Understanding the Impact of ISS’ Multiple of Median Test on Say on Pay Vote Support

Understanding the Impact of ISS’ Multiple of Median Test on Say on Pay Vote SupportZoom inDownload PDF

Our weekly Say on Pay research consistently demonstrates that vote support is, on average, meaningfully lower (28%) when Institutional Shareholder Services (ISS) recommends “against” an issuer’s Say on Pay proposal. And, while ISS will conduct a thorough qualitative review before issuing an “against” recommendation, we know that ISS’ three quantitative tests are used as a preliminary screen to determine the level of qualitative scrutiny applied. Further, ISS has reported that 80% of all “against” recommendations issued in 2014 identified one or more quantitative pay-for-performance concerns, suggesting that these initial screens can be strong predictors of the potential for an ISS “against” recommendation. Here we explore the impact of just one of these three quantitative tests – the Multiple of Median (MoM) test.