The NASPP Blog

Category Archives: Holding Requirements

January 9, 2018

ISS Policy Updates for 2018

It used to be that ISS would make only a few changes per year to its voting policies that affected stock compensation. Some years the changes didn’t even warrant a blog entry. But now ISS has the Equity Plan Scorecard and a scorecard requires constant tweaking. As a result, we now have a lengthy list of changes to review every year. Today’s blog entry is a summary of the ones I think are most significant.

It’s Harder for S&P 500 Companies to Earn a Passing Score

Big news for S&P 500 companies: your stock plans now have to earn an extra two points (a total of 55 pts) to receive a favorable recommendation. Everyone else’s plans still pass with only 53 pts.

The Burn Rate Test Gets a Little Easier for Acquirers

More big news: all companies can now request that ISS exclude restricted shares granted in consideration for an acquisition from their burn rate.  Companies that want to request this must include a tabular disclosure reporting the number of restricted shares granted in this context for their most recent three fiscal years.

Partial Credit Eliminated for Some Factors

No more partial credit for CIC provisions, holding requirements, and CEO vesting requirements, and in some cases, the requirements to receive full credit have been relaxed.

To earn full credit for CIC provisions, the provisions must meet both of the following conditions (unless the company doesn’t grant time-based awards, in which case only the condition related to performance awards matters):

  • Performance awards can allow the following: (i) pay out based on actual performance, (ii) pro rata pay out of the target level (or a combination of i and ii), or (iii) forfeiture of awards.
  • Time based awards cannot provide for automatic single-trigger or discretionary acceleration of vesting.

To receive full points for the holding period requirement, shares must be required to be held for 12 months (down from 36 months in past years) or until the end of employment. No points for requiring shares to be held until ownership guidelines are satisfied.

To receive full points for the CEO vesting requirements, awards granted to the CEO in the past three years cannot vest in under three years (down from four years in the past). Still no points if no performance awards have been granted to the CEO in the past three years, but grants of time-based awards are no longer required to earn full credit.

– Barbara

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April 18, 2017

6 Things I’m Excited to Learn

As announced yesterday, we’ve extended the deadline to participate in the Domestic Stock Plan Administration Survey that the NASPP co-sponsors with Deloitte Consulting. For today’s blog entry, I have six things I am excited about learning from this year’s survey.

  1. Domestic Mobility Compliance: New this year, we’ve added questions on tax compliance for domestically mobile employees. This is an area of increasing risk and I’m curious to learn how far companies have come in their compliance procedures.
  2. ESPP Trends: This survey takes an in-depth look at the design and administration of ESPP plans. I hear rumors of increased interest in ESPPs—both in terms of companies implementing new plans and enhancing the benefits in their existing plans; I’m excited to see if this plays out in the survey results.
  3. Stock Plan Administration Staffing: This is the only survey I’m aware of that collects data on how stock plan administration teams are staffed, the department that stock plan administration reports up through, and how companies administer their plans. It is always intriguing to see the trends in this area.
  4. Ownership Guidelines: The prevalence of ownership guidelines has increased dramatically in the last decade, with 80% of respondents to the 2014 survey reporting that they have these guidelines in place. Has this trend topped out or will we be reaching near universal adoption of ownership guidelines in this survey?
  5. Rule 10b5-1 Plans: These trading plans have become de rigueur for public company executives, with 84% of respondents to the 2014 survey allowing or requiring them. We’ve expanded this area of the survey to capture more data on policies and practices with respect to these plans.
  6. Director Pay: The survey reports the latest trends in the use of equity in compensating outside directors. I’m particularly interested in seeing what percentage of respondents indicate that they have imposed a limit on the number of shares that can be granted to directors. This is a best practice to avoid shareholder litigation but adoption of it was low in the 2014 survey—have we made progress on this in the past three years?

If you are interested in these trends, too, you’re going to want to participate in the survey so that you’ll have access to the results. It’s not too late to participate, but you have to do so by the end of this week. We’ve already extended the deadline once; we can’t extend it again. Register to participate today!

– Barbara

* Only issuers can participate in the survey. Service providers who are NASPP members and who aren’t eligible to participate will receive full access to the published results.

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November 24, 2015

ISS Scorecard: What’s New for 2016

Last Friday, ISS issued an updated FAQ for its Equity Plan Scorecard.  For most companies, the overall scorecard structure remains unchanged: a max of 100 points and 53 points is a passing grade.  For companies disclosing three years of equity data, the points available under each pillar also remain the same, but the scores for each test within the pillars may have been adjusted (ISS doesn’t disclose the number of points each test is worth).

Here’s what ISS is changing for 2016 (effective for shareholder meetings on or after February 1, 2016):

New Company Category

The IPO/Bankruptcy category has been renamed “Special Cases” and includes any companies that have less than three years of disclosed equity grant data. This is still largely newly public companies and companies emerging from bankruptcy, but it could include other companies. For example, if a public company implemented a new stock compensation program in 2016 and had not previously granted any equity awards, they would presumably be in this category (because they wouldn’t have any equity grant data to disclose for prior years).

In addition, the Special Cases category is now divided into S&P 500/Russell 3000 companies and non-Russell 3000 companies.  The S&P 500/Russell 3000 companies can earn 15 points for the Grant Practices pillar; to provide these points, their max score for the Plan Cost pillar is reduced by ten points to 50 and their max score for the Plan Features pillar is reduced by five points to 35.  Scoring for the non-Russell 3000 companies in this category is the same it was for IPO/Bankruptcy companies last year: 60 points for plan cost, 40 points for plan features, and no points for grant practices.

CIC Provisions

The “CIC Single Trigger” category under Plan Features is renamed “CIC Equity Vesting” and is a little more complicated (last year it was pass/fail).

For time-based awards:

  • Full points for 1) no acceleration, or 2) acceleration only if awards aren’t assumed/substituted
  • No points for automatic acceleration of vesting
  • Half points for anything else (does this mean half points for a double trigger?)

For performance-based awards:

  • Full points for 1) forfeiture/termination, or 2) payout based on target as of CIC, or 3) pro-rata payout
  • No points for payout above target (ISS doesn’t say if this applies if performance as of the CIC is above target)
  • Half points for anything else

Post-Vest Holding Periods

The period of time required to earn full points for post-vest holding periods increased from 12 months to 36 months (or termination of employment).  12 months (or until ownership guidelines are met) is still worth half credit.

Happy Thanksgiving!

– Barbara

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February 19, 2015

Post-Vest Holding Periods – Part 1

Today I’m going to dissect a concept that’s existed in equity compensation for a long time. In fact, it’s nothing “new” per se. Yet, some recent trends, governance practices and changes in other industry areas have brought about new life to the idea. So much that I’m officially calling it the “buzz word” (okay, words) of the month. What is it? Post-vest holding periods. In this week’s blog I’ll explore why the renewed attention to this previously under-used practice. In a later installment we’ll get down to the more detailed mechanics.

What is a Post-Vest Holding Period?

Just to make sure we’re all on the same page, the post-vest holding period that I’m talking about is an additional holding requirement imposed on vested shares. Once vested, you must hold them for a period of time (1 year? 2 years?). This is different from holding the shares until they vest (aka the service or vesting period). Typically a company would include this type of holding period in the governing plan and agreement language, in addition to vesting details.

Participants Are Already Subject to Vesting – Why an Additional Holding Period?

This is where the old concept turned hot topic comes into play. While the idea of holding shares has been around for a long time, we are seeing recent and renewed interest in implementing post vesting holding requirements. There are a number of reasons why this may be attractive to a company, including:

  • Clawbacks: Having a holding period after vesting maintains a “reserve” of retrievable stock in the event the company needs to clawback income from an executive. After all, once an executive liquidates stock and spends the money, it’s next to impossible to recoup those shares or proceeds in their original form. Does the company really want to try and repossess the executive’s vacation home or new yacht?
  • ISS Scorecard: When ISS released their new Equity Plan Scorecard (see previous blog on this topic), it became clear that the existence of post-vest holding periods count for something. This is one of the items eligible for points on the scorecard.
  • Prevalence of Stock Ownership Guidelines: We’ve seen the steady rise of stock ownership guidelines over the past several years, with recent data showing more than 90% of public companies having some form of stock ownership guidelines. Post-vest holding periods can help an executive achieve their ownership targets.


In addition to the reasons outlined above, there are other interesting considerations emerging. In talking with Terry Adamson of Aon Hewitt, he pointed out that in addition to the above, companies may be able to reduce their ASC 718 accounting expense on awards with post vest holding periods. Why? Because the “lack of marketability” of the award deserves a discount.

The above only touches upon the surface. Questions I haven’t explored today include the types of equity that make the most sense to cover with a post-vest holding period and whether this makes sense to implement on a broad basis.

We’ve got some great resources in the works to provide you with those additional details. With Dodd-Frank requirements for clawbacks on the horizon, the new ISS Equity Plan Scorecard coming into play this proxy season, ongoing corporate governance changes and continued interest in minimizing accounting expense, we think the concept of post-vest holding periods may be more than just a passing trend.

For additional information now, check out our latest podcast episode “Hold After Vest” (featuring Terry Adamson of Aon Hewitt). For even deeper details, we’ve got a great team of presenters assembled to address all of the points raised in this blog (including the possibility of reducing accounting expense) in our next webcast: Post-Vest Holding Periods on March 11th.

In the coming weeks I’ll touch on more of the nuances that make this topic so interesting.