The Advisors' Blog

– Broc Romanek

Yesterday, ISS released draft policy changes for comment in 15 areas spanning the globe (based on these survey results from constituents) – the deadline for comment is November 10th. It’s expected that ISS will release its final policies in late November (although burn rate thresholds & pay-for-performance quantitative concern thresholds are typically announced through updated FAQs in mid-December; here’s info about the ISS policy process).

For US companies, there are several significant proposals to be aware of:

Director elections:

1. Director election vote recommendations for directors at companies that impose undue restrictions on shareholders’ ability to amend bylaws:
– ISS proposes to amend its director election policy to include a provision to issue adverse vote recommendations on governance committee director elections where companies have placed “undue” restrictions on shareholders’ ability to amend the company’s bylaws.
– Examples of these restrictions include the outright prohibition on the submission of binding shareholder proposals, or share ownership requirements or holding periods in excess of SEC Rule 14a-8.
– Adverse vote recommendations will continue until the restrictions are completely lifted.

2. Director election vote recommendations for directors that have taken unilateral board actions or maintain unequal voting rights:
– ISS proposes to clarify its director election policy to state that, upon a company holding an IPO with a multi-class capital structure with unequal voting rights or other problematic governance provisions, ISS will generally issue adverse director vote recommendations unless there is a “reasonable” sunset provision on the unequal structure or the problematic provisions.
– The key change is that ISS will no longer consider the results of shareholder votes on problematic features when issuing vote recommendations; instead, ISS will only consider the inclusion of “reasonable” sunset provisions.

US-listed cross-market companies (companies listed in the US, but incorporated outside):

1. General share issuance proposals at companies listed in the US, but incorporated outside the US:
– ISS proposes to recommend in favor of general share issuance authorities up to 20 percent of currently issues capital, as long as the duration of the issuance authority is reasonable and clearly disclosed.

2. Executive compensation proposals at companies listed in the US, but incorporated outside the US:
– ISS proposes to implement, on a case-by-case basis, US policy in the evaluation of all compensation proposals on the ballots of companies listed in the US, but incorporated elsewhere.
– For proposals where there is no applicable US policy, the ISS policy from the country requiring the ballot item will be used.
– For clarification, say-on-pay proposals from most markets will be evaluated under the US Management Say-on-Pay voting policy.