ISS Policy Change re Section 162(m) Equity Plan Proposals
By Amy Muecke
Recently, I learned that ISS has made a mid-proxy season policy change that may affect vote recommendations for equity plans submitted to stockholders solely for purposes of Section 162(m) approval. Historically, ISS has always supported these proposals agreeing that it is in the best interests of the stockholders for the company to be able to grant awards under a plan that satisfies the 162(m) requirements for performance-based compensation that is excludable from the $1M deductibility limitation.
Effective immediately, ISS will no longer automatically support Section 162(m) proposals submitted by "IPO companies" – that is, companies whose public company stockholders have not previously approved their equity plans. Instead, ISS will further analyze the plan and proposal to determine whether any problematic features are more detrimental than the potential loss of tax deductions and if so, ISS will recommend voting against the proposal.
Going forward, ISS signaled that it also may also further scrutinize Section 162(m) proposals submitted by non-IPO companies (i.e., companies whose public company stockholders have previously approved their plans), but it suggested that this year it is primarily concerned with Section 162(m) plans submitted by IPO companies.
If you have any questions about this ISS policy or how to determine whether the ISS vote recommendation is likely to influence the success of a specific company's proposal, please feel free to contact Amy Muecke or Thomas Welk.