ISS Updates its Equity Plan FAQs for 2023 Proxy Season

Greg Gautam • April 19, 2023

Institutional Shareholder Services Inc. (“ISS”), a leading proxy advisory firm, uses a proprietary “Equity Plan Scorecard” approach to evaluate public company equity compensation plans.  For 2023, ISS has updated its Equity Plan Scorecard and the corresponding Frequently Asked Questions (“FAQs”). A full link to the ISS guidance can be found here. 

Although we are well into the 2023 Proxy Season, for issuers that have yet to file, we thought it would be helpful to summarize ISS’ updated guidance:

  • ISS has updated the methodology for calculating burn rate using a “New Value-Adjusted Burn Rate” model.  The new model compares the issuers burn rate to a benchmark of peers.  This new model may impact how an issuer scores under the Equity Plan Scorecard if the issuer is seeking shareholder approval of a new equity compensation plan.
  • ISS has updated the threshold scores for obtaining a passing score in the Equity Plan Scorecard.  For 2023, a passing score for: (i) S&P 500 issuers increased from 57 to 59 points; (ii) for Russell 3000 issuers increased from 55 to 57 points; and (iii) for non-Russell 3000 issuers increased from 53 to 55 points.
  • In order to receive positive points on the Equity Plan Scorecard for a clawback policy, the applicable policy must apply to both equity awards that vest based solely on the passage of time and performance-based awards.  This means that a clawback policy that only satisfies the minimum requirements of the final clawback rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act will not capture positive points for this Equity Plan Scorecard factor.

If you are an issuer seeking shareholder approval of your equity incentive plan and/or asking your shareholders to increase the size of your equity plan’s share pool, please consider reviewing the updates to the Equity Plan Scorecard in connection with the preparation of your new and/or amended equity incentive plan.

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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