Recently, Institutional Shareholder Services (“ISS”) updated its 2017 “burn rate” tables, which impact its voting recommendations on equity compensation plan proposals. Each year, ISS updates its burn rate tables and allowable limits for Standard & Poor’s 500, Russell 3000 (excluding the S&P 500), and non-Russell 3000 companies for the upcoming proxy season. ISS’ updated 2017 burn rate tables will be applicable to annual meetings of shareholders held on or after February 1, 2017.
Burn Rate Policy
ISS measures “burn rate” using the total number of equity awards (full value stock awards and stock options) granted in a given year and expresses the computation as a percentage of the number of common shares outstanding. These tables set ISS’ acceptable burn rate levels using Standard & Poor’s global industry classification standard (“GICS”) codes as assigned to each company.
Current burn rate “benchmarks” (utilized in Equity Plan Scorecard evaluations) are calculated as the greater of:
- the mean plus one standard deviation of the company's GICS group segmented by S&P 500, Russell 3000 index (less the S&P500), and non-Russell 3000 index; and
- 2% of weighted common shares outstanding.
In addition, year-over-year burn-rate benchmark changes will be limited to a maximum of two (2) percentage points plus or minus the prior year's burn-rate benchmark.
If a company grants both full value stock awards and stock options, a premium or “multiplier” will be applied to the full value awards for the past three fiscal years to equate them economically with stock options. For 2017, this premium or “multiplier,” is unchanged from prior years as follows:
