As compensation committees grapple with year-end executive pay decisions, including whether and how to address the impact of the pandemic on incentive awards, proxy adviser Institutional Shareholder Services (ISS) has weighed in with 11 FAQs. The FAQs explain how ISS will apply its pay-for-performance qualitative analysis to COVID-related pay decisions. As in the past, an elevated concern from the quantitative screen will result in a more in-depth qualitative review.
Although support from ISS is important, it is more critical for companies to engage with their top shareholders as to what they would consider a reasonable response to the challenges presented by the pandemic. Compensation committees must consider multiple factors in making pay decisions — including the company’s business strategy, broader workforce actions and executive retention risks —even if decisions may negatively impact the company’s say-on-pay vote result.
The FAQs indicate how ISS will apply its case-by-case approach to COVID-related pay decisions. While they offer few details as to what will be deemed “acceptable”, several themes emerge: