COVID Pay Adjustments: Early Look at ISS’s Assessment
I blogged a couple of weeks ago about one potential proxy season theme and another might be how investors and proxy advisors view 2020 COVID-related pay actions. A recent Compensation Advisory Partners’ memo provides insight into how ISS might view COVID-related pay changes. CAP reviewed select COVID-19-related pay actions from companies with fall fiscal year-ends and the corresponding ISS proxy research report. The memo highlights six companies that made various changes to their incentive plans and one high-level takeaway is that the proxy advisor’s assessment of COVID-related pay decisions appears highly correlated to the concern level on its quantitative CEO pay-for-performance screens. Here’s an excerpt:
CAP’s preliminary findings indicate that if a company made COVID-related compensation changes and received an elevated level of concern on the ISS pay for performance evaluation, the proxy advisor will likely recommend Against the Say on Pay proposal, thereby significantly impacting the Say on Pay vote. To date, we have observed three companies that experienced sharp declines in their Say on Pay results, with one failing to receive majority support.
Based on this early review, CAP encourages companies to prepare compelling proxy statement disclosures with the rationale supporting COVID-related pay decisions along with how they’re aligned with long-term shareholder value creation. Beware that ISS is highly critical of special one-time awards, upward (discretionary) adjustments to payouts, front loading annual equity awards, and reductions in performance-based long-term incentives.
-Lynn Jokela, CompensationStandards.com March 2, 2021
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