As reported in my October 24, 2014 post, Institutional Shareholder Services Inc. (“ISS”), a leading proxy advisory firm, has adopted a new “scorecard” approach to evaluating public company equity compensation plans.  In a recent set of FAQs, ISS offers additional guidance on how it will apply the new scorecard when analyzing equity plan proposals made on or after February 1, 2015.

Among other things, the FAQs clarify that regardless of other scorecard factors, the following equity plan features will continue to result in an “against” vote: (i) a liberal change in control definition that could result in vesting of awards by any trigger other than a full double trigger, (ii) provisions that permit the repricing and/or cash out of underwater options or stock appreciation rights without shareholder approval, (iii) provisions that make a plan a vehicle for problematic pay practices or create a pay for performance disconnect, and (iv) any other plan features that are detrimental to shareholder interests which may include tax gross-ups or reload options.

Importantly, the FAQs also clarify that equity plan proposals that only seek to ensure tax deductibility of awards under Section 162(m) of the Internal Revenue Code will generally receive a favorable recommendation from ISS regardless of other scorecard factors as long as the issuer’s compensation committee is 100% independent according to ISS independence standards.

The entire set of FAQs can be found here.