It appears proxy powerhouse ISS has been listening to complaints from issuers about last proxy season.
Last week, the proxy adviser issued several proposed changes to its policy voting recommendations for next year – changes that should be finalized during the week of November 14 and go into effect on January 1.
Compensation issues dominate the proposals, especially the implementation of a pay-for-performance standard for executives, which is sure to have compensation committees wringing their hands as they try to determine what level of pay increases will be acceptable. ISS’s views on say-on-pay frequency and voting responses for ‘yes’ recommendations will be adjusted next year as well – proving that it does pay to raise your voice. And the firm seems to be promoting more disclosure in relations to political contributions and expansion of natural gas ‘fracking’, which will be two major issues on the agenda for 2012, an election year.
All of these proposed changes will be discussed during the Corporate Secretary free webinar, 2012 Proxy Season Outlook, on November 3. A panel of experts will discuss what will be different in year two of say on pay; new developments in shareholder activism; and how corporate secretaries can prepare for the upcoming proxy season. So don’t feel like you have to tackle proxy season on your own: we are here to help.
Companies will definitely need help sorting out how they might need to adjust their pay structures when incorporating pay for performance metrics. Fairly determining performance during a recession, across different industries and among different sized companies, will be a challenge, so most will have to be prepared to defend their pay schemes with detailed explanations of the board’s reasoning. This raises the pressure on board members to rely less on the past history of rising compensation, more on justifying the levels CEOs have come to expect.
In an economic environment where experts are predicting lower shareholder returns, having your board explain why your compensation plan is fair and performance based would be a good start toward getting a positive ISS recommendation and reducing shareholder angst.
