Institutional Shareholder Services (ISS) has updated its approach to evaluating US companies’ CEO pay and performance alignment under its 2021 US Proxy Voting Guidelines. The pay-for-performance assessment is a key driver of the proxy adviser’s recommendations on say on pay (SOP) and other proxy voting issues. If the assessment would result in a negative voting recommendation but there’s no SOP proposal on the proxy ballot (e.g., where the company has adopted a biennial or triennial SOP vote), ISS will recommend against members of the compensation committee or potentially the full board. And a negative outcome may affect ISS’s voting recommendation for a company’s equity plan proposal if there’s one on the ballot. This article describes the quantitative tests and qualitative factors ISS uses in the assessment.

 

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