ISS has issued a series of 26 FAQs on its Equity Plan Scorecard, or EPSC. The basic EPSC policy has not changed, but effective for meetings as of Feb. 1, 2016, the FAQs state the following adjustments will apply to EPSC evaluations:
- The “IPO” model is re-named “Special Cases,” to analyze companies with less than three years of disclosed equity grant data (generally, IPOs and bankruptcy emergent companies).
- In addition, a new Special Cases model that includes grant practice factors other than burn rate and duration will apply to Russell 3000/S&P 500 companies. Maximum pillar scores for this model are as follows:
- Plan Cost: 50
- Plan Features: 35
- Grant Practices: 15
- The Plan Features factor “Automatic Single-Trigger Vesting” is renamed “CIC Vesting,” with the following scoring levels:
- Full points if plan provides for: with respect to outstanding time-based awards, either no accelerated vesting or accelerated vesting only if awards are not assumed/converted; AND with respect to performance-based awards, either forfeiture or termination of outstanding awards or vesting based on actual performance as of the CIC and/or on a pro-rata basis for time elapsed in ongoing performance period(s).
- No points if plan provides for: automatic accelerated vesting of time-based awards OR payout of performance-based awards above target level.
- Half points if plan provides for any other vesting terms related to a CIC.
- The period required for full points with respect to the Post-Vesting/Exercise Holding Period Plan Feature is 36 months (versus 12 months previously) or until employment termination; half of full points will accrue for a holding period of 12 months.
- Additionally, certain factor scores have been adjusted, per ISS’ proprietary scoring model. The maximum of 100 total points and threshold of 53 points to receive a favorable recommendation (absent egregious factors) are unchanged.
ISS has also updated its governance scoring product referred to as QuickScore. In the United States, QuickScore subscribers will now be able to determine whether portfolio companies across the Russell 3000 allow for proxy access, or investors’ ability to nominate corporate board members. For this iteration of QuickScore, the factor is being provided for screening purposes only and will not be scored.
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