As
we head into proxy season and many of you begin preparing to submit
stock plans to shareholder votes, it might be helpful for you to know
that RiskMetrics (formerly ISS) has issued updates to its corporate
governance policy for 2009.  For the most part, the updates seem fairly
light with respect to stock compensation (unlike in past years--see our
practice alerts on ISS's 2005, 2007 and 2008 updates).

Burn Rates

As usual, RiskMetrics updated the burn rates they
consider acceptable for stock plans.  RiskMetrics will recommend voting
against stock plans if a company's burn rate exceeds their published
guidelines.  For the most part, the acceptable burn rates seem to have
increased. For Russell 3000 companies, the only industries where
acceptable burn rates decreased were Commercial Services &
Supplies, Consumer Services, Health Care Equipment & Services, and
Real Estate.  Non-Russell 3000 companies saw decreases in acceptable
burn rates in the Materials, Automobiles & Components, and
Retailing industries.

In addition, RiskMetrics indicates that they are now using a 400-day
volatility to determine the acceptable burn rates (rather than a
200-day volatility they've used in the past).  Wondering how volatility
figures into a burn rate calculation?  When calculating burn rates,
Riskmetrics applies a premium to full value awards based on the
company's volatility (e.g., for companies with a volatility of 54.6% or
higher, each share granted under a full value award counts as 1.5
shares in RiskMetrics burn rate calculation). 

Paying Dividends on Performance Awards

The policy takes a position against paying dividends (or
equivalents) on unvested performance-based stock awards.  Where
companies have stock plans that provide for this, RiskMetrics may
recommend withholding votes or voting against the company's directors
or may recommend voting against the company's stock plans.

It seems like this could be significant for NASPP member companies that pay dividends.  According to our 2007 Stock Plan Design and Administration Survey
(co-sponsored by Deloitte), 45% of respondents pay dividends on their
performance share plans and 42% pay dividends on performance unit plans.

more...  http://www.naspp.com/blog/2009/01/issriskmetrics-policy-updates.html