- Peer Group Selection: Prior to the revisions, Glass Lewis used a proprietary peer group selection model based on GICS code, enterprise value and location; from July 1, peer groups will be limited to a maximum of 30 companies and will be determined using Equilar’s new market-based “peer of peers” methodology. Glass Lewis will identify the Equilar peers used and compare these to the company’s self-disclosed peer group in each report.
- Definition of Pay: Instead of comparing 1-year total compensation for the CEO and other NEOs, Glass Lewis will now use a 3-year weighted average total compensation in its pay for performance analysis (the components of pay included remain unchanged).
- Definition of Performance: Glass Lewis will continue to consider a 3-year weighted average of performance but will reduce the number of performance metrics from 7 to 5, eliminating “change in stock price” and “change in book value per share” from the list.
- Grading System: Prior to the revisions, Glass Lewis assigned a final pay for performance “grade” based on a forced bell curve for each company’s universe of peers; from July 1, this grade will be based on each company’s relative positioning versus its peers, focusing on the actual gap between performance and compensation relative to peers.
ISS is also expected to announce changes it is making to its process for the 2013 proxy season shortly in its annual policy survey.