November 23, 2015
ISS Releases 2016 Policy Updates
– Broc Romanek, CompensationStandards.com
On Friday, ISS issued its 2016 policy updates. As noted in this press release, key US policy updates include changes to the director overboarding policy (we’re posting memos in our “ISS Policies” Practice Area):
– For most directors except for standing CEOs, maximum number of public company boards that a director can sit on before being considered “overboarded” reduced from six to five.
– There will be a one-year grace period until 2017, giving directors and companies sufficient time to make any changes in advance of the 2017 proxy season.
– During 2016, ISS research reports will highlight if a director is on more than five public company boards, but adverse voting recommendations will not be issued under this new overboarding policy unless the current maximum of six boards is exceeded.
– For CEOs, the current overboarding limit will remain at two outside directorships.
For board actions that significantly reduce shareholder rights without approval by shareholders (so-called unilateral board actions), the policy is being updated to distinguish between (1) unilateral board adoptions of bylaw or charter provisions made prior to or in connection with a company’s IPO and (2) unilateral board amendments to those documents made after the IPO.
On executive pay and transparency, the “Problematic Pay Practice” policy will be updated to add “Insufficient Executive Compensation Disclosure by Externally Managed Issuers (EMIs)” to the list of practices that may result in an adverse voting recommendation on executive compensation. This will apply when an EMI fails to provide sufficient disclosure to enable shareholders to make a reasonable assessment of compensation arrangements for the EMI’s named executive officers.