Here’s an excerpt from this Cooley Alert by Ali Murata, Barbara Mirza, Michael Bergmann, and Janice Chan about new FAQ 46 of ISS’ Executive Compensation FAQs:
“In short, the new FAQ specifies that a clawback policy will not be viewed as “robust” for purposes of ISS’ Executive Compensation Analysis unless it extends beyond Dodd-Frank requirements and applies to all time-vesting awards as well as performance-vesting awards. This is consistent with ISS’ existing position under its Equity Plan Scorecard, where an equity plan will not receive points under the clawback policy metric unless the policy applies to both time- and performance-based awards.
Implications. Many companies do not go beyond the minimum Dodd-Frank requirements. Regardless, it appears that – going forward – a clawback policy that does not apply to time-based awards will be viewed negatively by ISS in determining its SOP vote recommendation, though it is not clear how much weight will be given to this factor.
We continue to think that while companies should periodically revisit their clawback policies and take this new ISS position into account as another factor in the overall calculus, the guiding principle should be to ensure that the policy remains appropriate and best serves its purpose in the company’s particular circumstances.”
Authored by
Broc Romanek