The Advisors' Blog

As Meredith blogged late last week on TheCorporateCounsel.net, ISS has announced its proposed benchmark policy updates for 2027 and opened the corresponding comment period. The comment period will run through 5 p.m. ET on November 4th – and ISS is seeking input from investors, companies, and other market participants on its proposed voting policy changes for the 2027 proxy season.

There’s just one proposed compensation-related update applicable to the U.S. market:

Option Valuation Model: For equity plan evaluations and the EPSC, removes references to ISS’ binomial option pricing model, replacing it with Black-Scholes as the methodology to be used for ISS’ valuation of options to calculate Shareholder Value Transfer (SVT) from 2027.

ISS notes:

This policy update removes references to ISS’ binomial option pricing model, which is being retired. Beginning with Feb. 1, 2027, meetings, the methodology for ISS’ valuation of options for purposes of Shareholder Value Transfer (SVT), which is utilized as part of the equity plan cost analysis in the Equity Plan Scorecard framework as well as for certain other situations requiring option cost estimations including option exchanges, will be updated to Black-Scholes methodology. This will align the option valuation methodology for SVT and other proposals to the option valuation methodology already used for CEO and NEO option valuations used in ISS’ pay-for-performance, burn rate and realizable pay policies (as detailed in the US Executive Compensation Policies FAQ document).

As Meredith noted, the proposed updates applicable to the U.S. market seem pretty light compared to some prior years, and notably, quite a few topics addressed in ISS’s recent survey are not reflected in the proposed policy changes. That’s not particularly surprising for some survey questions that asked a “what if,” assuming pending SEC proposals are finalized as proposed.

ISS expects to release its 2027 benchmark voting policies, which will be effective for shareholder meetings occurring on or after February 1, 2027, in late November or early December.

– Liz Dunshee