The NASPP Blog

It’s that time of year again…when a stock plan administrator’s thoughts turn to proxy disclosures and stock plan proposals and ISS makes repeated appearances in the NASPP Blog.  I recently blogged about the ISS policy survey and about their new Equity Plan Data Verification Portal. For today’s entry, I have another ISS update: the results of their policy survey. (And I’m not through with the topic of ISS yet–expect another entry when they release their updated policy and probably yet another when they release the burn rate tables for 2015).

Survey Respondents

ISS’s survey was completed by 370 respondents, 28% of which are institutional investors and 69% of which are issuers.  Most of the respondents are located in the United States.

Balanced Scorecard

As I mentioned in my earlier blog, ISS has announced that they are moving to a “balanced scorecard” approach to evaluating stock plan proposals. This approach will weigh 1) the cost of the plan along with 2) the plan features and 3) past grant practices. (Since ISS already looks at all of these areas when evaluating a stock plan proposal, it’s not clear to me how this will differ from what they already do, but if they weren’t changing anything, I wouldn’t have anything to blog about, so I guess I can’t complain.)

The survey asked respondents how much weight each of these three factors should carry in ISS’s analysis of the plan.  The results are kind of hard to parse, but I think the upshot is that respondents generally thought that plan cost should carry the most weight (in contrast to my informal and highly unscientific survey, where close to half of the respondents thought all three areas should carry equal weight).  From the ISS press release:

With respect to how the plan cost category should be weighed in a scorecard, 70 percent of investors indicate weights ranging from 30 to 50 percent, with a 40 percent weighting cited most often. Sixty-two percent of investors suggest weightings from 25 to 35 percent for plan features; and 64 percent indicate weights ranging from 20 to 35 percent for grant practices. Weightings suggested by issuers were also quite dispersed, but generally skewed somewhat higher with respect to cost, and somewhat lower for plan features and grant practices compared to investors.

Factors Important in Markets with Poor Disclosures

ISS notes that in some developing/emerging markets, the quality of stock plan disclosures is poor.  The survey asked respondents what factors are most important to evaluating plans in these markets.  The results exposed an interesting discrepancy of opinion between institutional investors and issuers (at least for developing/emerging markets).  Investors placed a lot of importance on the use of performance conditions (76% of investors rated this as “very important”); issuers didn’t place nearly as much importance on this (only 49% of issuers rated performance conditions as “very important”). 10% of issuers rated performance conditions as “not important at all” whereas all investors thought performance conditions were at least somewhat important.

– Barbara