Equity Plan Proposals: Changes in ISS’ EPSC Evaluation

Why It Matters

The change raises the hurdle for equity compensation plans, potentially increasing shareholder dissent and reshaping corporate compensation strategies.

Key Takeaways

• ISS now overrides votes for plans scoring under seven
• Plan Features pillar lacks disclosed point breakdown
• Companies must strengthen positive plan attributes quickly
• Legal advisors can navigate EPSC complexities

Pulse Analysis

Institutional Shareholder Services (ISS) has long been a bellwether for proxy voting recommendations, and its EPSC (Equity Plan Scoring Criteria) model is a cornerstone for evaluating corporate equity compensation proposals. In December 2025, ISS introduced an additional negative overriding factor: any plan that falls below a seven‑point threshold on the Plan Features pillar may receive a recommended against vote, regardless of other favorable scores. This adjustment reflects ISS’s heightened scrutiny of plan design, yet the agency has not revealed the granular point distribution for each feature, creating a transparency gap for issuers seeking to fine‑tune their proposals.

The practical impact is immediate. Companies with modest or legacy equity plans now face a higher risk of shareholder opposition, which can delay approvals, increase advisory costs, and pressure boards to redesign compensation structures. The lack of clarity around point allocation forces issuers to adopt a more conservative approach, emphasizing universally positive features such as performance‑based vesting, broader employee eligibility, and clear alignment with shareholder interests. Failure to meet the seven‑point benchmark could translate into negative market perception, as investors interpret a recommended against vote as a signal of misaligned incentives.

Advisors and legal counsel play a pivotal role in navigating this new landscape. By leveraging deep familiarity with the EPSC framework, they can model likely score outcomes, recommend targeted plan enhancements, and pre‑emptively address potential ISS concerns. As the market adapts, we may see a wave of revised equity plans that prioritize transparency, performance linkage, and broader participation, ultimately aligning compensation more closely with shareholder value creation. Companies that proactively adjust their plans are likely to mitigate voting risks and maintain investor confidence.