| New SEC Disclosure Requirements |
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| 1.
What changes have been made to the executive compensation section? Back to Top |
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| If a company has filed under the new disclosure rule requirements, the executive compensation section has expanded to reflect the various compensation elements such as non-equity compensation, equity compensation and change in pension values. In addition to compensation data, CEO directorship(s) at other publicly-traded companies is disclosed under CEO Stats. Information on whether the company grants performance-based equity to any of the named executive officers is disclosed under CEO Stats. Compensation for the CFO and the aggregate remaining three named executive officers is disclosed in a separate table. |
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| 2.
Will the charts reflect CEO compensation for the past three years? Back to Top |
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| For 2007, the charts will not reflect CEO compensation for the past three years due to the new disclosure requirements. However, by 2009, CEO compensation for the past three years will be shown. For the transition period, a chart showing the CEO’s last fiscal year total compensation, as disclosed under the previous SEC disclosure rules will be presented at the end of the executive compensation section. |
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| Determining Peer
Companies |
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| 1.
How are peer companies determined? Back to Top |
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| Peer companies are determined using a standard methodology based on revenues and Global Industry Classification Standard (GICS) classifications and are not selected by Equilar. For each company, the methodology identifies 12 peer companies closest in revenue at fiscal year end within the same 6-digit GICS category. If insufficient companies are compiled in the 6-digit GICS category, peer companies will be added from the company’s 4-digit GICS category. |
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| 2.
What are GICS codes? Back to Top |
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| The Global Industry Classification Standard (GICS) is a collaboration between Standard & Poor's and Morgan Stanley Capital International. GICS codes correspond to various business or industrial activities, such as Oil & Gas Drilling or Wireless Telecommunication Services. GICS is based upon a classification of economic sectors, which can be further subdivided into a hierarchy of industry groups, industries and sub-industries. |
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| 3. Is the list of peer companies disclosed in the ISS proxy analysis? Back to Top |
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| Starting in 2007, the list of peer companies is disclosed in one of the footnotes in the executive compensation section. |
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| 4. Who can I contact if I disagree with the GICS classification? Back to Top |
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| ISS does not classify companies into the GICS codes. Please contact Standard & Poor’s at 1-800-523-4534 if you would believe that a company has been misclassified. |
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| 5. Why is the median peer group calculation zero? Back to Top |
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| Most companies will be required to file under the new SEC rules on compensation in 2007. Since companies file their proxy statements at different times during the year, it is possible that some peer companies are still filing under the former disclosure rules or that their proxy statements will be filed at a later day. For 2007, if less than eight peer companies have filed under the new rules the median peer group calculation for the respective pay components and company financials will not be displayed. If eight or more companies have filed under the new rules, the median peer group calculation will be displayed. |
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| Listing Named Executive Officers |
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| 1. How many named executive officers’ total compensation is shown in the executive compensation section? Back to Top |
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| The executive compensation section will reflect the same number of named executive officer’s total compensation as disclosed in a company’s proxy statement. However, if six or more named executive officers’ total compensation has been disclosed, only five will be shown in the section. |
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| 2. A company’s CEO has resigned and there is a new CEO in place. Why does the executive compensation section continue to show the former CEO’s total compensation and not that of the current CEO’s? Back to Top |
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If the former CEO has been with the company for at least 11 months for the past complete fiscal year, his/her total compensation will be reflected in the analysis. The new CEO pay data is likely to be shown in next year’s ISS proxy analysis. |
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| Executive Compensation |
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| 1.
How does Equilar calculate Total Direct Compensation for ISS under the former SEC disclosure rule? Back to Top |
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| Total
Direct Compensation = Cash Compensation + Long-Term Awards + Other
Compensation |
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Cash
Compensation = Salary + Bonus |
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Salary
– base salaries have been annualized for executives that joined
mid-year. |
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Bonus
– as stated in the Summary Compensation Table. |
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Long
Term Awards = Grant Date Present Value of Options + Restricted Stock
+ LTIP Payouts |
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Grant
Date Present Value of Options – as calculated by Equilar; please see
Black-Scholes
Formula. |
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Restricted Stock – nominal value as stated in the Summary
Compensation Table. |
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LTIP
Payouts - nominal value as stated in the Summary Compensation
Table. |
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Other
Compensation |
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Other
Annual Compensation - as stated in the Summary Compensation
Table. |
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Other
Compensation - as stated in the Summary Compensation
Table. | |
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| 2. How does Equilar calculate Total Compensation for ISS under the new SEC disclosure rule? Back to Top |
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| Total Compensation = Base Salary + Bonus + Non-equity Incentive Plan Compensation + Stock Awards (full grant date value) + Option Awards (full grant date value as calculated by Equilar) + Change in Pension Value and Nonqualified Deferred Compensation Earnings + All Other Compensation |
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Stock Awards – Grant date value as reported in the Grants of Plan-Based Awards Table for any stock awards. If the grant date value is not reported, the number of target units/shares multiplied by the closing stock price on the grant date will be calculated. |
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Option Awards - Grant date present value of options using Black-Scholes Option Pricing Model as calculated by Equilar. |
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| 3.
What is Equilar's Black-Scholes methodology? Back to Top |
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| Variable |
Item |
Source |
Comments |
| C |
Option Value |
Calculated |
N/A |
| S |
Stock Price |
Proxy |
N/A |
| E |
Exercise Price |
Proxy |
N/A |
| σ |
Volatility |
SunGard |
Historical
three-year stock price volatility measured on a daily basis from the
date of grant. If a company has not been publicly traded for at
least three years, we measure volatility from the IPO date through
grant date. |
| q |
Dividend Yield |
SunGard |
Cumulative
dividends for the 12 months prior to the option grant date divided
by stock price (adjusted for stock splits over the
period). |
| r |
Risk Free Rate |
SunGard |
U.S.
Government Bond Yield on the date of grant corresponding to the term
of the option. For example, if the option has a 10-year term, the
risk free rate is the 10-year U.S. Government Bond Yield on the date
of grant. |
| t |
Term/Expected Life |
Proxy |
Full term
of the option. |
| e |
Base of Natural
Logarithm |
N/A |
N/A |
| ln |
Natural Logarithm |
N/A |
N/A |
| N(x) |
Cumulative Normal Distribution
Function |
N/A |
N/A | |
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| 4. Why is the stock awards figure different from the company’s disclosed figure under the new SEC disclosure rule? Back to Top |
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| The stock awards figure in the executive compensation section shows the full grant date value rather than the amortized value over the requisite period. The full grant date value is reported in the Grants of Plan-Based Awards table. If the full grant date value is not reported, the target number of units/shares under equity incentive plan is multiplied by the closing stock price on the grant date. |
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| 5. Why is the option awards figure different from the company’s disclosed figure under the new SEC disclosure rule? Back to Top |
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| The option awards figure in the executive compensation section is the estimated present value of options calculated using Black-Scholes Option Pricing Model under full-term assumptions. See question number three under Executive Compensation for the detailed Black-Scholes methodology. |
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| 6. Why is the total compensation figure different from the company’s reported figure? Back to Top |
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| All pay elements, with the exception of stock awards and option awards, are taken from the company’s most recent proxy statement. The stock awards figure is the full grant date fair value as disclosed in the Grants of Plan-Based Awards Table and the option awards figure is calculated under full-term assumptions using Black-Scholes Option Pricing model. Another possible difference could be due to base salary of a newly-hired or appointed executive who join mid-year. |
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| 7.
Are salaries annualized? Back to Top |
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| Equilar annualizes salaries for all
executives who join mid-year. Wherever possible, Equilar attempts to take
salary figures directly from the employment agreement or offer letter.
When this is not available, we calculate an annualized base salary based
on the executive's start date and the fiscal year end date. If a specific
date is not disclosed, we assume the start date is the middle of the month
in which the executive joined. |
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| 8. Is ISS calculating the year-over-year change in total direct compensation in 2007? Back to Top |
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| The SEC disclosure rule requirements on executive and director compensation are distinctly different starting in 2007 for most companies. A comparison of total compensation between the new rule and old rule would not produce a meaningful result as the new rule requires expansive information on all forms of compensation. Therefore, a year-over-year change in total direct compensation will not be performed in 2007 but will be calculated in subsequent years. |
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| 9. Does the pay-for-performance policy still apply in 2007? Back to Top |
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| Yes. ISS will continue to pay close attention to companies that have negative one-year and three-year total shareholder returns. While the year-over-year change in total direct compensation will not be displayed in the executive compensation section, ISS will sum the following pay components for the previous fiscal year: base salary, bonus, present value of stock options, restricted stock and LTIP payouts and compare against the following pay compensation for the current fiscal year: base salary, bonus, stock awards (as disclosed in the Grants of Plan-Based Awards table), option awards (as calculated by Equilar) and non-equity incentive plan compensation. In cases where there is an increase in pay from the previous year, ISS will review the company’s compensation discussion & analysis report and any narrative disclosure to gain a further understanding of the pay increase. |
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| Financial Data: Total Shareholder Return and Revenue |
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| 1. Where does ISS obtain a company’s 1-year fiscal total shareholder return, 3-year fiscal total shareholder return and revenue? Back to Top |
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| ISS obtains all financial data in the executive compensation section from Standard & Poor’s Research Insight. |
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| 2. How does Research Insight calculate 1-Year fiscal Total Shareholder Return (TSR)? Back to Top |
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| The one-year total shareholder return is the annualized rate of return reflecting price appreciation plus reinvestment of monthly dividends and the compounding effect of dividends paid on reinvested dividends over a one-year period. |
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| 3. How does Research Insight calculate 3-Year fiscal Total Shareholder Return (TSR)? Back to Top |
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| The three-year total shareholder return is the annualized rate of return reflecting price appreciation plus reinvestment of monthly dividends and the compounding effect of dividends paid on reinvested dividends over a three-year period. |
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| 4. How does Research Insight calculate company revenue? Back to Top |
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| Revenue is the gross sales (the amount of actual billings to customers for regular sales completed during the period) reduced by cash discounts, trade discounts, and returned sales and allowances for which credit is given to customers. |
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| 5. How does Research Insight calculate company net income (loss)? Back to Top |
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| Net income or loss is reported by a company after expenses and losses have been subtracted from all revenues and gains for the fiscal period including extraordinary items and discontinued operations. |
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| 6. Why is the CEO pay as percent of a company’s revenue showing NA? Back to Top |
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| If a company’s revenue is zero or negative, the CEO pay as percent of a company’s revenue will be NA. |
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| 7. Why is the CEO pay as percent of a company’s net income showing NA? Back to Top |
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| If a company’s net income is zero or negative, the CEO pay as percent of a company’s net income will be NA. |
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| Additional Questions |
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| 1.
Who can I contact if I have additional questions? Back to Top |
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| Please contact ISS for any policy and methodology questions. |
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