March 23, 2012
The Center On Executive Compensation has received an encouraging response to letters it sent in February to the CEOs of the 100 largest institutional investors expressing concerns about ISS’s revised pay for performance analysis and requesting a meeting with their proxy voting staffs. The letters state that ISS’s new pay for performance methodology uses inconsistent time frames for analyzing pay for performance and is overly focused on short-term pay and performance. The letters also note that “a positive by-product of the first year of say on pay was that many of the largest institutional investors have developed an independent approach to analyzing pay for performance and say on pay for 2012 that goes beyond the analyses of the proxy advisory firms.” The letters urge institutional investors to compare pay actually realized by CEOs to performance over the period during which the pay is earned rather than relying exclusively on the total pay number contained in the Summary Compensation Table, which mixes current and future potential pay. In response to the letter, the Center is holding calls with over a dozen large investors, ranging from BlackRock to Vanguard to state pension funds – and the results are encouraging. Nearly all institutional investors have expressed interest in a standardized alternative disclosure of pay for performance. The results of our calls will be summarized in a guide for Center Subscribers later this spring. In addition, the Center sent a letter to ISS President Gary Retelny, expressing our concerns about ISS’s pay for performance model and requesting a meeting to discuss its pay for performance analysis.