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ISS Policy Targets Excessive Director Compensation

ISS recently introduced a change to its U.S. policy to respond to concerns over excessive director pay. Under the policy, ISS will recommend a negative vote on the re-election of board members responsible for approving or setting director compensation when there is a recurring pattern of excessive director pay without a compelling rationale or other mitigating factors. ISS noted that although the size of non-employee director compensation varies by company size and industry, it has identified extreme outliers that pay directors substantially more than their peer companies without providing a clear explanation for these discrepancies. Under the new policy, negative recommendations will be triggered only where a pattern of excessive non-employee director pay is identified in two or more consecutive years. The policy update will not impact vote recommendations in 2018.