ISS published today its preliminary Compensation Policies FAQs for meetings on or after February 1, 2019.
Among the key takeaways: ISS won't be issuing adverse director recommendations under its new excessive non-employee director (NED) pay policy in 2019; rather, ISS intends to revise its methodology for identifying NED pay outliers, and the first possible adverse vote recommendations under the policy will be delayed until 2020. More details on the revised methodology reportedly are forthcoming in the comprehensive FAQ that ISS will release in December:
Director Pay Evaluation
Are there any changes regarding the application of the excessive non-employee director (NED) compensation policy?
Last year, ISS introduced a policy that provides for potential adverse vote recommendations for the board committee responsible for approving/setting NED pay when there is an established pattern (two or more consecutive years) of excessive pay levels without a compelling rationale or other clearly explained mitigating factors.
In light of recent feedback received through the policy survey and investor roundtables, ISS intends to revise its methodology for identifying NED pay outliers for the purposes of this policy. Further, ISS endeavors to increase the transparency around the methodology used for identifying pay outliers. For these reasons, ISS will not be issuing adverse director recommendations under this policy in 2019; rather, the first possible adverse vote recommendations under this policy will be delayed until 2020. More details on the revised methodology will be provided in the comprehensive FAQ coming in December.
As previously reported, this new policy (methodology and application) was among those the Society expressed concerns about in its comment letter on ISS's recent Americas Policy Application Survey, so this is a favorable development.
The Preliminary FAQs also note updates to the Equity Plan Scorecard (EPSC) methodology that will include a new negative overriding factor relating to excessive dilution for the S&P 500 and Russell 3000 EPSC models, and changes to the CIC vesting factor to provide points based on the quality of disclosure of CIC vesting provisions rather than on the actual vesting treatment of awards.