The Advisors' Blog

Back in December, ISS published an “executive compensation” FAQ to alert companies that it would be taking a closer look at performance-vesting equity disclosures in the upcoming proxy season, especially for companies that show a disconnect between pay and performance. For example, ISS wants to see disclosure of forward-looking goals and robust disclosure of closing-cycle vesting results.

Now, the proxy advisor has published a “proxy season preview” – which includes a reminder about this FAQ. The report also contains other governance and executive compensation predictions & recommendations. Here are a few compensation-related takeaways:

– Fewer boards are tasked with demonstrating robust say-on-pay responsiveness. Last year’s higher say-on-pay support levels overall means that fewer boards are tasked with demonstrating robust responsiveness to low vote results. Core pay-for-performance areas are expected to remain in focus, such as the proportion of performance-conditioned pay, goal rigor, clarity of disclosure, and one-time awards.

– Performance equity disclosure and design deficiencies will be subject to greater scrutiny going forward. Beginning with the 2025 proxy season, ISS will place a greater focus on performance-vesting equity disclosure and design aspects, particularly for companies that exhibit a quantitative pay-for-performance misalignment. Multiple concerns identified with respect to performance equity programs will be more likely to result in an adverse vote recommendation in the context of a quantitative pay-for-performance misalignment.

– Investors may see increases in security-related perquisites in 2025. As many companies reevaluate the need for new or enhanced security protections for their top executives in the wake of recent events, security-related perquisites are likely to come to the forefront for many companies. It remains to be seen what impact this will have for 2025 proxy disclosures or how investors will evaluate potential increases in such perquisites, which often include executives’ personal use of company aircraft.

– Investors should be on the lookout for new clawback disclosures. Most listed companies have now implemented clawback policies that comply with the final Dodd-Frank rule and corresponding listing standards. Many investors will be on the lookout for additional disclosures for companies conducting clawback analyses, particularly given that the 2025 proxy season marks the first year in which end-of-year pay decisions are expressly subject to potential clawback under the listing standards.

As Dave Lynn noted in this site’s January webcast on “Your Upcoming Proxy Disclosures,” ISS added the “performance-vesting equity” FAQ in connection with potentially softening its stance on the heavy use of time-vested equity in future policy updates. For more about this year’s proxy advisor policies, check out this 16-minute podcast that Meredith taped with Compensation Advisory Partners’ Shaun Bisman.

– Liz Dunshee