May 3, 2021
Pay Gap Proposals: What Leads to ISS Support
– Liz Dunshee
ISS recently published updated “Policies & Procedures FAQs” – and #113 explains how the proxy advisor evaluates “pay gap” shareholder proposals. Here’s an excerpt:
In its analysis of these proposals, ISS takes a case-by-case approach and considers the company’s disclosure of policies and practices related to fair and equitable compensation, as well as its diversity and inclusion initiatives. Specifically, ISS looks to assess whether the company is actively trying to improve the representation of women and people of color and people from different ethnic backgrounds in senior leadership and technical positions and whether it is making progress in these efforts. Additionally, ISS considers the company’s efforts in this area compared to its industry peers.
ISS will also take note of information that may be reported by US companies in the UK in response to that country’s requirement that companies that employ more than a certain number of people in the UK report the pay gap between the median male and female employees and the percentage of men and women in pay quartiles. ISS also takes into account whether there are any related significant controversies that could result in reputational risks.
Should ISS assess that the company is lagging in its efforts to improve the median pay gap, or there are significant controversies, it will generally recommend support for proposals requesting a median gender/racial/ethnicity pay gap report as it could provide shareholders with useful information about how effectively management is assessing and mitigating risks that may rise from inequitable employee treatment.
ISS will generally not recommend support for proposals that request a global median race or ethnicity pay gap report, due to the fact that types of racial/ethnic disparities, issues of discrimination, and the racial/ethnic composition of underrepresented groups can be entirely different depending on the countries in which a given company operates. A global racial/ethnicity pay gap statistic may not be possible to produce and would not produce usable information to track how well the company is doing at offering all employees equal opportunity.
Lynn blogged last week that there’s been a slowdown in pay equity proposals on proxy statements, due to more engagements on the topic.