The Advisors' Blog

As Liz shared last week, ISS recently announced the launch of its Annual Global Benchmark Policy Survey, and there are a number of key, compensation-related questions. This Pay Governance alert goes into more detail on the content of those questions and shares some expectations for what these questions signal at this early stage. For example, here’s what the alert says about the question focused on whether competitive harm is a compelling rationale for not disclosing forward-looking LTI performance targets:

ISS is seeking investor views on whether concerns about competitive harm justify a company’s decision not to disclose forward-looking long-term incentive performance goals. The survey explores whether ISS should give weight to:

– Retrospective disclosure of goals and outcomes;
– Whether metrics are relative or absolute goals; and
– Company-specific explanations for nondisclosure.

Pay Governance shares this color:

Many companies view prospective disclosure of LTI goals as problematic because it may:
– Reveal competitively sensitive information;
– Be interpreted by analysts and investors as financial guidance; and
– Create unintended expectations regarding future performance.

A practical approach may involve:
– Explaining in the CD&A how performance goals were established and why management believes they are rigorous;
– Describing the governance process used to set targets; and
– Providing comprehensive retrospective disclosure of goals, performance ranges, and outcomes once performance periods conclude.

ISS acknowledges that relatively few companies provide forward-looking LTI goal disclosure. Market data provided by ESGAUGE indicates that forward disclosure rates remain below 20% for most performance metrics, with relative total shareholder return (TSR) plans representing a notable exception.

– Meredith Ervine