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ISS Scorecard: What's New for 2016

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November 24, 2015 | Barbara Baksa

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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