On the heels of the release of ISS's Global Policy Survey, which the Center submitted comments on in August as well as the subsequent Policy Application Survey, IISS has opened the comment period on changes to its Benchmark Policies for 2018. The relevant compensation and governance changes are revised draft policies on Gender Pay Gap Proposals and Non-Employee Director Pay - two topics that were queried in the recent policy application survey.
- Gender Pay Gap Proposals: Citing the growth in number of shareholder proposals requesting information on gender pay gaps and data, ISS notes that, to date, it has applied its "global approach on social/environmental proposals when analyzing gender pay gaps proposals, which is a case-by-case approach". The new approach, according to ISS "provides for more specificity" but "is not a major shift in ISS' current policy approach". Going forward, for gender pay gap proposals, ISS will generally continue the case-by-case approach and will consider (1) the company’s current policies and disclosures on diversity/inclusion policies and practices as well as its compensation philosophy/practices; (2) whether the company has been the subject of "recent controversy or litigation" related to gender pay issues; and (3) whether the company's gender pay gap reporting is "lagging" compared to peers. ISS notes that the shift in policy provides "more clarity" and that it does not expect the shift to have a major impact on vote recommendations. ISS has requested comments on whether there should be any additional factors considered in evaluating Gender Pay Gap Proposals. One potential area for comment is on what is meant by a "recent controversy" over gender pay issues given that without a clearer definition, the determination is subjective and difficult to consistently apply.
- Non-Employee Director Pay: As it did in the Policy Application Survey, ISS expresses concern with the recent rise in director pay as well as some shareholder legal challenges to the director pay amounts at some companies. According to the Benchmarking Survey, the ISS Application survey investor respondents "strongly favored" adverse voting recommendations where "a pattern of excessive [Non-Employee Director (NED)] pay levels at a company has been identified". The proposed new ISS policy would explicitly provide for adverse voting recommendations for board committee members who are "responsible for approving/setting NED compensation when there is a pattern (i.e., two or more consecutive years) of high NED pay magnitude without a compelling rationale or other mitigating factors."