ISS Proposes New Approach to Evaluating Equity Compensation Plans

Greg Gautam • October 24, 2014

Institutional Shareholder Services Inc. (“ISS”), a leading proxy advisory firm, recently proposed a new “scorecard” approach to evaluating public company equity plans (the “Equity Plan Scorecard”).  Under the new approach, ISS will recommend a “for” or “against” vote based on a company’s Equity Plan Scorecard.  Pursuant to the proposal, a company’s Equity Plan Scorecard score will be based on factors related to the following three categories:

•  The total potential cost of the company’s equity plan relative to industry/market cap peers, measured using ISS’ proprietary “shareholder value transfer” or “SVT” model.

•  Plan features including automatic single trigger vesting on change in control, discretionary vesting authority, liberal share recycling, and minimum vesting periods for grants made under the plan.

•  Grant practices including three-year burn rates, vesting requirements in recent CEO equity grants, the estimated duration of a plan, the proportion of the CEO’s most recent awards subject to performance-based vesting (vs. timed-based vesting), the existence of a company clawback policy, and whether the company has established post exercise and vesting share-holding requirements.

Even though certain plan features that ISS considers “egregious” will still result in an “against” vote regardless of a company’s Equity Plan Scorecard score (e.g., the ability to reprice stock options without shareholder approval), ISS has indicated that recommendations under the new “scorecard” approach will largely be based on a combination of factors related to three categories described in the bullets above.

A company that is seeking shareholder approval of an equity plan proposal at its 2015 annual meeting may wish to consider incorporating the Equity Plan Scorecard factors into its plan if it wants ISS to recommend a vote in favor of the plan proposal.  More information on the Equity Plan Scorecard can be found here.

Employee burnout: what it is and how to prevent it

By Mardy Gould • May 24, 2024
Employee burnout has become an epidemic in today’s modern workplace. So much so that the World Health Organization (WHO) officially recognizes it as an “occupational phenomenon.”1 While many used to consider mounting workplace stress an individual employee problem, these days, it’s become an employer’s responsibility to prevent burnout before it hurts productivity and business performance—not to mention your employees’ physical and mental health. Luckily, you can prevent burnout from affecting your workforce in several ways. This article will explore the causes and signs of employee burnout and the steps you can take to create a positive work environment where employees feel safe from toxic stress levels.

Form 720 and PCORI fee FAQs

By Mardy Gould • May 23, 2024
If you're a small business owner, you may have heard of the acronym PCORI and the fees that come with it. But what is PCORI, and how does it apply to your organization? Under the Affordable Care Act (ACA), sponsors of self-insured health plans must pay a fee to fund the federal Patient-Centered Outcomes Research Institute (PCORI). PCORI is an independent organization the ACA created to conduct research to help healthcare consumers make better decisions for their specific needs and outcomes. It also performs research related to clinical effectiveness. Employers offering a self-insured medical reimbursement health plan, such as a health reimbursement arrangement (HRA), must pay this fee by July 31 each year via Form 7201. This fee was initially set to expire in 2019, but Congress extended it through September 30, 20292, due to the Further Consolidated Appropriations Act of 20203.
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