ISS Publishes Guidance on Pay-for-Performance Assessments and Updates to Governance Ratings System: Provides Additional Detail on Measuring Relative and Absolute Alignment Between CEO Pay and Total Shareholder Return; Update to GRId Ratings System Adds Numerous New Elements to Governance Scoring in Compensation and Other Areas

Sullivan & Cromwell LLP - December 22, 2011

Institutional Shareholder Services, the influential proxy advisory firm, issued two publications this week that U.S. public companies should be aware of in connection with year-end compensation and governance planning, proxy statement drafting and investor relations.  First, ISS has published a technical document containing additional detail as to how it will assess pay-for-performance alignment for purposes of recommending votes on 2012 say-on-pay advisory votes.  Second, ISS has issued a comprehensive update to its Governance Risk Indicator, or GRId, ratings system, adding dozens of new questions designed to probe a company’s governance practices in a more detailed way.

Companies should review these documents and consider any impact they may have on the expected level of support for the company’s 2012 say-on-pay proposal or on the company’s GRId ratings for 2012.