Last week, ISS published the results of its annual policy survey, which is one of its steps in formulating next year’s voting policies. The background on the main comp-related topic is that ISS is planning to incorporate “Economic Value Added” metrics into the “Financial Performance Assessment” component of its quantitative pay-for-performance model starting next year, as an attempted response to client feedback asking the proxy advisor to use financial metrics beyond TSR. But people have been criticizing EVA – some take issue with the fact that it’s non-GAAP and others point out that it would need to be customized on a company-by-company basis to be a sound gauge of investment value.
So in its survey, ISS asked whether investors & others still also want to see the previously used GAAP metrics alongside the new-fangled numbers – and the answer was a resounding “yes.” Here’s an excerpt:
In this year’s survey, when asked for the respondent’s viewpoint regarding the display of the prior-used GAAP-based metrics, a significant majority of both investors and non-investors (84 percent and 71 percent respectively) responded that prior-used GAAP-based metrics should be displayed below the Financial Performance Assessment screen in the ISS report as a point of comparison. Thirteen percent of investors and nine percent of non-investors responded that display of the prior-used GAAP-based metrics was unnecessary.
The smaller percentages of other responses and comments, from three percent of investors and 20 percent of non-investor respondents, were varied, mainly indicating some concerns with the use of EVA metrics in the FPA (one investor and 12 non-investor respondents) and some suggestions for using other metrics beyond GAAP and EVA as part of the financial performance assessment.
