Institutional Shareholder Services recently proposed changes to its equity plan and independent chair policies. Under the proposal, ISS would update its Equity Plans policy to “a more nuanced approach around traditional cost evaluation.” The move would implement a “scorecard” model that would consider a range of factors. The presence of some “egregious features” alone would still result in negative recommendations, but in general, the new method would rely on factors in three categories: plan cost, plan features, and grant practices. Factor weightings would be “keyed to company size and status” and burn rate would be considered relative to peers based on calibrated benchmarks.
ISS noted that, over the past five years, shareholder proposals calling for independent chairs have more than doubled and that such proposals were the most prevalent type of shareholder proposals offered in 2014. The current ISS policy is to “generally recommend” the proposal unless the board meets specific criteria. The proposal would add new governance, board leadership, and performance factors that would be considered “in a holistic manner.”