Client Alert: ISS Releases 2016 Policy Updates

Client Alert: ISS Releases 2016 Policy Updates

December 1 2015

PDFISS recently released its final policy guidelines for the 2016 proxy season.  While compensation-related updates for U.S. issuers were minor, ISS also announced a modified definition for “overboarded” Directors as well as tweaks to its Equity Plan Scorecard and QuickScore 3.0 models for 2016.  The updated guidelines will be effective for all companies with annual meetings on or after February 1, 2016.

The highlights for U.S. issuers include:

  • Compensation disclosure at externally-managed companies
    • Insufficient disclosure may lead to ISS recommending Against say-on-pay
  • Analysis of shareholder proposals on equity holding requirements
    • Clarified factors considered in the analysis, but vote recommendation will remain a case-by-case analysis
  • Under the new definition, a director is considered “overboarded” if they sit on more than five public company boards, a reduction from the previous limit of six boards
    • “Overboarded” directors are in danger of an ISS Against vote recommendation beginning in 2017
  • Adjustments to Equity Plan Scorecard for 2016
    • Plan Features pillar modified two factors
      • Post-vesting holding requirements: Full points if the holding period is 36 months (previously 12 months) or until employment termination
      • CIC vesting: Full points for time-based awards if there is no accelerated vesting upon CIC or if accelerated vesting occurs only if awards are not assumed/converted by acquirer. Full points for performance-based awards if vesting is based on actual performance and/or pro rata time basis as of the CIC or if outstanding performance awards are forfeited.
    • Companies that are recent IPOs or newly emergent from bankruptcy will now have a small portion of their score determined based on Grant Practices pillar factors, excluding burn rate and plan duration
  • One new question focused on proxy access was added to QuickScore 3.0
  • Peer group submission window is open
    • Companies with annual meetings between February 1, 2016 and September 15, 2016 may submit 2015 peer group modifications to ISS on their website no later than December 11, 2015.
    • The peer group provided should be the group used for benchmarking CEO pay in 2015

To read the full client alert click here.