Proxy advisory firm Institutional Shareholder Services Inc. (“ISS”) recently issued its 2011 governance and executive compensation proxy voting policy updates (the “Updates”), effective for shareholder meetings occurring on or after February 1, 2011. Given ISS’ influence in today’s compensation and governance environment, many public companies will want to consider the Updates in evaluating whether aspects of their governance or – in particular – compensation practices should be modified, as companies gear up for the new say on pay requirements mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act. ISS’ major compensation-related policy updates include the following:

ISS will recommend a vote for annual say on pay votes, as opposed to votes every two or three years;

ISS will evaluate say on pay proposals for golden parachute compensation on a case-by-case basis;

The list of “problematic pay practices,” which ISS considers in formulating its voting recommendation for say on pay votes, has been streamlined; and

ISS will no longer accept a company’s future commitment to change a problematic pay practice as a means of preventing or reversing a negative vote recommendation.