In “Changes to GICS Code Classification System to Take Effect in 2023,” Compensia describes changes to the GICS (Global Industry Classification Standard) structure that become effective on March 17, 2023, and potential ISS compensation-related voting recommendation implications for companies. The changes, which are summarized in this S&P Dow Jones Indices/MSCI press release, generally affect companies currently classified as Retailers, Data Processing & Outsourced Services, Thrifts & Mortgage Finance (within the Banks Industry Group), REITs, and the Trucking Sub-Industry (in Transportation).
Compensia anticipates a likely impact on many Internet and e-commerce companies. Among other things, the Internet & Direct Marketing Retail classification will be discontinued in favor of company classifications based on the nature of goods sold due to the blurring of brick & mortar and online sales channels.
Compensia anticipates that the GICS structure changes may impact ISS's review and analysis of company compensation-related proposals and other analytics in these areas:
- Construction of peer groups that it uses to formulate vote recommendations on say-on-pay and other compensation-related proposals
- Review of the compensation arrangements for the non-employee directors relative to the competitive market for purposes of identifying "excessive compensation" practices
- Review of new or amended employee stock plans to determine the shareholder value transfer and gross burn rate relative to companies with similar GICS classifications
- Calculation of a company's "QualityScore," which considers specific corporate governance and executive compensation-related policies and practices relative to GICS-based industry norms
The current GICS structure consists of 11 sectors, 24 industry groups, 69 industries, and 158 sub-industries. The new structure will consist of 11 Sectors, 25 Industry Groups, 74 Industries and 163 Sub-Industries.
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This post first appeared in the weekly Society Alert!