November 2, 2016
Governance Ratings: ISS Tweaks “QualityScore” & Verification Has Begun
– Broc Romanek
A few days ago, ISS announced the latest release of its governance ratings product – which also was renamed to “QualityScore” from “QuickScore.” Here’s the 139-page technical document. Not much new in the executive pay area – here’s one:
Does the company employ at least one metric that compares its performance to a benchmark or peer group (relative performance)? This factor will consider whether the company has a pre-established metric in any short- or long-term incentive plan that is measured relative to an external group such as a peer group, index or competitors.
In addition to board diversity and board refreshment areas being added, one area that appears to have been updated involves proxy access – with subscribers now being able to view the details of a company’s proxy access bylaw provision.
Last year, ISS included a question on proxy access, but that was “zero weighted” & was included for informational purposes only. This year, it counts. The QualityScore will give credit to a company for having proxy access – but the existence of any “problematic provisions”- e.g. counting mutual funds under common management as separate shareholders under the aggregation limit, requiring a pledge to hold shares past the annual meeting date, providing the board with broad & binding authority to interpret the proxy access provision or combinations of other problematic provisions – could be deemed sufficient to “nullify the proxy access right” & result in no credit being given. See this Gibson Dunn blog for a larger summary of the changes.
As noted in this blog from Davis Polk’s Ning Chiu, the data verification period began yesterday – and runs through November 11th. QualityScores will be published on November 21st.
By the way, with this rebranding to “ISS QualityScore,” it now has made more name changes than Jefferson Airplane. My favorite was GRid 2.0…although CGQ was nice…