15th Annual Executive Compensation Conference”; yesterday was the “Proxy Disclosure Conference” (for which the video archive is already posted). Note you can still register to watch online by using your credit card and getting an ID/pw kicked out automatically to you without having to interface with our staff. Both Conferences are paired together; two Conferences for the price of one.
– How to Attend by Video Webcast: If you are registered to attend online, just go to the home page of TheCorporateCounsel.net or CompensationStandards.com to watch it live or by archive (note that it will take about a day to post the video archives after it’s shown live). A prominent link called “Enter the Conference Here” – on the home pages of those sites – will take you directly to today’s Conference (and on the top of that Conference page, you will select a link matching the video player on your computer: HTML5, Windows Media or Flash Player). Here are the “Course Materials.”
Remember to use the ID and password that you received for the Conferences (which may not be your normal ID/password for TheCorporateCounsel.net or CompensationStandards.com). If you are experiencing technical problems, follow these webcast troubleshooting tips. Here is today’s conference agenda; times are Pacific.
– How to Earn CLE Online: Please read these “FAQs about Earning CLE” carefully to see if that is possible for you to earn CLE for watching online – and if so, how to accomplish that. Remember you will first need to input your bar number(s) and that you will need to click on the periodic “prompts” all throughout each Conference to earn credit. Both Conferences will be available for CLE credit in all states except for a few – but hours for each state vary; see this “List: CLE Credit By State.”
Today is the “Pay Ratio & Proxy Disclosure Conference”; tomorrow is the “Say-on-Pay Workshop: 15th Annual Executive Compensation Conference.” Note you can still register to watch online by using your credit card and getting an ID/pw kicked out automatically to you without having to interface with our staff. Both Conferences are paired together; two Conferences for the price of one.
– How to Attend by Video Webcast: If you are registered to attend online, just go to the home page of TheCorporateCounsel.net or CompensationStandards.com to watch it live or by archive (note that it will take about a day to post the video archives after it’s shown live). A prominent link called “Enter the Conference Here” – on the home pages of those sites – will take you directly to today’s Conference (and on the top of that Conference page, you will select a link matching the video player on your computer: HTML5, Windows Media or Flash Player). Here are the “Course Materials.”
Remember to use the ID and password that you received for the Conferences (which may not be your normal ID/password for TheCorporateCounsel.net or CompensationStandards.com). If you are experiencing technical problems, follow these webcast troubleshooting tips. Here is today’s conference agenda; times are Pacific.
– How to Earn CLE Online: Please read these “FAQs about Earning CLE” carefully to see if that is possible for you to earn CLE for watching online – and if so, how to accomplish that. Remember you will first need to input your bar number(s) and that you will need to click on the periodic “prompts” all throughout each Conference to earn credit. Both Conferences will be available for CLE credit in all states except for a few – but hours for each state vary; see this “List: CLE Credit By State.”
Here’s an excerpt from this article from Judith Samuelson of the Aspen Institute:
An unintended consequence of pay-for-performance is we treat companies as if they are in the airline business, except the only person who matters is the pilot—not the grounds crew, nor the quality control tinkerers, nor the guys who wrangled the ore and fuel from the ground, forged the parts, tightened the bolts and soldered the frame.
And especially not those who are served the food in the cafeteria or cleaned the restroom late into the night. This segment of the workforce is now basically hidden, working for contractors who trade in lesser skilled labor where benefits and income security are sacrificed in the name of competitiveness.
Meanwhile, because pay-for-performance is so weighted in stock, it incentivizes senior managers to think more about the shareholders than their direct reports or the labor and talent on which the enterprise depends. In the 1970s, shareholders took out about 50% of a company’s profits, while the rest was reinvested in the productive capacity of the firm, including R&D to employee training and rewards. Today, the shareholder gets over 90% between dividends and share buybacks. Today, a 60% or greater weight on equity or equivalents is the norm in pay packages.
Here is a somewhat-dated research report from Credit Suisse, which appears to favor companies that set earnings guidance (ie. external targets) slightly below incentive plan objectives (ie. internal targets) to avoid negative earnings surprises. The report focuses on the big food manufacturing companies and slots them into one of three categories:
– What you see is what you get (incentive targets near mid-point of the guidance)
– Conservative guiders (incentive targets below the mid-point of the guidance)
Most companies were categorized as “what you see is what you get.” I think the report provides some ‘food for thought’ when setting incentive plan targets:
– Earnings guidance and incentive targets are being evaluated by investors as a way of assessing the reasonableness of the incentive plan targets
– It does not look good if incentive targets are far below earnings guidance, as it suggests the incentive plans are rigged for a payout
– Similarly, it does not seem reasonable to have incentive plan targets far above earnings guidance, as it appears you are sandbagging what you’re telling shareholders that you can achieve for the year
A recent study by Meridian, based on 160 S&P 500 companies, examined the prevalence &structure of change-in-control agreements, finding that such agreements remain common – and that single-policy plans are increasing in prevalence. Cash severance is the most common benefit to provide in a change-in-control situation, with double-trigger vesting for unvested equity also increasing in popularity…
Also see this study of change-in-control agreements from Alvarez & Marsal…
For the many of you that have registered for our Conferences coming up next Tuesday, September 25th, we have posted the “Course Materials” (attendees received a special ID/PW yesterday via email that will enable you to access them; note that copies will be available in San Diego). The Course Materials are better than ever before – with numerous sets of talking points. We don’t serve typical conference fare (ie. regurgitated memos and rule releases); our conference materials consist of originally crafted practical bullets & examples. Our expert speakers certainly have gone the extra mile this year!
Here is some other info:
– How to Attend by Video Webcast: If you are registered to attend online, just go to the home page of TheCorporateCounsel.net or CompensationStandards.com to watch it live or by archive (note that it will take a few hours to post the video archives after the panels are shown live). A prominent link called “Enter the Conference Here” – which will be visible on the home pages of those sites – will take you directly to the Conference (and on the top of that Conference page, you will select a link matching the video player on your computer: HTML5, Windows Media or Flash Player).
Remember to use the ID and password that you received for the Conferences (which may not be your normal ID/password for TheCorporateCounsel.net or CompensationStandards.com). If you are experiencing technical problems, follow these webcast troubleshooting tips. Here are the conference agendas; times are Pacific.
– How to Earn CLE Online: Please read these “FAQs about Earning CLE” carefully to see if it’s possible for you to earn CLE for watching online – and if so, how to accomplish that. Remember you will first need to input your bar number(s) and that you will need to click on the periodic “prompts” all throughout each Conference to earn credit. Both Conferences will be available for CLE credit in all states except for a few – but hours for each state vary; see our “CLE Credit By State” list.
– Register Now to Watch Online: There is still time to register for our upcoming pair of executive pay conferences – which starts on Tuesday, September 25th – to hear Keith Higgins, Meredith Cross, etc. If you can’t make it to San Diego to catch the program in person, you can still watch it by video webcast, either live or by archive. Register now to watch it online.
– Register to Watch In-Person in San Diego: Starting this Saturday, you will no longer be able to register online to attend in San Diego – but you can still register to attend when you arrive in San Diego! You just need to bring payment with you to the conference and register in-person. Through the end of this Friday, you can still register online to attend in-person in San Diego. And you can always register online to watch the conference online…
Last Thursday, the SEC came out with two salvos against “informal” staff guidance. First, there was this statement from SEC Chair Jay Clayton reminding us that all Staff guidance is non-binding (ie. creates no enforceable legal rights or obligations for the SEC or other parties) because it hasn’t been subject to notice & comment under the Administrative Procedures Act. That statement noted that the SEC “will continue to review whether prior staff statements and staff documents should be modified, rescinded or supplemented in light of market or other developments.”
A few moments later, the Division of Investment Management issued this statement that – ahead of the upcoming “proxy plumbing” roundtable – it was withdrawing two no-action letters granted in 2004 to ISS and Egan-Jones Proxy Services.
Over on “TheCorporateCounsel.net Blog,” I have blogged extensively about what this means, both in Friday’s blog – and today’s blog. For example, I cover these topics in today’s blog:
1. What Does This Mean for the “Proxy Plumbing” Roundtable?
2. Any “Real World” Impact?
3. Withdrawal Didn’t Change the Law?
4. How Much Do Companies Rely on Proxy Advisors?
5. Do Courts Give Deference to SEC Staff Guidance?
