ISS Issues Guidance on “Robust” Clawback Policies

On October 11, 2024, Institutional Shareholder Services Inc. (“ISS”), a leading proxy advisory firm, updated their Equity Compensation Policies Frequently Asked Questions (“FAQs”) to define what it means for a clawback policy to be “robust.”  A full link to the updated ISS guidance can be found here. 

The new FAQ provides that “[i]n order to receive credit for a ‘robust’ clawback policy in the ‘Executive Compensation Analysis’ section of the [ISS] research report, a company’s clawback policy must extend beyond minimum Dodd-Frank requirements and explicitly cover all time-vesting equity awards. A clawback policy that adheres only to minimum Dodd-Frank requirements will not be considered robust, because those requirements generally do not cover all time-vesting equity awards.”

The above guidance appears consistent with ISS’ current Equity Plan Scorecard which provides that an equity plan will not receive points under the clawback policy metric unless the policy applies to both time- and performance-based awards.

In the new FAQ, ISS indicated that a subsequent update is expected in December 2024 so, if you are a public company issuer, be on the lookout for more updates before year end.