As previously reported, ISS had recommended a no vote for executive compensation for Tyco International. Tyco’s efforts resulted it in decidedly beating ISS, with 70% of its shareholders voting to approve Tyco’s compensation plans.
The initial implications are huge. Is this a harbinger that ISS’ consultants are under-qualified and issue error ridden recommendations, or that institutional investors do not back ISS’ non-market based recommendations?
Tyco stated ISS’ premise was that Tyco’s executive compensation program does not align the pay of its CEO with company performance. Tyco believed this is clearly not the case. Tyco noted that first and foremost, from year to year, well over half of its CEO’s compensation is delivered in the form of performance-based long-term equity awards and annual incentive compensation. That reflects the Compensation and Human Resource Committee’s philosophy of placing the largest component of executive officer compensation in alignment with shareholder returns.
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