The Advisors' Blog

Yesterday, ISS announced the results of its latest annual global Benchmark policy survey, which asked participants several compensation-related questions. For example, the survey asked for input on how to signal significant concerns about executive pay when no say-on-pay vote is on the ballot, given that more companies may be exempt from holding this vote if the SEC’s “Filer Status” rule changes are adopted as proposed. The press release summarizes the answers to that question as follows:

Fifty percent of investor respondents said that where pay concerns and a say-on-pay vote is not on the ballot, they would support in the first year opposing the election of the chair of the compensation committee, and a further 41 percent of investor respondents supported opposing all incumbent compensation committee members. Among non-investor respondents, 54 percent of non-investor respondents said opposition of compensation committee members would not be appropriate under such circumstances.

The survey also addressed several other U.S. compensation topics. Here’s a brief summary of the input ISS received on those matters:

As a follow-up, the survey asked what level of support for compensation committee members should be considered a low vote that triggers ISS’s responsiveness policy. (Currently, there’s a 50% director election threshold and a 70% say-on-pay threshold.) Most investor respondents (67%) favored the 70% threshold applying for purposes of assessing whether the responsiveness policy has been triggered. Only 26% of non-investor respondents supported the 70% threshold. 46% of non-investor respondents supported the 50% threshold.

Investor and non-investor respondents differed on whether financial services companies’ discretionary bonus programs should receive special, sector-specific treatment rather than being treated generally as a concern in the pay-for-performance evaluation, with 85% of non-investors saying financial services discretion-based bonus programs should not be viewed as a concern, while 71% of investor respondents said they should continue to be treated as concerning. However, more than 80% of both groups agreed that disclosures — like pre-set pay opportunities, performance category or factor weightings plus explanations regarding payout determinations — could mitigate concerns.

Finally, the survey also asked whether and when the risk of competitive harm constitutes a compelling rationale for not disclosing forward-looking LTI performance targets, and specifically whether it’s less compelling for relative than for absolute metric goals. For investors, the most common response (50%) was that this could be a reasonable rationale but should be assessed on a case-by-case basis. Non-investor respondents most commonly (49%) thought the risk of competitive harm is a reasonable rationale for non-disclosure by any company. Some respondents (21% of investors and 31% of non-investors) thought the risk of competitive harm may be a compelling rationale if the company commits to retrospective disclosure. That same number of investor respondents (21%) thought competitive harm is not a reasonable rationale in most or all cases. Investors largely (79%) considered the rationale more compelling for absolute versus relative performance metrics, while non-investors were evently split.

See Liz’s blog on TheCorporateCounsel.net for the results of the governance-related survey questions.

– Meredith Ervine