The Advisors' Blog

Earlier this month, ISS launched its Annual Global Benchmark Policy Survey. The survey is open for comment until Thursday, September 5th – and it represents a key step in the proxy advisor’s formulation of voting policies for 2025 AGMs.

As Dave pointed out on TheCorporateCounsel.net, this year’s survey includes several questions relating to executive compensation matters, including questioning whether ISS should continue to look for a high ratio of performance-conditioned equity awards in its qualitative pay-for-performance assessment, versus also giving “credit” for time-based equity awards with extended vesting periods. It would be a big step for investors to recognize that performance conditions aren’t always the “be all, end all” – although Norges and a few other investors have been pushing for time-based compensation for several years.

A new blog from Meridian Compensation Partners takes a deeper dive into this and the other compensation-related questions. Here are the key takeaways:

– Time-Based Equity Awards with Lengthy Vesting Period: The Survey asks respondents to identify whether ISS should consider the use of time-based equity awards with extended vesting terms as a positive mitigating factor in its pay-for-performance assessment, similar to performance-based awards. The Survey also asks whether ISS should consider equity awards with a meaningful post-vesting holding period as a positive mitigating factor in the context of a pay-for-performance misalignment.

– Discretionary Annual Incentive Programs: The Survey asks respondents to identify whether largely discretionary annual incentive programs, such as those adopted by some large financial sector companies, are problematic, even if the program structure is consistent with industry and/or peer practice.

– Shareholder Proposals on Workforce Diversity: Currently, ISS will evaluate, on a case-by-case basis, shareholder proposals requesting that a company report on: (i) pay data by gender, race or ethnicity, or (ii) policies and goals to reduce any gender, race or ethnical pay gap taking into account certain factors. The Survey asks respondents to identify whether certain human capital management metrics or disclosures should be considered by investors in evaluating a shareholder proposal on workforce diversity (e.g., EEO-1 data, promotion velocity data, retention rates, hiring rates, adjusted gender pay gap disclosure, unadjusted gender pay gap disclosure, board oversight, etc.).

Meridian notes that ISS’s survey questions could signal incremental changes to policies that apply to executive compensation and human capital matters in 2025. It’s also worth noting that Glass Lewis recently launched its annual survey, which, like ISS, includes some executive compensation topics.

Don’t miss the opportunity to hear from representatives from both proxy advisors at our “Proxy Disclosure & 21st Annual Executive Compensation Conferences” – coming up October 14-15th in San Francisco (with a virtual option also available)! They will be discussing what worked & what didn’t during 2024, as well as sharing some expectations for 2025 based on what they are hearing from clients. Check out the agendas – 16 fast-paced panels over two days – and the great speaker lineup. Register online or by calling us at 800-737-1271. I am very excited to see everyone and hope that many of you can make it!

– Liz Dunshee