As
previously discussed, ISS elected to release two surveys for upcoming 2022 policies, a climate related survey and its standard global benchmark policy survey including executive compensation concerns. The
Center submitted comments to the questions related to executive compensation which generally advocated the policy advisor avoid one-size-fits-all policies.
ISS has published the results of the benchmark survey
here and the climate results
here. Highlights include the following.
Use of ESG Metrics in Incentives:
- 52% of investors supported the use of ESG metrics if the metrics are specific, measurable, and transparent.
- 34% of investors believe ESG metrics that are not measurable can be effective in incentive plans if they are tied to positive outcomes.
- Only 4% of investors felt ESG metrics should not be used.
- 81% believed ESG metrics can be appropriate in both long-term and short-term incentives.
- 15% selected only long-term incentives and 1% selected only annual incentives.
Racial Equity Audits:
- 44% of investors feel most companies would benefit from an audit regardless of the existence of diversity programs or any racial equity controversies.
- 47% felt an audit should be determined by the specific circumstances.
Long-term Incentives:
- 85% of investors supported a longer-term data point on the CEO Pay Quantum screen (pay versus the ISS peer-group media) in addition to the current annual measure.
- 53% feel that mid-cycle changes to equity incentives should be viewed as problematic (read: may drive an adverse vote recommendation regardless of other factors).
- 40% felt that such changes may be reasonable if the company has faced long-term, negative impacts from the pandemic.
The climate survey did not contain policies regarding links between climate risk reduction and executive compensation. It did show that investors strongly support meaningful disclosure with clear data on emissions and expect demonstrated improvements.
For the results presented above, ISS is unlikely to dramatically shift its existing policies. They will likely be supportive of ESG metrics in incentives but as mentioned in a separate story, it is not clear that the use of non-financial ESG metrics in years of under-performance will meet with investor approval. One important point to highlight on ISS surveys is that each investor is counted as one vote. High support on ISS policies in a survey may not be correlated with support for similar votes at annual meetings.
