Newly-Sold ISS Publishes 2018 Policy Survey Results Detailing Investor Pay Ratio Interest

Executive Pay Legislation and Regulation

Weeks after being sold to a new private equity firm, proxy advisory firm ISS published the results of its 2018 policy survey, which included questions about the pay ratio and which show some investor interest in the soon-to-be required disclosure.  The survey, which covered a wide range of issues throughout ISS's global markets, was answered by 129 investors, 121 of which were institutional investors, and 469 "non-investor" responses, 382 of which were corporate issuers.  The survey found the following with respect to the pay ratio:

• Nearly three quarters of investor respondents reported that they would use the pay ratio to compare ratios across companies/industry sectors or assess year-on-year changes in a ratio at an individual company, with 63 percent of investors noting that they would use the ratio for both purposes.
  
  
• Only 16 percent of investors indicated they did not plan to use the ratio with another 12 percent adopting a "wait-and-see" approach.
  
  
• Among the non-investor respondents, 44 percent stated there would be no use for the data.  ISS points out, interestingly, that "[n]otably" 21 percent of non-investors would "compare ratios across companies/industry sectors or assess year-on-year changes in a ratio at an individual company."  It is likely that many, if not most of these respondents will compare their own ratio against peers or across their own timeline to prepare external and internal communications strategies or even calculation methodologies.

The survey responses may be explained by the fact that the first pay ratio disclosures will appear next year and investors are likely to at least look at the information.  The results also indicate that ISS will continue to evaluate how to use the pay ratio as part of its research analysis.  That analysis (or any product based on it), however, will be developed under new ownership as ISS was recently sold by its prior private equity firm owner, Vestar Capital Partners to Genstar Capital for $720 million.  In a press release announcing the sale, ISS stated the firm "will continue to operate independently once the transaction is completed and the current ISS executive leadership team will remain in place."  This is the fifth time in the last fifteen years ISS has been sold.