ISS vs. Nucor’s Ghost

Posted by Marc Hodak on August 5, 2014 under Executive compensation, Governance | Be the First to Comment

Just published in Directors & Boards.  The summary:

Nucor’s classic incentive plan contained three elements:

1)  A fixed share of profit growth…

2)  …without limit

3)  Annual grant of standard stock options

The company was enormously successful because of this plan.  It looks like everything that shareholders care about is imbedded in this plan.  Empirical evidence strongly supports these plan elements as being good for shareholders.

Yet none of them would pass muster with ISS today.

So, if you’re a director of a public company, and you know what reason and evidence suggest, and you had a choice between adopting a Nucor-style plan or hewing to ISS’s standards, what would you do?

Unfortunately, we know what they are doing, and that it is hurting the value of public companies.