This Viewpoint is one in a series of ongoing articles Pay Governance will be publishing regarding the impact of COVID-19 on compensation programs.
This Viewpoint is one in a series of ongoing articles Pay Governance will be publishing regarding the impact of COVID-19 on compensation programs.
The Securities and Exchange Commission (SEC, or "The Commission") recognizes five major firms as "proxy voting advice businesses": Institutional Shareholder Services (ISS), Glass Lewis, Egan-Jones, Marco Consulting Advisors, and ProxyVote Plus. The Commission defines proxy voting advice as the act of providing voting recommendations on specific matters presented at a company's shareholding meeting, or when written shareholder consents or authorizations are sought in lieu of a meeting, including the underlying analysis and research supporting such recommendations.
For 2020, ISS has changed its policy on the FPA test. Economic Value Added (EVA) will replace the GAAP metrics for the vast majority of companies. The new FPA test will generally utilize four equally weighted EVA-based metrics as defined by ISS: EVA Margin, EVA Spread, EVA Momentum vs. Sales, and EVA Momentum vs. Capital.
The selection of appropriate performance measures to use in incentive programs is a critical decision for management teams and Compensation Committees. While a company's business strategy should be the primary factor when selecting incentive plan measures, it is insightful to consider other perspectives, such as historical results and market practices. In this Viewpoint, we discuss the role that total shareholder return (TSR) correlation analysis can play in performance measure selection.
The Council of Institutional Investors (CII) provides corporate governance information to a membership of 135 asset owners including public pension funds, labor retirement funds, endowments, and corporate retirement funds with more than $4 trillion in assets under management. On September 17, 2019, CII released its latest update on executive compensation policy. The CII position paper makes numerous statements about their preferences and opinions regarding various elements of executive pay. In this Viewpoint, Pay Governance highlights CII's expressed opinions on pay for performance issues. We have also provided corresponding comments regarding certain CII policy statements.
