Institutional Shareholder Services (ISS) har skrivit ett åtta sidors vitbok med titeln An Investor Guide till Stock Option Timing Scandal. Papperet ger en bra översikt över de senaste uppdateringarna om backdating och spring-loading. Det har varit ett antal inlägg i blawgosphere som debatterar lagligheten av backdating och spring-loading. Medan dessa metoder inte nödvändigtvis är olagliga, som det framgår av papperet: Option-timing skandalen. ifrågasätter övervakningen från styrelser och ersättningskommittémedlemmar vid dessa företag. Investerare kan frukta att det finns andra redovisningsproblem men som ännu inte har kommit fram. Upplysningen om backdating skickar en 8216 signal som ledningen är villig att fudge nummer till egen fördel och de kan vara villiga att spela andra bokföringstryck.8217 ISS rekommenderar följande som bästa praxis för optionsbidrag: Adopt 8220blackout8221 perioder för att utesluta aktiebidrag när företaget chefer har material, icke-offentlig information i handen. Anta fasta stipendier som föreskriver stipendier med jämna mellanrum (månadsvis, kvartalsvis eller årligen), tillsammans med regler för fastställande av optionsutnyttjandepriser på sådana bidragsdatum. Avstå från att bevilja bidrag på dessa fasta datum då chefer har marknadsrörande nyheter. Uppge motiveringen för bidrag på ett visst datum och förklara varför ersättningskommittén valde det datumet över andra möjliga datum. File Form 4 rapporterar om optionsbidrag omedelbart med SEC. Medan dessa metoder verkligen skulle gå långt för att eliminera backdating och spring-loading, som Geoff påpekade huvudsakligen på dag ett av skandalen (se här), kan alternativtiming vara en effektiv kompensationsform. SEC-kommissionär Atkins gav nyligen en liknande uppfattning om vårbelastningen i ett tal inför det internationella bolagsstyrningsnätverket (se här). Denna uppfattning har emellertid inte blivit särskilt väl mottagen (se t ex här), kanske delvis för de skäl som Tom diskuterar här. Det blir intressant att se hur många företag antar de åtgärder som rekommenderas av ISS. För företag som är involverade i skandalen kommer den förlorade flexibiliteten vid utformningen av ett kompensationspaket sannolikt att uppvägas av den potentiella återställandet av investerarnas förtroende. För företag utanför brotten kanske skandalen helt enkelt resulterar i ett par linjer med tilläggsinformation i linje med 8220. Kompensationsutskottet kan vid utövandet av sin affärsdömning från tid till annan godkänna bidragsoptioner kort före offentliggörandet av gynnsamma företagsutvecklingar.8221 Betygsätt detta: Dela detta: Gilla detta: Postnavigering Bill 8212 162 (m) har tolkats på ett sätt som motsvarar prestationsbaserat med en ökning av aktiekursen. In-the-money-alternativen behandlas inte som prestationsbaserade eftersom de skulle ha värde även om aktiekursen sjönk lite. Backdated alternativ är den funktionella motsvarigheten av i pengarna alternativ. Fjäderbelastade alternativ är i bästa fall ett närmare fall. Tänk dig, I8217m, försvarar inte hur skattekoden gör en dum linje mellan pengar och pengar. Det borde alla vara avdragsgilla. Och ja, bara företag med en positiv marginal skattesats kommer att bry sig. Vissa teknikföretag don8217t Jag undrar om detta hjälper till att förklara mönstret för backdating. I8217m inte medveten om någon myndighet på något sätt på vårbelastade alternativ. Varför tror du att det verkar som en aggressiv inställning (det kan mycket väl vara, men eftersom du är skatteexperten hoppades du att du kunde utarbeta). Det skulle också vara den fulla bruden av 35 straff som vanligtvis endast gäller företag som har tillräckligt med skattepliktiga inkomst i år för beviljande för att dra nytta av avdrag Bill 8212 Precis som en sidotal skiljer sig effektivitetsargumentet ifrån dig om du förlorar skatteavdraget under 162 (m) och eventuellt löper av 409A. Finns det auktoritet där ute som säger att fjäderbelastade alternativ fortfarande är prestationsbaserade för 162 (m). Det verkar som en aggressiv inställning. Jag är helt överens om att bindning av en kompommission 8217s händer kan tyckas vara ineffektiv för företag som inte har en investerarförtroendefråga. Men om skattekoden redan har infört en 35 straff på pengarna och effektivt alternativ i pengar, så verkar ISS-förslagen vara förnuftiga. I8217m förvånad över att ISS didn8217t meddelade sin preferensposition att alla optioner skulle beviljas till det höga aktiekurset under bidragsåret. Jag hörde att de övervägde att rekommendera prissättning till det höga priset under intjänandeperioden, men trodde att det inte kunde ge de lämpliga incitamenten.10202014: Tiden för ISS att besluta: Är aktieprisrörelsen en åtgärd av prestanda eller inte (Towers Watson) Det finns en intern inkonsekvens med ISS: s ställning på standardoptioner för tidsintäkter. Hur kan man fundamentalt skilja mellan: 1 Optionsoptioner (ej prestationsbaserad lön enligt ISS), som levererar värde baserat uteslutande på aktiekursrörelse och fortsatt service, och 2 Stock-utmärkelser knutna till relativ total aktieägarnas avkastning baserad lön enligt ISS), som också levererar värde uteslutande baserat på aktiekursrörelse och fortsatt service. Faktum är att man kan argumentera för att aktieoptioner är det mer prestationsbaserade fordonet eftersom de inte levererar någon ersättning med negativ aktiekursutveckling, vilket ofta inte är sant för relativa TSR-priser. Att säga att ett fordon är prestationsbaserat betalt och det andra inte är inkonsekvent. Vänligen klicka här för att rapportera den här länken om den är trasig (till exempel om du får ett felmeddelande om 404 fil inte hittat efter att du klickat på länken ovan). Ett viktigt ord om författarskap: BenefitsLinkreg tillhandahåller en hypertextlänk till objektet som visas ovan, men är inte författaren till föremålet (om inget annat anges). Webmaster: Vänligen aktivera Javascript i din webbläsare för att skicka ett mail till webmaster. kopiera 2017 BenefitsLink, Inc. Sekretesspolicy2013 Omfattande amerikanska kompensationspolicy Vanliga frågor Uppdaterad: 8 mars 2013 US Executive Pay Overview Hur många som heter executive officers8217 totala kompensationsdata visas i avsnittet Executive Pay Overview Den verkställande ersättningssektionen kommer generellt att återspegla samma Antal utnämnda verkställande befattningshavare8217s kompensation enligt vad som anges i ett bolagets proxyförklaring. Om sex eller flera namngivna ledande befattningshavare 8217 totalt ersättning har uppenbarats, kommer dock endast fem att vara representerade i sektionen. Ordern blir VD, andra, tredje, fjärde och femte högsta betalda verkställande direktören med total ersättning. Aktuella chefer kommer att väljas först, följt av avslutade chefer. Ledande befattningshavare som avslutas efter det sista räkenskapsårets slut kommer att inkluderas, eftersom de var ledande befattningshavare under det senaste hela verksamhetsåret. Ett företag8217s VD har avgått och det finns en ny VD på plats. Vilken VD visas i rapporten Vår rapport visar i allmänhet VD i kontoret på sista dagen i verksamhetsåret. Hur beräknas Totalkompensation Totalkompensationsbas Lönebonus Icke-aktiebaserad incitament Plankompensation Aktierutmärkelse Alternativpriser (baserat på fullständiga bidragsdatumvärden, beräknat av ISS) Förändring av pensionsvärde och icke-kvalificerad uppskjuten kompensationsvinst All annan kompensation. Beräkningen överensstämmer i allmänhet med Sammanställningskompensationstabellen med undantag för aktieoptionsvärdet andor stockutmärkelser, beskrivna längre fram nedan. Aktiepriser 8211 Prenumerera värde, generellt som rapporterats i bidragsplanen för planbaserade utmärkelsestabeller för eventuella aktieutmärkelser, inklusive tidsmässiga utmärkelser och prestationsaktier. Om börskursvärdet är högre i Sammanställningskompensationen än det verkliga värdet för tilldelningsdatum som visas i tabellen Grants of Plan-Based Awards, kommer ISS i allmänhet att ta det högre värdet i vår rapport. Om aktieutmärkelserna som presenteras i tabellen Grants of Plan-Based Awards återspeglar nuvarande snarare än tidigare räkenskapsår kommer ISS inte att inkludera värdet i vår rapport. I enlighet med sekretesskrav för SEC ska bidrag av planbaserade prisvärden återspegla aktieutmärkelser som gjorts under det gångna verksamhetsåret. Om bidragsdatumsvärdet inte rapporteras beräknas antalet målenhetsandelar multiplicerat med sista börskursen på bidragsdatumet. Värdet på börskursen bör i allmänhet matcha både för kompensationskompensationstabellen och tilldelningen av planbaserade utmärkelsestabell. Alternativpriser 8211 Prenumerera nuvärdet av alternativen med Black-Scholes Options Pricing Model, beräknat av ISS (se 5). Vilka ingångar används i ISS8217 Black-Scholes-metodiken Hur är nuvärdet av alla ackumulerade pensioner beräknade i VD Tally Sheet-tabellen Denna siffra representerar de belopp som redovisas som nuvärdet av förmånerna för alla pensionsplaner (inklusive kvalificerade och icke kvalificerade) , som beskrivs i tabellen om pensionsförmåner i proxyutlåtelsen. Hur beräknas värdet av icke-kvalificerad uppskjuten kompensation i VD-tabellbladet Denna figur representerar summan av alla uppskjutna kompensationsvärden, från både kvalificerade och icke-kvalificerade planer, som beskrivs i tabellen Icke-kvalificerad uppskjuten kompensation. Hur beräknas potentiella uppsägningsbetalningar i VD-tabellbladet. Värdena för en ofrivillig uppsägning utan orsak och en förändring av kontrollrelaterad uppsägning lämnas enligt vad som anges under det relevanta termineringsscenariot i Ändra i kontrolltabellen och förklaringen av proxy-redovisningen Finansiella data Totalt Aktieägare Avkastning och Inkomster Var erhåller ISS en bolags8217s 1-årig finansiell total aktieägare, 3 års finansiell total aktieägare avkastning och intäkter. ISS erhåller all finansiell data i kompensationsprofilen från Standard Amp Poor8217s Research Insight. Hur beräknar Research Insight 1 års finansiell totalaktieåtervinning (TSR) Den årliga totala aktieägarnas avkastning är den årliga avkastningen som avspeglar prishöjning plus utdelning (baserat på återinvestering vid utgången av månad för utdelning) och den sammanslagande effekten av utdelningar som betalas på återinvesterad utdelning över en årsperiod. Hur beräknar Research Insight 3 års finansiell totalaktieåterbäring? Den treåriga totala aktieägarnas avkastning är den årliga avkastningen som återspeglar prishöjning plus återinvestering av utdelningar (som beskrivs ovan) och den sammanslagande effekten av utdelningar som betalas på återinvesterad utdelning över en treårsperiod. Hur beräknar Research Insight företagets intäkter? Revenue är bruttoförsäljningen (antalet faktiska faktureringar till kunder för regelbunden försäljning som slutförts under perioden) reducerad med kontantrabatter, handelsrabatter och återförsäljning och ersättningar för vilka kredit ges till kunder. Hur beräknar Research Insight företagets resultat (förlust) Nettoresultat eller - förlust redovisas av ett företag efter att kostnader och förluster har dras av från alla intäkter och vinster för räkenskapsperioden inklusive extraordinära poster och avvecklade verksamheter. Varför är verkställande direktören betalning som procent av ett företag8217s intäkter som visar NA (ej tillämpligt) Om ett företag8217s intäkter är noll, betalar VD som procent av ett företag8217s intäkter kommer att vara NA. Varför är verkställande direktören betala som procent av företagets nettoomsättning som visar NAIf ett bolag 8217s nettoresultat är noll eller negativt, verkställande direktören betalar som procent av ett företags8217s nettoresultat blir NA. Management Say on Pay (MSOP) Utvärdering Vad är ISS8217 Executive Compensation Utvärderingspolicy Utvärderingsutvärderingspolicyen består av tre avsnitt: Betala för prestation, problematiska betalningsförfaranden och styrkommunikation och responsivitet. Rekommendationer som utfärdats inom ramen för verkställande ersättningsutvärderingspolitiken kan vara tillämpliga på något av eller alla följande omröstningsposter, beroende på löneproblemet (enligt vad som anges i policyen): Val av styrelseledamöter (främst ersättningskommittémedlemmar), Advisory votes on Compensation (MSOP) , andor Equity Plan förslag. Om ett företag har en MSOP-resolution vid omröstningen, kommer ISS också att tillämpa kompensationsrelaterade rekommendationer till ersättningsutskottets medlemmar som är upptagna inför valet. Om ett företag har en MSOP-resolution vid omröstningen kommer eventuella ersättningsrelaterade rekommendationer att vara tillämpat på det förslaget, men om ett företag tidigare har fått en negativ rekommendation om en MSOP-resolution i samband med ett problem som fortfarande är igång, kan ISS även rekommendera INNEHÅLLIGA röster gentemot ersättningsutskottets ledamöter. Om en eller flera styrelseledamöter mottog en negativ rekommendation under det föregående året på grund av ISS8217 kommer oro över ersättningspraxis att påverka följande år8217s rekommendation Om en eller flera styrelseledamöter mottog mindre än 50 procent av aktieägarens stöd (oavsett om det är kompensationsfråga ) Kan ISS rekommendera att aktieägarna avstår från hela styrelsen med undantag för nya nominerade om företaget inte vidtar tillräckliga åtgärder för att svara eller avhjälpa de problem som uppkommit i föregående rapport. Om en eller flera styrelseledamöter mottog en stor skillnad (30 procent till 49,5 procent), bör företaget diskutera eventuella åtgärder eller överväganden som vidtagits för att ta itu med problemet. En hög nivå av motsats indikerar ett övergripande missnöje och styrelsens utskott bör vara lyhörd för aktieägarna. En brist på diskussion eller överväganden, i kombination med befintliga gränsvärden, kan ha betydelse för följande år8217s rekommendation Betala prestationsutvärdering Se ISS8217 8220Evaluering betala för resultatjustering 8221 vitbok för en förklaring av den kvantitativa metodiken som användes i den första fasen av Denna analys och sammanfattning av de kvalitativa faktorer som beaktas. Hur påverkar den inledande kvantitativa lön för prestationsanalys den slutliga omröstningsrekommendationen för Management Say on Pay-förslag eller val av ersättningsutskottets ledamöter (i avsaknad av förvaltningsanspråk om betalningsförslag) Den kvantitativa lön för prestationsanalys tjänar som en första skärm av company8217s betalar prestationsjustering. En hög eller medelhög omsorg från den kvantitativa skärmen resulterar i en djupgående kvalitativ granskning av företagets kompensationsdiskussionsförstärkningsanalys för att identifiera de sannolika orsakerna till felinriktningen och / eller förmildrande faktorer. Efter den kvalitativa granskningen av företagen8282s proxyutlåtande resulterade endast 53 av de höga företagen i negativa omröstningsrekommendationer under proxysäsongen 2012, medan 47 av de högaktiga företagen fick en positiv omröstningsrekommendation på grund av förmildrande faktorer som identifierades i den kvalitativa bedömningen . Vilka är de faktorer som ISS anser för att genomföra den kvalitativa översynen av lönen för prestationsanalys. Dessa är viktiga faktorer som ISS anser för att genomföra den kvalitativa översynen av lönen för prestationsanalys: Förhållande mellan prestations - och tidsbaserade aktieutmärkelser Övergripande resultatförhållande - baserad ersättning Kompletteringen av upplysningar och stränga prestationsmål Företagets benchmarkingprocess (peer group benchmarking) (t. ex. om det finns närvaro av outsourced peers eller över-median benchmarking) Faktiska resultat av finansiell statistik, såsom inkomstökning, vinst, kassaflöde , etc. både absolut och i förhållande till kamrater Särskilda omständigheter relaterade till till exempel en ny VD under det föregående räkenskapsåret eller avvikande kapitalbidragspraxis Realiserbar lön jämfört med bidragslön och Övriga faktorer som anses relevanta. Relevanta faktorer kommer att diskuteras i rapporten. Om ett företag fick en fråga om 8220low8221 i den kvantitativa lönen för prestandamodell, kommer ISS fortfarande att utvärdera företagets incitamentsprogram? ERISS recensioner alla företag8217 Kompensationsdiskussion och analys och lyfter fram anmärkningsvärda frågor till investerare oavsett kvantitativ problemnivå. Den kvalitativa utvärderingen är den viktigaste delen av analysen. Problematiska incitamentsdesigner som fleråriga garanterade betalningar, diskretionära lönekomponenter eller bristande stränga mål behandlas generellt i den kvalitativa analysen och kan leda till en negativ rekommendation trots en kvantitativ oro för 8220low8221. Hur använder ISS realiserbar lön i analysen8282 Standardforskningsrapporten visar treårig realiserbar lön jämfört med den treåriga beviljade lönen för SampP 500-företag som börjar med 1 februari 2013 mötesdatum. Se fråga 7 nedan för ISS8217 definition av realiserbar lön och hur det kommer att beräknas. Realiserbar lön kommer i allmänhet att diskuteras i fall där bolagets initiala kvantitativa skärm visar en stor eller medium fråga. För SampP 500-företag kan vi använda det realiserbara lönekortet för att se om realiserbar lön är högre eller lägre än beviljas lön och vidare utforska de bakomliggande orsakerna. Till exempel är realiserbar lön lägre än beviljad lön på grund av brist på målprestation i prestationsbaserade utmärkelser eller helt enkelt på grund av en nedgång i börskurs. Är realiserbar lön högre än beviljad lön på grund av ovan angivna utbetalningar i prestationsbaserade aktieutmärkelser och, Om så är fallet är de underliggande målen tillräckligt strikta eller är skillnaden på grund av det ökade aktiekursen. För alla företag är ISS8217 att hänsyn tas till realiserad andorrealiserbar lön för att avgöra huruvida företaget visar ett starkt engagemang för en pay-to-performance-filosofi . Det faktum att realiseringslön är lägre eller högre än beviljningsdaglön kommer inte nödvändigtvis att avhjälpa andra starka indikationer på att ett bolags8217s ersättningsprogram inte är tillräckligt knutet till prestanda som är utformat för att öka aktieägarvärdet över tiden. I avsaknad av sådana indikationer kommer emellertid realiseringslön som visar ett löneförpliktande åtagande att vara en positiv övervägning. Hur är realiserbar Betalning för stora företagslager computedISS8217 Målet är att beräkna en beräknad mängd 8220realiserbar pay8221 för VD: erna i SampP 500-bolagen. Det kommer att innehålla de belopp som faktiskt betalats eller realiserats, eller det nuvarande värdet av incitamentsbidrag som gjordes under en viss mätperiod, vid utgången av denna mätperiod. Realiserbar lön kommer att omfatta alla icke-incitamentskompensationsbelopp som betalats under mätperioden plus värdet av eget kapital eller långsiktiga kontantinkomstutdelningar som gjorts under perioden och antingen uppnådda eller, om tilldelningen fortsätter, omvärderas till målnivå som av mätperiodens slut. Det totala realisationsvärdet för dessa bidrag och betalningar kommer därmed att vara summan av följande: Baslön redovisad för alla år under mätperioden Bonus redovisad för alla år Kortfristiga (vanligen årliga) utmärkelser redovisade som Incitament alla år För alla framtida långsiktiga kontantutdelningar som gjorts under mätperioden, erhålls det intjänade värdet av priset (om det erhålls under samma mätperiod) eller dess målvärde vid pågående tilldelningskurser För alla aktiebaserade utmärkelser som gjorts under mätperioden, värdet (baserat på aktiekursen vid utgången av mätperioden) av utdelningar som gjorts under perioden (minus eventuella andelar som förverkas på grund av att prestandakriterierna inte uppfylls) eller, om priserna fortsätter, Målnivå för sådana utmärkelser För optionsoptioner som beviljats under mätperioden har nettovärdet realiserats med avseende på sådana beviljade optioner som även utnyttjades under perioden för optioner som beviljats men inte exklusive uppskattat under mätperioden kommer ISS att på nytt beräkna optionsvärdet med hjälp av Black-Scholes-optionsprissättningsmodellen vid utgången av mätperioden. Förändring av pensionsvärde och icke-kvalificerat uppskjuten ersättningsvinst redovisat för alla år och All Other Compensation rapporterade för alla år. Generellt tre fiscal år, baserat på company8217s räkenskapsår. För realiserbar lön beräknad som en del av ISS8217 2013 analyser kommer detta generellt att bestå av räkenskapsår 2010 till 2012. Notera att ISS8217 realiserbart lönebelopp kommer att baseras på ett konsekvent tillvägagångssätt, med hjälp av information från bolagets proxyupplysningar. Eftersom nuvarande SEC-beskrivningsregler är utformade för att räkna upp 8220grant-date8221-betalning snarare än realiserbar lön, kommer dessa uppskattningar att baseras på ISS8217 bästa ansträngningar för att bestämma nödvändiga ingångar i beräkningen. I fall där det till exempel inte är tillräckligt klart om en tillämplig utmärkelse har intjänats eller förverkats under en mätperiod, kommer ISS att använda den tilldelade målprisnivån. Varför använder ISS inte det inhemska värdet (lösenpris minus nuvarande marknadspris) av optionsoptioner vid beräkning av realiserbara payTop executives8217 optionsoptioner löper vanligtvis efter sju till 10 år vilket innebär att även om ett alternativ är under vattnet under de första åren efter det att det beviljats, det finns en stor sannolikhet att det i slutändan kommer att ge ett värde till innehavaren före utgången. Aktieägarna erkänner att vid bedömning av 8220realizable8221 betala som en lönsamhetsfaktor är det viktigt att inkludera det ekonomiska värdet av undervattensalternativ (vilket också kommer att återspegla effekten av ett lägre aktiekurs, om tillämpligt). Ett företag skulle vilja avslöja pågående och / eller genomförda prestationsbaserade aktiekurser för utmärkelser de senaste tre åren. Vilken typ av upplysningsformat skulle ISS föreslå? Uppsägning av pågående eller slutförda prestationsbaserade aktiekurser på ett konsekvent sätt skulle underlätta ISS8217 beräkning av realiserbar lön (som bygger på en bästa ansträngning av nödvändig information från proxy-uttalanden). Om ett företag har tilldelat prestationsbaserade aktiekurser under de senaste tre åren, skulle utlämnande av utmärkelserna i följande tabell vara till hjälp: Ej bestämd än Prestationsperioden inkluderar inte tidsvinstkrav. Vad beträffar lönsamhetsinriktning och realisationslönberäkningar, hur ska ISS behandla VD som inte har varit i ståndpunkten i tre år. Den kvantitativa metoden kommer att analysera den totala VD-ersättningen för varje år i analysen utan hänsyn till huruvida alla år är samma eller olika VD. Om den analysen indikerar betydande lön för prestandaförskjutning kan den efterföljande kvalitativa analysen ta hänsyn till eventuella relevanta faktorer relaterade till en förändring av VD under perioden. Men med tanke på en uppenbar koppling mellan prestation och VD-lön, skulle aktieägarna förvänta sig att det nya VD8217s lönepaketet skulle vara väsentligt prestationsbaserat. I flera år när ett företag har mer än en VD, kommer vi att använda endast en VD: s lön: VD som befann sig i slutet av räkenskapsåret kommer i allmänhet att vara den som kommer att använda lön. VD: s grundlön kommer att årligställas. På samma sätt beräknar ISS med avseende på realiserbar lön det realiserbara beloppet, per slutet av mätperioden, av den sammanlagda kompensationstabellen som redovisas för VD i kontoret den sista dagen i varje räkenskapsår under mätperioden. Hur beräknas de årliga och treåriga aktieägarens avkastning (TSR) Hur redovisas 8220spår och dalar8221 i femårsanalysen? Under den relativa bedömningen representerar de en - och treåriga TSR: erna årliga avkastningar som återspeglar aktiekursen uppskattning under perioden plus effekterna av återinvestering av utdelningar (och sammanslagningseffekten av utdelningar betalade på återinvesterade utdelningar). Enligt den absoluta bedömningen representerar indexerad TSR värdet av en hypotetisk 100 investering i bolaget, under förutsättning att återinvestering av utdelningar. Investeringen börjar dagen fem år före månadsslutet närmast bolagets senaste räkenskapsår, och mäts på följande fem årsdagar av det datumet. PTA-åtgärden (som beskrivs i ISS-utvärderingsbetalningen för prestandajustering) är utformad för att beräkna möjligheten för 8220bumps8221 i den övergripande trenden. Nedanstående tabell illustrerar hur indexerad TSR skulle beräknas för ett företag med ett räkenskapsår som slutade den 2 oktober 2011 och hur indexerad TSR avser årlig total aktieägarnas avkastning: Vilken TSR-tidsperiod kommer ISS att användas för ämnesföretaget och jämnåringarna i Pay for Performance-analysen Vad händer med kompensationsperioden TSR för ämnesföretaget och alla sina jämnar är mätt från den sista dagen i månaden närmast ämnet company8217s räkenskapsårs slut. Om ämnet company8217s räkenskapsår slutligen är 31 december, kommer de ettåriga och treåriga TSR för ämnesföretaget och dess jämställdare att vara baserade den 31 december. Ersättningssiffror för alla företag är från det senaste tillgängliga datumet . För företag med möten i början av året, vars senaste årsstämma VD 2011 betalning ännu inte har släppts, vilka löneuppgifter använder ISS useISS de senaste kompensationsdata som finns tillgängliga för peer-företagen, vilket kan vara från föregående år. Inkluderar du ämnesföretaget i derivat av gruppmedianen När du säger 14 företag minimum för kamrater, ingår 14 ämnesföretaget Nej, varken verkställande direktören eller TSR för ämnesföretag ingår i medianberäkningen. Ämnesföretaget ingår inte i antalet peerbolag, vilket i allmänhet kommer att vara minst 14. Vilka konsekvenser kan en negativ rekommendation om löneförmåner ha om förslag till aktieplaner Om en betydande del av koncernchefens felaktiga lön hänför sig till icke-prestationsbaserade aktiekurser, och det finns en aktieplan på omröstning med VD som en av deltagarna kan ISS rekommendera en röst mot egenkapitalplanen. Överväganden att rekommendera mot egenkapitalplanen kan innefatta men är inte begränsade till: Lönesviktens avvikelse Bidrag för icke-prestationsbaserade kapitalbidrag till övergripande lön och Andel av aktieutmärkelser som beviljats under de tre senaste räkenskapsåren koncentrerades till den utsedda verkställande direktören officernivå. Ett koncentrationsförhållande för topp 5 som överstiger 25 skulle motivera ytterligare granskning. Vi skulle titta på både VD och topp 5 koncentrationsförhållandena. Om VD har mindre än 20 men topp fem har 50 på grund av en ny hyrasituation är det osannolikt att vi skulle rekommendera mot eget kapital. Vi skulle också titta på de tre senaste koncentrationsförhållandena med och utan VD. Är koncentrationen hög på grund av verkställande direktören eller är det ledigt likvärdig fördelning mellan nyckeln exek Är LTI-programmet liknande för VD och topp 5 Är prestationsfunktionerna för aktiekurserna och är det samma för alla topp fem Är prestationen mål tillräckligt rigorösa Om ett företag inte har varit offentligt handlat för fem räkenskapsår, gäller den kvantitativa utbetalningsprestandan fortfarande Vad om företaget inte har varit offentligt handlat för tre räkenskapsår Skulle ett sådant bolag användas som ett jämställdhetsföretag för andra företag Om företaget inte har varit offentligt handlat för fem räkenskapsår, kommer den relativa bedömningen, särskilt den relativa ettårs - och treåriga TSR-löne - och prestationsrankningen och multipel av lönen mot medarbetaren, fortfarande att gälla. Om bolaget inte har varit offentligt handlat för tre räkenskapsår kommer löne - och prestationsrankningen på ett år och multipelbeloppet mot medarbetaren fortfarande att gälla om bolaget varit offentligt minst ett år. I båda fallen kommer företaget8217s begränsat liv som ett offentligt handlat företag att betraktas som en del av någon kvalitativ utvärdering. I allmänhet kommer endast företag med tre hela år av data att vara peer-företag. Under begränsade omständigheter kan ett företag med mindre än 3 års data användas när den kvantitativa utvärderingen fokuserar på endast ett år. Kommer betala fortsättningsvis att definieras som kompensationstabellavgift eller överväga nuvarande värde av LTI (potentiell realiserbar lön) Total ersättning beräknad av ISS kommer fortsättningsvis att definieras som beviljade lön och lönemöjligheter av flera skäl men inklusive det: 1 ) Det är den bästa reflektionen av kompensationsutskottet 8217s övervakning och beslutsfattande, och 2) Lösmöjligheter bör avspegla företagets tidigare prestation till viss del, särskilt om möjligheten verkar vara felaktig med den prestationen (på ett negativt sätt ), förväntar aktieägarna att dessa bidragsmöjligheter ska vara starkt prestationsbaserade. Realiserad eller potentiellt realiserbar lön kommer att övervägas som en del av ISS8217 kvalitativ utvärdering av utbetalning av prestanda. Med diskonteringsräntan till sitt lägsta har det beräknade värdet av pensionsförmåner ökat. Kommer ISS att ta hänsyn till detta i sin bedömning av VD: s payBecause ISS8217 kvantitativa analyser har en långsiktig orientering, förväntas löneavvikelser från år till år inte få betydande inverkan på resultatet. Sådana avvikelser kan emellertid beaktas i den kvalitativa utvärderingen som genomförts innan en negativ rekommendation skulle utfärdas. ISS har rekommenderat nedläggningar i kompanys ersättningskommitté eller rekommenderas mot bolagsledningen på förslag om lön eller eget kapital på grundval av en verkställande direktör betala prestandakoppling. Vilka åtgärder kan företaget vidta för att ta itu med oroen? Betalningen för prestationsutvärdering är en fallstudieanalys, och åtgärderna ska skräddarsys enligt de underliggande problemen som identifieras i lön för prestandauppkoppling. Framtida åtaganden att öka andelen prestationsbaserad lön i framtiden kommer inte att tillgodose tillräckligt med hänsyn till justeringar av de senaste utmärkelserna för att stärka deras prestationsförbindelser kan emellertid beaktas. Till exempel, om den primära källkoden för löneökningen beror på tidsintäkterna aktiekurser, skulle det kunna vara ett medel för företaget att göra en betydande del av sådana aktieutmärkelser till namngivna tjänstemän som är prestationsbaserade. En väsentlig del av prestationsbaserade utmärkelser skulle vara minst 50 procent av de aktier som tilldelades till var och en av de verkställande befattningshavarna. Observera att detta är 50 procent av de tilldelade aktierna i stället för 50 procent av priset på utmärkelserna. Prestationsbaserade aktiekurser utvinns eller utbetalas utifrån uppnåendet av förutbestämda, mätbara prestationsmål. Företaget bör avslöja detaljerna i prestandakriterierna (t ex avkastning på eget kapital) och hurdlehastigheterna (t ex 15 procent) förknippade med prestandatilldelningarna vid den tidpunkt då de tillverkas. Från den här informationen kommer aktieägare att få veta vilken miniminivå av prestation som krävs för att eventuella kapitalbidrag ska förvärvas. I det här sammanhanget innehåller starkt prestationsbaserade aktiekurser inte standardbaserade optionsoptioner eller prestationsaccelererade bidrag. Istället är prestationsbaserade aktiekurser utmärkande bidragsmedel, där individen inte kommer att få eget kapitalbidrag om målresultatet inte uppnås. Premium-priced options with an exercise price at least 25 percent higher than the fair market stock price on the date of grant may be considered performance-based. The 25 percent premium should serve as a guideline rather than a bright line test. A 25 percent premium may not be rigorous for a company trading at 1.00. If option vesting is contingent on the stock reaching a specified price, the price condition should be maintained for at least 30 consecutive trading days before vesting. In order for shareholders to assess the rigor of the performance-based bonus and equity programs, the company needs to disclose the performance measures and goals. Complete and transparent disclosure is critical. The company needs to disclose the following: the measures(s) used (and rationale for the selections) the goal(s) that were set for each metric and the target (and, if relevant, threshold and maximum) payout level(s) set for each NEO the reason that each goal was determined to be appropriate for incentive pay purposes (including the expected difficulty of attaining each goal) the actual results achieved with respect to each goal and the resulting award (or award portion) paid to the NEO with respect to each goal. The pay-for-performance action must be made in a public filing, such as a Form 8-K or DEFA 14A. Based on the additional disclosure of a renewed commitment, ISS may recommend a vote FOR the compensation committee members up for annual election andor vote FOR the management say on pay or equity plan proposal, if there is one on the ballot. However, ISS is not likely to recommend a vote FOR the compensation committee members andor vote FOR the management say on pay or equity plan proposal if ISS believes the company has not provided compelling and sufficient evidence of action to strengthen the performance-linkage to its executives8217 compensation and transparent additional disclosure. A company makes equity grants near the beginning of each year based on an evaluation of the company andor the executives performance in the immediately preceding year. Such grant information will appear in the following years proxy statement. Will ISS take into account the timing of these early equity grants made in the current fiscal year and make adjustments to the top executives total compensation when conducting its pay-for-performance evaluationSuch timing issues can be problematic for investors evaluating the relationship between performance and pay. The value of equity grants generally represents a significant proportion of top executives pay if the grants are made subsequent to the performance year, disclosures in the Grants of Plan-Based Awards Table may distort the pay-for-performance link. Some investors believe that equity awards can incentivize and retain executives for past and future performance therefore, adjustments for such timing issues may not be relevant. In addition, ISS8217 pay-for-performance analysis has a long-term orientation, where these types of timing issues are less relevant than an evaluation of one year8217s pay. Nevertheless, ISS may consider the timing of equity awards made early in a fiscal year in its qualitative assessment if complete disclosure and discussion is made in the proxy statement. In order to ensure that pay-for-performance alignment is perceived, the company should discuss the specific pre-established performance measures and goals that resulted in equity awards made early in the next fiscal year. A general reference to last years performance is not considered sufficient and meaningful to shareholders. If the company makes equity grants early in each year, based on the prior years specific performance achievement, shareholders should not be required to search for the information in Form 4s and compute the adjusted total compensation for the top executives in order to make a year-over-year comparison. Instead, companies should provide information about grants made in relation to the most recently completed fiscal year in the proxy statement for the shareholder meeting that follows that fiscal year (aligned with other compensation reported for that year). Many companies provide an alternate summary compensation table that takes into account the recent equity awards made in the current fiscal year. The number of options or stock awards with the relevant exercise price or grant price should be disclosed in the proxy statement. The term of the options should be provided as well. In order for ISS to compute the adjusted total compensation and include it for purposes of our narrative discussion and analysis, companies need to make transparent and complete disclosure in the proxy statement ISS will not search for the companies Form 4 filings to make such adjustments but will rely on the specific grant disclosures found in the proxy statement. With respect to pay-for-performance alignment, how does ISS treat CEOs who have not been in the position for three yearsISS8217 quantitative methodology analyzes total CEO pay for each year in the analysis without regard to whether all years represent the same or different CEOs. If that analysis indicates significant pay for performance misalignment, the ensuing qualitative analysis may take into account any relevant factors related to a change in CEO during the period. However, given an apparent disconnect between performance and CEO pay, shareholders would expect the new CEO8217s pay package to be substantially performance-based. For years when a company has more than one CEO, we will use only one CEOs pay: the CEO who was in the position at the end of the fiscal year will generally be the one whose pay will be used. The base salary for a recruited CEO will be annualized. A company awards time-based stock awards after meeting specific performance criteria. Does ISS consider such awards to be performance contingent compensationPerformance measures and goals need to be pre-established and disclosed in the proxy statement for ISS to consider such awards as performance contingent compensation. How does ISS capture transition period compensationDisclosure of transition period compensation varies across companies. Therefore, ISS does not apply a standardized methodology in all cases. Transition periods generally represent an extension of a recently completed fiscal year (until the start of a new fiscal year period). ISS will generally include transition period pay as part of the most recently completed fiscal year pay. Cash pay components such as base salary and bonus will be annualized and equity pay components will be added, subject to a company-specific case by case review. Determining Peer Companies How does ISS select constituents for the peer groups used in its Pay-for-Performance analysis As of 2013, ISS8217 methodology for selecting peers maintains its focus on identifying companies that are reasonably similar to the subject company in terms of industry profile, size, and market capitalization, taking into account a company8217s self-selected peers to guide industry selections. ISS8217 selected peer group generally contains a minimum of 14 and maximum of 24 companies based on the following factors: following: the GICS industry classification of the target company the GICS industry classifications of the company8217s disclosed benchmarking peers size constraints for both revenue (or assets for certain financial companies) and market value. Subject to the size constraints, and while choosing companies that push the subject company8217s size closer to the median of the peer group, peers are selected from a potential peer universe in the following order: the measures(s) used (and rationale for the selections) from the subject8217s own 8-digit GICS group from the subject8217s peers8217 8-digit GICS groups from the subject8217s 6-digit GICS group from the subject8217s peers8217 6-digit GICS groups from the subject8217s 4-digit GICS group When choosing peers, priority is given to potential peers within the subject8217s 8220first-degree8221 peer group (the companies that are either in the subject8217s own peer group, or that have chosen the subject as a peer), and companies with numerous connections (by choosing as peer or being chosen as a peer) to these first-degree peers. All other considerations being equal, peers closer in size are preferred. What are some ways that the peer groups constructed via ISS methodology implemented for 2013 differ from ISS8217 previous peer groupsThe following table outlines some of the characteristics of the projected 2013 peer groups (based on most recent disclosure as of September 2012) relative to prior peer groups: New Methodology (as of 2013) While ISS may choose peers that fall outside a subject company8217s market cap bucket if necessary to reach a minimum peer group size, none may have a market cap of less than 0.25 times the low end or more than 4 times the high end of the subject8217s market capitalization bucket. Which industry groups will be use assets for size comparisons What happens when a company has potential peers in both asset-based and revenue-based industry groupsISS will use balance sheet assets (rather than revenue) to measure the size of companies in the following 8-digit GICS groups to disclose the performance measures and goals. Complete and transparent disclosure is critical. The company needs to disclose the following: 40101010 Commercial Banks 40101015 Regional Banks 40102010 Thrifts mortgage 40202010 Consumer Finance 40201020 Other diversified Both subject and potential peer must be in the asset-based GICS groups listed above in order to be compared on the basis of assets. In cases where a subject company is in one of the asset-based GICS groups and a potential peer is not, revenues will be used for size comparisons. This principle applies to the size comparisons made to qualify a peer for potential inclusion as a peer, to the size rankings made to maintain the subject company near the median size of the peer group, and to the size prioritization of peers When will a company8217s peer group have more than 14 membersIn general, the closer the industry match, the larger the subject size of the peer group: for direct matches to the company8217s own 8-digit GICS, as many as 24 peers may be chosen. For matches of the company8217s peers8217 8-digit GICS, as many as 18 peers may be chosen, falling to a maximum of 14 peers when choosing from the company8217s 4-digit GICS. More peers, however, may be selected in order to bring the target company8217s size closer to the median of its peers. If the standard methodology fails to yield the minimum number of acceptable peers, what peer group will be usedHow will ISS create peer groups for very large 8220super-mega8221 companies for 2013In general, ISS will supplement the peer group generated by the standard methodology in such cases. For larger 8220super-megacap8221 companies, ISS will use the standard methodology to identify as many peers as possible for these very large companies. In cases where this does not provide a sufficient number of peers, ISS will supplement these peer groups according to the principles above. In exceptional cases, the ISS peer group may contain a minimum of 12 constituents. How does ISS treat foreign-domiciled or privately-held company peersISS uses these peers for the purpose of identifying relevant GICS industry groups, if relevant industry data is readily available. Foreign-domiciled companies that file Def14A, 10-Qs, and 10-Ks may be included as ISS selected peers. Privately-held or other foreign-domiciled companies that do not make such filings are not included as ISS selected peers. If a company used multiple peer benchmarking groups, which group will ISS use as an input to the process What does ISS do if a company does not employ a peer group for benchmarkingAISS uses the company peergroup that is used for CEO pay benchmarking purposes. If there is no peer group employed, the peer methodology will draw peers from the company8217s own 8-, 6- and 4-digit GICS groups, subject to ISS8217 size constraints. Does ISS apply additional judgment in the process of building peer groupsISS may adjust any peer groups that appear to have inappropriate constituents at the time of our analysis. The basic principles of the methodology will still apply: peers should come from similar industries and be of similar size, and company peers should be prioritized where possible. What impact will peer group methodology changes have on the pay-for-performance quantitative screen ISS8217 preliminary back-testing indicates that more than 80 percent of companies would experience a change of less than 15 points (up or down) in their Relative Degree of Alignment (RDA) measure under the new methodology, compared to the current peer methodology. Similarly, 80 percent of companies would experience a change of less than 0.2 in their Multiple of Median (MOM) measures under the new methodology. Accordingly, for the overwhelming majority (gt95) of companies, the quantitative screen concern levels would not be affected by the new peer groups. In addition, the overall distribution of these RDA and MOM measures under the new methodology does not deviate significantly from the current distribution of these scores. When will ISS reconstruct peer groupsCompany peer groups will be reconstructed during July and August, after the Russell 3000 index is updated in July. Expectation is that any revisions to company peer groups, which are not anticipated to be significant, will be in place for research in process as of September 1 (generally affecting companies that have filed DEF14As after mid August). A subsequent peer group construction will occur in December and early January, effective for meetings as of February 1. In December 2012, ISS provided companies an opportunity to communicate any changes made to their benchmarking peer groups following their 2012 proxy disclosures. Will companies with later fiscal year-ends that did not know at that time what changes they were making to peer groups used with respect to fiscal 2012 compensation decisions also have an opportunity to communicate changesYes, ISS will provide asimilar opportunity after proxy season, prior to reconstruction of its peer groups per above, for companies with later meetings. Can only Russell 3000 companies be used as peer companies Will ISS use companies that an issuer considers as peers (specified in the proxy) to develop the ISS comparator groupIf a Russell company discloses the names of the companies that it uses as its peers, and these companies are public, ISS will collect the data on them even if they are not in the Russell 3000. If these companies fit ISS criteria for peers, then they may be used as ISS peers as of the next update of ISS peer groups. What are GICS codes Who can I contact if I disagree with the GICS classificationThe Global Industry Classification Standard (GICS) was developed by Standard amp Poor8217s and MSCI in response to the financial community8217s need for a reliable, complete (global) standard industry classification system. GICS codes correspond to various business or industrial activities, such as Oil amp Gas Drilling or Wireless Telecommunication Services. GICS is based upon a classification of economic sectors, which is further subdivided into a hierarchy of industry groups, industries and sub-industries. The GICS methodology is widely accepted as the industry analysis framework for investment research, portfolio management, and asset allocation. ISS does not classify companies into the GICS codes. Please contact Standard amp Poor8217s at 1-800-523-4534 if you believe that a company has been misclassified. Are the same peer companies used for a company8217s allowable cap on an equity plan proposal (as used under the pay-for-performance analysis)No, the list of companies shown in the executive compensation section is not the same peer group used in calculating a company8217s allowable cap on an equity plan proposal. The peer group used for benchmarking executive pay is based on a combination of industry and size (revenueassets and market cap) the peer group used for creating the allowable cap calculations for stock-based compensation is based on industry, with adjustments for market cap size. How are the peer medians calculated for the Components of Pay tableThe median is separately calculated for each component of pay and for the total annual compensation (TC). For this reason, the median total compensation of the peer CEOs will not equal the sum of all the peer median pay components, because the values are calculated separately for each pay component the median TC reflects the median of TC of the peer group constituents. Problematic Pay PracticesCommitments on Problematic Pay Practices What is ISS8217 Problematic Pay Practices evaluation Pay elements that are not directly based on performance are generally evaluated on a CASE-BY-CASE basis considering the context of a company8217s overall pay program and demonstrated pay-for-performance philosophy. The list below highlights the problematic practices that carry significant weight in this overall consideration and may result in adverse vote recommendations: Repricing or replacing of underwater stock optionsSARS without prior shareholder approval (including cash buyouts and voluntary surrender of underwater options) Excessive perquisites or tax gross-ups, including any gross-up related to a secular trust or restricted stock vesting New or extended agreements that provide for: o CIC payments exceeding 3 times base salary and averagetargetmost recent bonus o CIC severance payments without involuntary job loss or substantial diminution of duties (8220single8221 or 8220modified single8221 triggers) o CIC payments with excise tax gross-ups (including 8220modified8221 gross-ups). Would an agreement which is automatically extended (e. g. an evergreen feature) but is not modified warrant a negative vote recommendation if it contains a problematic pay practice)Automatically renewingextending agreements (including agreements that do not specify any term) are not considered a best practice, and existence of a problematic practice in such a contract is a concern. However, if an 8220evergreen8221 agreement is not materially amended in manner contrary to shareholder interests, it will be evaluated on a holistic basis, considering a companys other compensation practices along with features in the existing agreement. The policy lists the most problematic practices. What is the full list of pay practices that are considered problematic and may result in a withhold or against recommendation, on a case-by-case basisBased on input from client surveys and roundtables, ISS has identified certain adverse practices that are contrary to a performance-based pay philosophy, which are highlighted in the list below. o Egregious employment contracts: Contracts containing multi-year guarantees for salary increases, non-performance based bonuses, or equity compensation. o New CEO with overly generous new-hire package: Excessive make whole provisions without sufficient rationale Any of the problematic pay practices listed in this policy. o Abnormally large bonus payouts without justifiable performance linkage or proper disclosure: Includes performance metrics that are changed, canceled, or replaced during the performance period without adequate explanation of the action and the link to performance o Egregious pensionSERP (supplemental executive retirement plan) payouts: Inclusion of additional years of service not worked that result in significant benefits provided in new arrangements Inclusion of performance-based equity or other long-term awards in the pension calculation o Excessive Perquisites: Perquisites for former andor retired executives, such as lifetime benefits, car allowances, personal use of corporate aircraft, or other inappropriate arrangements Extraordinary relocation benefits (including home buyouts) Excessive amounts of perquisites compensation o Excessive severance andor change in control provisions: Change in control cash payments exceeding 3 times base salary plus targetaveragelast paid bonu s New or materially amended arrangements that provide for change-in-control payments without loss of job or substantial diminution of job duties (single-triggered or modified single-triggered, where an executive may voluntarily leave for any reason and still receive the change-in-control severance package) New or materially amended employment or severance agreements that provide for an excise tax gross-up. Modified gross-ups would be treated in the same manner as full gross-ups Excessive payments upon an executive8217s termination in connection with performance failure Liberal change in control definition in individual contracts or equity plans which could result in payments to executives without an actual change in control occurring o Tax Reimbursements: Excessive reimbursement of income taxes on executive perquisites or other payments (e. g. related to personal use of corporate aircraft, executive life insurance, bonus, restricted stock vesting, secular trusts, etc see also excise tax gross-ups above) o Dividends or dividend equivalents paid on unvested performance shares or units. o Internal pay disparity: Excessive differential between CEO total pay and that of next highest-paid named executive officer (NEO) o Repricing or replacing of underwater stock optionsstock appreciation rights without prior shareholder approval (including cash buyouts, option exchanges, and certain voluntary surrender of underwater options where shares surrendered may subsequently be re-granted). o Other pay practices that may be deemed problematic in a given circumstance but are not covered in the above categories. Why does ISS now consider hedging and pledging of company stock under its policy framework for the election of directors, rather than under the problematic pay practices policyIn considering new policy related to the significant pledging of company stock, ISS obtained market feedback from our policy survey, roundtables, comment letters, and other means. While shares that are used by executives or directors who engage in hedging or pledging transactions often have been acquired via compensation programs, many investors expressed the view that the board is specifically responsible for setting policies related to risks to shareholder value. Since both hedging and pledging raise such risks, ISS decided to move this aspect of the policy to the appropriate section, election of directors, where it will be evaluated under the Egregious Actions framework. How does ISS view hedging or significant pledging of company stock by an executive or directorHedging is a strategy to offset or reduce the risk of price fluctuations for an asset or equity. Stock-based compensation or open market purchases of company stock should serve to align executives8217 or directors8217 interests with shareholders. Therefore, hedging of company stock through covered call, collar or other derivative transactions sever the ultimate alignment with shareholders8217 interests. Any amount of hedging will be considered a problematic practice warranting a negative vote recommendation against appropriate board members. Please see the Frequently Asked Questions (excluding Compensation) Board Accountability for more insight on ISS policy in this regard. After its most recently completed annual andor long-term performance cycle ended with no payout (due to failure to achieve goals), a company granted retention awards of cash or equity to executives. How would ISS view such awardsInvestors do not expect boards to reward executives when performance goals are not achieved, whether by 8220moving the goalposts8221 (i. e. lowering goals) or granting other awards to compensate for the absent incentive payouts. They recognize, however, that retention of key talent may be critical to performance improvements and future shareholder value. Companies that grant special retention awards of cash or equity to executives when regular incentive plan goals are not met should provide clear and compelling rationale in their proxy disclosure. Awards of cash should be conservative and reflect the fact that performance is lagging (i. e. should generally be significantly less than unearned target award levels). Optimally, 8220extra8221 awards designed to encourage retention should also include performance conditions that will ensure strong alignment of pay and performance going forward and avoid 8220pay for failure8221 scenarios if the executive is not retained. Does the presence of single trigger vesting acceleration in an equity plan result in an automatic AGAINST recommendation for the plan, the say on pay vote, the entire compensation committee, or the full boardThere are no automatic negative recommendations under ISS policy. We will consider all relevant aspects included with the companys ultimate disclosure. With regard to equity-based compensation, ISS policy encourages double trigger vesting of awards after a CIC (considered best practice). In the absence of double-triggered vesting, the current preferred practice is for the board to have flexibility to determine the best outcome for shareholders (e. g. to arrange for outstanding grants to be assumed, converted, or substituted), rather than the plan providing for automatic accelerated vesting upon a CIC. Equity plans or arrangements that include a liberal CIC definition (such as a very low buyout threshold or a CIC occurring upon shareholder approval of a transaction, rather than its consummation), coupled with a provision for automatic full vesting upon a CIC, are likely to receive a negative recommendation. While guaranteed multi-year incentive awards remain problematic, is providing a guaranteed opportunity for what ISS considers a performance-based vehicle acceptableWhile guaranteeing any executive pay elements (outside of salary and standard benefits) is not considered best practice, the fact that the payout of such an award would ultimately depend on performance attainment (i. e. no payout would occur if performance is below a specified standard), assuming the performance hurdles appear reasonably, robust would generally mitigate concerns about the guaranteed award opportunity. Are material amendments other than extensions of existing contracts a trigger for analysis with respect to problematic existing contract provisionsShareholders are concerned with the perpetuation of problematic practices thus, agreements that are extended or new will face the highest scrutiny and weight in ISS8217 analysis. Material amendments will be considered an opportunity for the board to fix problematic issues, but as part of the holistic analysis. In 2009, in response to an ISS vote recommendation, a company adopted a policy prohibiting payments of tax gross-ups made on life insurance premiums in new or amended agreements. Certain officers were grandfathered at that time, and they continue to receive such payments. Is that policy, which ISS approved, to no longer be honored by ISSAll factors are weighed in the holistic analysis including existing agreements, commitments, and continuing practices of the company. However, unless the existing contracts are extended, they do not rise to the level of the most problematic practices. Will commitments entered into in 2010 or prior, before ISS announced its policy not to consider forward-looking commitments for the 2011 Proxy Season, be 8220grandfathered8221 Commitments not to enact problematic features in future agreements will no longer mitigate the enacting of problematic pay practices in new or amended agreements during the prior fiscal year. If a company put excise tax gross-ups in new agreements in the last fiscal year, what action can they take to prevent an against recommendation from ISSA company can remove that provision from the new agreements. Frequency of Advisory Vote on Executive Compensation In the event that a companys board decides not to adopt the say on pay vote frequency supported by a plurality of the votes cast, what are the implications in terms of ISS voting recommendations at subsequent meetings Per 2012 policy, if the board adopts a longer frequency for say-on-pay votes than approved by a plurality of shareholder votes, ISS will make a case-by-case recommendation, considering the following: The board8217s rationale for choosing a frequency that is different from the frequency which received a plurality The company8217s ownership structure ISS8217 analysis of the company8217s executive compensation and whether there are compensation concerns or a history of problematic compensation practices and The previous year8217s support level on the company8217s say-on-pay proposal. Advisory Vote on Golden Parachutes (SOGP) An event has technically triggered a change in control according to the company8217s formal definition however the company continues to exist and there is minimal impact on board turnover or management structure. How would ISS apply its SOGP policy in this regard In cases where ISS concludes that a bona-fide change in control event has not occurred (e. g. the company8217s equity remains outstanding and the board is not significantly affected) ISS views that severance payments or automatic acceleration of outstanding equity awards should not occur. If ISS8217 policy framework is not applicable due to unusual circumstances, recommendations will generally be made on a case-by-case basis, taking into consideration whether the outcome is beneficial to shareholders. How would ISS determine that the performance measures would not have been achieved in the absence of the decision to accelerate the performance based awards If a truncated performance period is used, then how would ISS know whether the performance measures would not have been achieved had no CIC transaction occurredBest practice is pro rata vesting based on current achievement. If it is impossible to measure performance under pre-determined performance criteria the board should justify paying an award as if target or highest performance goals were met. How does ISS determine whether specified golden parachute payouts are 8220excessive8221In evaluating disclosed payouts related to a change in control with respect to the SOGP proposal, ISS may consider a variety of factors, including the value of the payout on an absolute basis (e. g. relative to an executive8217s annual compensation) or one or total payouts relative to the transaction8217s equity value. There are no bright line thresholds for these considerations, since they are made in conjunction with other factors in ISS8217 review. How will ISS consider existing problematic change-in-control severance features in its SOGP evaluationBeginning in 2013, ISS will consider existing (as opposed to new in the last year) problematic features such as excise tax gross-up provisions and single and modified single payout triggers in determining a vote recommendation on SOGP proposals. In general, legacy excise tax gross-up provisions will be considered in the context of the amount of actual tax gross-ups reported as part of the company8217s SOGP disclosure. Legacy singlemodified single triggers also may be considered in the context of the total change-in-control payout and whether they result in unjustifiable payouts in the absence of an executive8217s termination without cause in connection with the change in control. Equity Related Option RepricingExchange Proposals With the market rebound, fewer companies are seeking shareholder approval for option exchange programs. If a company were to consider such a program, can you provide additional guidance besides the standard shareholder friendly features, such as value-for-value exchange, exclusion of named executive officers and directors, resetting vesting schedules Option exchange creates a gulf between the interests of shareholders and management, since shareholders cannot reprice their stock. Option exchange should be the last resort for management to use as a tool to re-incentivize employees. Only deep underwater options should be eligible for the program rather than somewhat underwater options, especially if the companys stock is volatile. Using a companys 52-week high as the threshold exercise price may be reasonable in a depressed economy, but it may not be rational in a market rebound. A companys 52-week high may be its current stock price which may suggest that these options are marginally underwater. As a rule of thumb, the threshold exercise price for eligible options should be the higher of the 52-week high or 50 percent above the current stock price. That way, only deep underwater options are eligible for the program. However, this rule of thumb should not be considered in isolation, as there are several other factors, such as the timing of the request and whether the company has experienced a sustained stock price decline that is beyond managements control among others. Further, a companys current stock price can be a consideration as well. A premium of 50 percent for a company trading at 1 may be a low threshold if the companys stock price is particularly volatile. A company should discuss the various levels of employees (management versus non-management) who will be eligible participants in the program. Some companies have broad-based option programs whereas others tend to grant to management at the Vice President level. Absent such disclosure, institutional investors may assume that equity grants are generally awarded to management. Cost of Equity Plans A company has a May 2013 shareholder meeting and did not start trading until January 2013. ISS would normally use a December QDD for this company but there is no data for this company. What would be ISS8217 approach in determining the company8217s stock price in evaluating its equity plan proposal Here is the hierarchy of choices that ISS uses to determine stock price with respect to equity plan proposal evaluations: 200-day avg. stock price as of the applicable QDD 50-day avg. stock price as of the applicable QDD Closing stock price as of applicable QDD If applicable QDD is not available, use most recent QDD 200-day avg stock price If applicable QDD is not available, use most recent QDD 50-day avg stock price If applicable QDD is not available, use closing price as of the most recent QDD Last resort, use current stock price How does ISS look at the practice of buying shares on the open market to fund employees8217 equity grantsThe practice of repurchasing shares on the open market in order to avoid dilution from employees equity grants may be beneficial to shareholders if this represents a good use of the companys cash. However, there is still a cost to the company, and we would still capture that cost by our SVT calculation. In an efficient market, the buyback should have a positive impact on the companys stock price despite the reduction in outstanding shares. Therefore, it should have a generally neutral effect on market valuation. In addition, when a buyback is executed, a company immediately receives higher EPS and other share denominated accounting performance metrics, which in turn may lead to higher allowable cap. With respect to burn-rate calculations, ISS uses the weighted average number of outstanding common shares for the applicable year(s), which smooths out the impact of both share buybacks and share issuances. Adjustments to reduce the voting power dilution may be made if the share repurchase is implemented to offset dilution from stock-based compensation and if such repurchase is made within the past two years. What is the policy on stock in lieu of cash plansISS includes all stock in lieu of cash plans in evaluating the total costs of equity plans. ISS believes that cash or stock payments are considered as compensation to the employees and therefore should be considered in evaluating equity proposals. The total cost of equity-based compensation to directors is also generally considered under the compensation model. However, some stock-based plans do provide directors to take all or a portion of their cash compensation in the form of stock. If such plan provides for a clear dollar-for-dollar stock exchange of the cash compensation, ISS will view the stock in lieu of cash as value neutral for SVT purposes. Any other non-value neutral form of exchange which may include a premium for deferring cash compensation for stock is considered by ISS to cause transfer of shareholders equity which should still be measured. A non-REIT company would like ISS to consider its limited partnership (LP) units as part of the company8217s common shares outstanding when determining market capitalization in the shareholder value transfer analysis and weighted common shares outstanding in the burn rate analysis. Currently, operating partnership (OP) units are included for REIT companies because each OP unit is generally equivalent to one share of common stock and is convertible into common stock. OP units also receive the same dividend payout as common stock. ISS applies a case-by-case analysis to determine if a company8217s convertible equity or debt should be considered as part of common stock outstanding. If the convertible vehicle carries direct voting and dividend rights and may be converted into common stock, then ISS may include such convertible vehicle as part of common stock outstanding. The total number of outstanding convertible vehicle, vested or unvested should be clearly disclosed in the company8217s proxy statement or 10-K. Burn Rate Policy How does ISS calculate the burn rate and annual stock price volatility The annual burn rate is calculated as follows: Annual Burn rate ( of options granted of full value shares awarded Multiplier) Weighted Average common shares outstanding) Stock Volatility is based on the 3-year historical volatility as of the company8217s quarterly data download, then annualized: Annualized stock volatility Stock Volatility X Square Root of 250. A company went public two and a half years ago. However, the 10-K discloses three years of historical grant information. Does the burn rate policy applyThe burn rate policy applies to companies that have been publicly traded for three complete fiscal years. However, ISS will closely scrutinize cases where there is any unusual outsized equity grant made just before the three-year burn rate policy becomes applicable to such companies. Such scrutiny may result in application of the burn rate policy, if appropriate. What action may a company take if it fails to meet the three-year average burn rate policyA company may commit to a prospective gross three-year average burn rate, which excludes stock options with a reload feature granted prior to 2005, equal to the higher of two percent of the company8217s common shares outstanding or the mean plus one standard deviation of its GICS peer group. A company8217s burn rate may exceed the peer group average in the first year, provided the prospective three-year average burn rate remains below the commitment level. The company would need to publicly notify shareholders of its commitment via, e. g. a form 8-K, DEFA14A, or in the summary plan description of the stock plan proposal in the DEF14A. The company would also be required to disclose in its future proxy statements the status of the commitment during the applicable period. 8220The Company commits that, with respect to the number of shares subject to awards granted over the next three fiscal years period of time, we will maintain an average annual burn rate over that period that does not exceed x of weighted common shares outstanding. For purposes of calculating the number of shares granted in a particular year, all awards will first be converted into option-share equivalents. In this case, each share that is subject to awards other than options will count as equivalent to current multiplier option shares. 8220 Making a commitment does not guarantee a vote change if ISS believes there are concerning flaws that remain in the company8217s equity plan design. Also, when the plan potentially propagates an egregious compensation practice that was identified, a recommendation AGAINST the plan may persist. Note that when a prior burn-rate commitment was modified or has been violated mid-stream, it may warrant a vote AGAINST the plan absent justifiable reasons, or in some cases, may result in a recommendation AGAINST the compensation committee members. What multiplier is used to evaluate whether the company has fulfilled its burn rate commitmentMost companies, as part of their burn rate commitment, 8220lock in8221 the current year8217s multiplier to reduce uncertainty. If the multiplier is thus specified in the commitment, ISS will use that multiplier. If a company did not lock in the multiplier as part of their burn rate commitment, then ISS uses the multiplier that applies to them in the year we are analyzing them to see if they fulfilled their burn rate commitment. Are reload options included in the numerator of the three-year burn rate calculationYes, reload options are included. ISS anticipates that many companies will eliminate reload options since FASB maintained under SFAS 123R that they must be counted as separate grants. However, reload options are excluded in the prospective three-year average burn rate commitment. Which burn rate policy applies to a company whose GICS classification or Index Membership has been recently changedPresumably, the new classification or index membership will reflect the appropriate operational and revenue size thus the burn rates that are reasonable for the compensation structure of similar companies under the new classification will apply. In very limited cases, ISS may consider a modified burn-rate commitment. Does the burn rate policy apply to a company that has been recently acquiredYes. For companies that have been acquired, we would generally use the three-year average burn rate data for the acquirer. For companies that have merged in a merger of equals, we would generally average the three-year average burn rate for both companies. If a company assumes an acquired companys stock options in connection with a merger, will ISS exclude these stock options in the three-year average burn rate calculationIf the company discloses in the option activity table of the 10-K the number of assumed options in connection with the merger, ISS will not include assumed options for that year. However, if the company does not separate the number of assumed options and number of options granted, the assumed options will be included. This exclusion does not apply to new (inducement, recruitment, retention) equity awards granted following an acquisition, as these have the effect of depleting the available share reserves for compensation purposes. How many prospective burn rate commitments may a company maintain at one timeShareholders prefer to see clear demonstration that a company is fulfilling a burn rate commitment before accepting a new commitment thus, consecutive-year commitments will generally not be accepted. In the case of a company that has made multiple overlapping burn-rate commitments, each average burn-rate commitment level is expected to be maintained for the applicable commitment period (i. e. a second burn-rate commitment does not supersede a prior one that is still in effect). What are the implications for a company that is unable to fulfill its burn rate commitmentISS may recommend that shareholders withhold votes from the compensation committee members and is unlikely to accept another burn rate commitment from the company due to the company8217s failure to fulfill its burn rate commitment made to shareholders previously. If a company reprices options, how will the shares be counted to avoid double countingIf the company discloses the number of repriced options in the option activity table of the 10-K, and the repricing was approved by public shareholders, ISS will not include repriced options for that year. However, if the company does not separate the number of repriced options from number of options granted, the repriced options will be included. If a company grants performance-based awards, how will the shares be counted to avoid double countingIf the company clearly distinguishes the portion of unearned performance-based awards from the year8217s grants in its proxy statement or 10-K, ISS will not include these in the burn-rate calculation, provided that the company also clearly discloses the number of performance shares that vest each year based on attainment of performance goals. Actual performance-based shares earned, deferred shares earned, or any performance-based equity awards that deplete the share reserve will be counted as they are earned, provided that all disclosure is adequate. In general, time-based awards are counted in the year in which they are granted, and performance-based awards are counted in the year in which they are earned (subject to adequate disclosure practice). Liberal Share Recycling What is the liberal share recycling policy Plans that have liberal share recycling provisions, i. e. where shares granted and exercised can, under certain circumstances, be added back to the plan reserve for future grants, will receive a more costly valuation in that all shares will be evaluated in the ISS model as full-value awards. Under what circumstances are shares considered recycledFor purposes of ISS liberal share recycling policy, recycled shares may include, but are not limited to, the following: Shares tendered as payment for an option exercise Shares withheld from exercised shares for taxes Shares added back that have been repurchased by the company using stock option exercise proceeds Stock-settled SARs where only the actual shares delivered with respect to the award are counted against the plan reserve. Are SARs settled in cash considered recycledIn cases where a plan allows SARs to be settled in either cash or stock, ISS will assume all to be stock-settled. If the plan also provides that only the net shares delivered with respect to the award will be counted against the plan reserve, the liberal share recycling policy will be triggered. What happens if a company provides a limit on the number of shares that it can recycleIf there is an articulated limit on full value awards and it is explicit that liberal recycling is only allowed on full value awards, then ISS will apply the limit accordingly as stated. However, if liberal recycling is also permitted on other forms of awards (i. e. options), then ISS will consider that the recycling feature effectively nullifies the stated limit under the plan because of the additional cost attributed to the potential of recycling other types of awards. Does ISS consider the cancellation and regrant of stock optionsSARs as repricing What about the cancellation of stock optionsSARs for cash payments Yes, ISS considers the above two scenarios as repricing and will recommend an AGAINST vote on the equity plan if the company allows such arrangement without shareholder approval. What progressive action may a company take if it fails to meet the repricing provision policy in equity plansCompanies may eliminate the provision that allows the board or the administrator discretion to implement any form of repricing without seeking prior shareholder approval. Alternatively, such provisions can also be explicitly superseded by a statement clarifying that any transaction allowing for an economic value exchange by optionees will require further shareholder approval. 8220Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, distribution (whether in the form of cash, Common Shares, other securities or other property), stock split, extraordinary cash dividend, recapitalization, change in control, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Common Shares or other securities, or similar transaction(s)), the company may not, without obtaining stockholder approval: (a) amend the terms of outstanding Options or SARs to reduce the exercise price of such outstanding Options or SARs (b) cancel outstanding Options or SARs in exchange for Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs or (c) cancel outstanding Options or SARs with an exercise price above the current stock price in exchange for cash or other securities. Liberal Definition of Change in Control What is the policy on liberal change in control definitions found in equity plans ISS may recommend a vote AGAINST an equity plan if it could permit accelerated vesting of equity awards based upon a liberal change in control definition (e. g. a trigger linked to shareholder approval of a transaction, rather than its consummation, or an unapproved change in less than a substantial proportion of the board, or acquisition of a low percentage of outstanding common stock, such as 15 percent). What progressive action may a company take if its equity plans contain liberal change in control definitionsA company may qualify the problematic change in control definition to be preconditioned on determinate events that effectively constitute a change in control event, such as 8220consummation of a transaction8221 or 8220constructive loss of employment (double-triggered CIC).8221 Sample language: Change in Control shall be deemed to have occurredupon the consummation of a merger or consolidation of the Company with any other corporation. For an existing plan that is being amended, as opposed to a new plan, it is acceptable to specify that the CIC definition is effective for grants made after the plan amendment date. Fungible Plans How does ISS evaluate flexible share plans or fungible share pools Under a flexible share plan, each full-value award counts more than one share and each option counts as one share of the plan reserve. ISS evaluates the total costs of the plan by analyzing a flexible share plan under two scenarios: (1) all new shares requested as full value awards (2) all new shares requested as stock options. Under the first scenario, ISS adjusts the number reserved according to the ratio provided in the plan document. ISS will support a flexible share plan as long as both scenarios generate total costs below the allowable cap. ISS presents the more costly scenario in our proxy analysis. 162(M) Plans A post-IPO company submits an equity plan that has problematic issues (e. g. repricing provisions) for approval by public shareholders for the first time, solely for 162(m) purposes. The company will not be adding shares to the plan or in any way changing any provision in the plan. Will ISS review the plan Per 2012 policy updates, while ISS generally recommends support for 162(m) plan approvals, all equity plans put up for shareholder approval, for any reason, for the first time following a company8217s IPO will receive a standard analysis, including SVT calculation and a review of plan features. This is to ensure that any adverse provisions would not have a more detrimental potential impact on shareholders than a potential loss of tax deductions related to named executive officer grants. Stock Option Overhand Carve-Out When will ISS apply the stock option overhang carve-out policy Companies with sustained positive stock performance and high overhang cost attributable to in-the-money options outstanding in excess of six years may receive a carve-out of these options from overhang as long as the dilution attributable to the new share request is reasonable and the company exhibits sound compensation practices. A company needs to demonstrate that the in-the-money options outstanding in excess of six years have been continuously in-the-money after they were vested. The fact that employees had the opportunity to exercise these options but chose not to exercise them may reflect the confidence they have in the companys future prospects. Presenting in-the-money options in excess of six years is not sufficient information for ISS to determine whether these options were continuously in-the-money after they were vested. Companies are advised to provide the individual tranches of option grants with grant dates, option exercise prices and vesting schedules so that ISS can analyze the portion of in-the-money options to potentially carve out from the overhang. In the stock option overhang carve-out policy, what does ISS consider to be sustained positive stock performanceISS generally looks for positive 5-year total shareholder return (TSR) as well as positive year over year performance for the past five fiscal years at the time of the analysis. Exceptions may be made if stock performance was negative for the first two years and then strongly positive for the remaining three years, but vested grants that have been underwater for a substantial time during the 5-year period will not be eligible for the carve-out. These options should be deeply in the money for the periods where the companys stock performance was only high for the latest three years. A comparison of the companys five-year TSR against its four-digit GICS group can be helpful. Is ISS making any exceptions to the sustained positive stock performance criteria in light of the financial debacle experienced by almost all companies in 2009ISS recognizes that companies are affected by the global recession and would take that into consideration of the companys stock performance during this tumultuous period. Strong performing companies have experienced significant market rebound and should reflect that the stock price decline is temporary. Can ISS provide an example of a company providing such disclosure in order for ISS to carve out continuously in-the-money options outstanding in excess of six yearsPlease see Myriad Genetics DEFA 14A filed Oct. 28, 2009, Air Products and Chemicals8217 8K filed Jan. 5, 2010, NVR8217s DEF 14A filed March 19, 2010. How does ISS define high overhang cost in applying the stock option overhang carve-out policyHigh overhang cost means that the sum of outstanding options and stock awards and remaining shares available under existing equity plan(s) should exceed or approach the companys specific allowable cap. Outstanding options and stock awards must be a significant driver of the high overhang, and should be in the range of 75 to 100 percent of the total overhang. What does ISS look for with respect to the distribution of awards to executives vs. other employees (concentration ratio) in the stock option overhang carve-out policyISS will calculate the concentration ratio in the past fiscal year, defined as total equity grants to the top five executives divided by total equity grants to employees and directors. Concentration ratios greater than 50 percent to named executive officers may be concerning. Note: The questions and answers in this FAQ page are intended to provide high-level guidance regarding the way in which ISS8217 Global Research Department will generally analyze certain issues in the context of preparing proxy analysis and vote recommendations for U. S. companies. However, these responses should not be construed as a guarantee as to how ISS8217 Global Research Department will apply its benchmark policy in any particular situation. Institutional Shareholder Services (ISS) has posted an eight-page white paper entitled An Investor Guide to the Stock Option Timing Scandal . The paper provides a good overview of the recent option backdating and spring-loading revelations. There has been a number of posts in the blawgosphere debating the legality of backdating and spring-loading. While these practices are not necessarily illegal, as the paper points out: The option-timing scandal. calls into question the oversight provided by boards and compensation committee members at these companies. Investors may fear that other accounting problems exist but have yet to come to light. The disclosure of backdating sends a 8216signal that management is willing to fudge numbers for their own benefit and they might be willing to play other accounting tricks.8217 ISS recommends the following as best practices for option grants: Adopt 8220blackout8221 periods to preclude stock grants when company executives have material, non-public information in hand. Adopt fixed grant date schedules that provide for grants on a periodic basis (monthly, quarterly, or annually), along with rules for the establishment of option exercise prices on such grant dates. Refrain from making grants on these fixed dates when executives have market-moving news. Disclose the rationale for grants on a certain date, explaining why the compensation committee chose that date over other possible dates. File Form 4 reports on option grants promptly with the SEC. While these practices would certainly go a long way towards eliminating backdating and spring-loading, as Geoff pointed out essentially on day one of the scandal (see here ), option timing can be an efficient form of compensation. SEC Commissioner Atkins recently expressed a similar view regarding spring-loading in a speech before the International Corporate Governance Network (see here ). This view, however, has not been particularly well received (see, e. g. here ), perhaps in part for the reasons Tom discusses here . It will be interesting to see how many companies adopt the measures recommended by ISS. For companies embroiled in the scandal, the lost flexibility in designing a compensation package would likely be outweighed by the potential restoration of investor confidence. For companies outside the fray, perhaps the scandal will simply result in a couple of lines of added disclosure along the lines of 8220The compensation committee may, in the exercise of its business judgment, from time to time approve grants of options shortly before the public disclosure of favorable company developments.8221 Rate this: Share this: Like this: Post navigation Bill 8212 162(m) has been interpreted in a way that equates performance-based with a rise in stock price. In-the-money options are not treated as performance based because they would have value even if the stock price declined a bit. Backdated options are the functional equivalent of in the money options. Spring-loaded options are at best a closer case. Mind you, I8217m not defending the way that the tax code draws a silly line between in the money and at the money options. It should all be deductible. And yes, only companies with a positive marginal tax rate will care. Some tech companies don8217t I wonder if this helps explain the pattern of backdating. I8217m not aware of any authority either way on spring-loaded options. Why do you think it seems like an aggressive stance (it may very well be, but since you are the tax expert I was hoping you could elaborate) Also, wouldn8217t the full brunt of the 35 penalty generally only apply to companies that have sufficient taxable income in the year of grant to take advantage of the deduction Bill 8212 Just as a side note, the efficiency argument falls apart if you lose the tax deduction under 162(m), and possibly run afoul of 409A. Is there authority out there saying that spring-loaded options are still performance-based for purposes of 162(m) It seems like an aggressive stance. I certainly agree that tying a comp committee8217s hands could appear to be inefficient for companies that don8217t have an investor confidence issue. But if the tax code has already imposed a 35 penalty on in-the-money and effectively in-the-money options, then the ISS proposals do seem sensible. I8217m surprised ISS didn8217t announce its preferred position that all options be granted at the high stock price in the year of grant. I heard they were considering recommending pricing at the high price during the vesting period, but thought that might not provide the proper incentives.
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