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ISS Updates FAQs for Compensation Policies and EPSC Evaluations in 2021

Fulcrum Partners. Fulcrum Partners News

Before 2020 wrapped up, ISS (Institutional Shareholders Services Inc.) posted its new and its updated compensation policies in two documents: 1.) Compensation Policies Frequently Asked Questions and 2.) Equity Compensation Plans Frequently Asked Questions.

Mike Mebinger, author of Winston Strawn Executive Compensation Blog, noted the policy’s key points relative to executive compensation, shown below.

Document 1: Compensation Policies

For meetings on or after February 1, 2021, the high concern threshold for S&P 500 companies in the Multiple of Median (MOM)[i] measure will be lowered from 3.33x to 3.00x the peer median. The MOM is one of the four measures of alignment between executive pay and company performance ISS uses in its quantitative pay-for-performance screen.

ISS will assess companies’ COVID-related pay decisions under its U.S. Compensation Policies and the COVID-19 Pandemic FAQ. Released on October 15, 2020.

Document 2: Equity Compensation Plans

ISS made changes to its EPSC[ii] evaluations for 2021. Effective for meetings as of February 1, 2021, the threshold passing scores will increase for the S&P 500 model (from 55 points to 57 points) and the Russell 3000 model (from 53 points to 55 points), out of a total 100 possible points. The threshold passing score for all other models is unchanged at 53. There are no new factors or factor score adjustments.

Finally, ISS clarifies the information it expects a company to disclose in order for the remaining shares reserved under the prior plan to be excluded from the SVT analysis, if the company intends to terminate an existing equity plan (canceling any remaining shares reserved for awards under the plan) when shareholders approve a proposed new equity plan.

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[i] Multiple of Median (MOM). This relative measure expresses the prior year’s CEO pay as a multiple of the median CEO pay of its comparison group for the most recently available annual period.

[ii] EPSC- Executive Policy & Standards Committee.

Securities offered through Lion Street Financial, LLC (LSF) and Valmark Securities, Inc. (VSI), each a member of FINRA and SIPC. Investment advisory services offered through CapAcuity, LLC; Lion Street Advisors, LLC (LSF) and Valmark Advisers, Inc. (VAI), each an SEC registered investment advisor. Please refer to your investment advisory agreement and the Form ADV disclosures provided to you for more information. VAI/VSI, LSF and BDO Alliance USA are non-affiliated entities and separate entities from Fulcrum Partners and CapAcuity, LLC. Unless otherwise noted, VAI/VSI, LSF and BDO Alliance USA are not affiliated, associated, authorized, endorsed by, or in any way officially connected with any other company, agency or government agency identified or referenced in this document.

ISS and Winston Strawn are not affiliated with Valmark Securities, Inc. or Valmark Advisors, Inc.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein.

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