December 13, 2016
Other ISS Policy Amendments
On November 29, I discussed ISS’s amendments related to dividends paid on awards (ISS Targets Dividends on Unvested Awards), but that’s not the only amendment to their 2017 Proxy Voting Guidelines that impacts stock compensation programs. For today’s blog entry, I discuss the other amendments.
Minimum Vesting Requirements
The plan must specify a minimum vesting period of one year for all awards to receive full points for this test under the Equity Plan Scorecard. In addition, no points will be earned if the plan allows individual award agreements to reduce or eliminate this vesting requirement (note, however, that ISS still permits an exception for up to 5% of shares awarded).
Anyone who listened to my podcast “Five Things Barbara Baksa Learned About the ISS Equity Plan Scorecard” knows that I’m not a fan of this test in the EPSC because I’m convinced it is just a compliance disaster waiting to happen. And now that the plan can’t allow any exceptions to it all, I like it even less.
Plan Amendments
Although ISS didn’t deem this change significant enough to include it in the Executive Summary, the policy with respect to how plan amendments are evaluated has also been updated. For most types of substantive amendments (i.e., amendments that aren’t purely administrative or that aren’t solely for purposes of Section 162(m)), the plan will be reevaluated under the EPSC and ISS will assess the amendments on a qualitative basis.
It isn’t clear to me why the EPSC isn’t enough by itself (since it would be enough for a new plan). Apparently ISS just doesn’t like some stuff that companies do with their equity plans and they want to be able to recommend that shareholders vote against amendments that would add those features to your plan, even if they would be allowed under the EPSC.
Where private companies are submitting a plan to shareholders for the first time, the plan will have to pass the EPSC even if no new shares are being requested (e.g., if the plan is submitted solely for Section 162(m) purposes) and ISS will make a qualitative assessment of any amendments.
– Barbara