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ISS Releases Its 2019 Pay-for-Performance Methodology
Practical Law Legal Update w-018-9831 (Approx. 4 pages)
ISS Releases Its 2019 Pay-for-Performance Methodology
by Practical Law Employee Benefits & Executive Compensation
| Published on 12 Feb 2019 • USA (National/Federal) |
Institutional Shareholder Services Inc. (ISS) released its updated pay-for-performance methodology for US companies. The updated methodology applies beginning on February 1, 2019.
In February 2019, Institutional Shareholder Services Inc. (ISS) released its updated pay-for-performance methodology for US companies. This methodology consists of both a quantitative and a qualitative review of executive pay and company performance.
ISS is making certain minor changes and clarifications to its pay-for-performance methodology for shareholder meetings taking place on or after February 1, 2019. The changes include:
- If five years of chief executive officer (CEO) pay or total shareholder return (TSR) data is unavailable, the pay-TSR alignment (PTA) measure, which is used in the quantitative evaluation and is intended to measure long-term directional alignment between executive pay and TSR, will be based on four years of data. If four years of data is unavailable, the PTA measure will be excluded.
- With respect to the factor concerning the strength of performance-based compensation, for purposes of the qualitative evaluation, companies should provide clear disclosures regarding the reconciliation of generally accepted accounting principles (GAAP) and non-GAAP results.
The white paper states that the pay-for-performance methodology continues to evolve with investor expectations, and that ISS welcomes feedback on the methodology from all market participants.
For more information on proxy advisory firms and on ISS proxy voting recommendations, see Practice Note, Developing Relationships with Proxy Advisory Firms and Handling ISS Proxy Voting Recommendations.