ISS has issued these FAQs to explain how it will approach COVID-related pay decisions in its pay-for-performance qualitative evaluation. As in the past, an elevated concern from the quantitative screen will continue to result in a more in-depth qualitative review.
The FAQs explain what disclosure ISS will be looking for if there were changes to salary, bonus programs or incentive cycles or grants of one-time awards – e.g., to show that compensatory actions further investors’ interests versus creating windfalls for executives. The FAQs also note a couple of changes to the proxy advisor’s responsiveness policy and Equity Plan Scorecard. Here’s an excerpt:
10. Are there any changes to ISS’ responsiveness policy in light of COVID-19?
When a company receives less than 70 percent support on the say-on-pay proposal, ISS’ responsiveness policy reviews three factors:(1) the disclosure of the board’s shareholder engagement efforts;(2) the disclosure of the specific feedback received from dissenting investors; and (3)any actions or changes made to pay programs and practices to address investors’ concerns.
The expectations regarding the first two factors will remain consistent with prior years. With respect to the third factor, if a company is unable to implement changes due to the pandemic, the proxy statement should disclose specifically how the pandemic has impeded the company’s ability to address shareholders’ concerns. If pay program changes are delayed, or do not necessarily fully address shareholder feedback, the company should disclose a longer-term plan on how it intends to address investors’ concerns.
11. Are there any changes to ISS’ Equity Plan Scorecard (EPSC), Problematic Pay Practices (PPP), or option repricing policies in light of COVID-19?
There are no changes to these policies specifically related to the pandemic. However, for the 2021 policy year, the passing score for the S&P 500 EPSC model will increase to 57 points. The passing score for the Russell 3000 EPSC model will increase to 55 points. For all other EPSC models, the passing score will remain 53 points.