Board Nominee Disclosure (Global)

Background and Overview

Although lack of nominee disclosure remains market practice in several countries, this significantly disenfranchises shareholders’ voting by proxy. Nonetheless, global disclosure practices have noticeably evolved in recent years: In Brazil, the largest market in Latin America, detailed disclosure is now mandatory. In Europe, the introduction of the EU Shareholder Rights Directive has improved nominee disclosure practices among member states.Due to legislative changes published at the end of 2011 in Turkey, companies must now provide the names of independent director candidates prior to their General Assemblies.

ISS generally recommends a vote against the election of directors across global markets if disclosure of nominee names has not been provided in a timely manner, with some exceptions – Eastern Europe (excluding Russia) and Middle East/North Africa – based on local market practices.Over the past few years, ISS has also recommended votes against the election of directors at Latin American and Turkish companies that do not disclose nominee information only if these companies are part of their country's main-equity index. However, institutional ownership of non-index companies has increased substantially, making such differentiation less practical.

According to ISS’ 2012-2013 policy survey, more than 76 percent of institutional investors indicated that they would vote against the election of directors at all companies in Latin America, Eastern Europe, and the Middle East/North Africa for failure to disclose nominee names.

Key Changes under Consideration

ISS' proposed policy in 2013 will be to recommend AGAINST the election of directors at all companies if nominee names are not disclosed in a timely manner prior to the meeting. The policy would include a one-year grace period for Poland and for non-index Turkish companies during which ISS would include warning language in our research reports; the policy would be fully implemented in these markets in 2014.

Intent and Impact

The proposed policy would be better aligned with global best practices and the growing expectations of institutional investors. Furthermore, the proposed one-year grace period would allow Turkish companies sufficient time to adapt to recent regulatory changes; it would also communicate the upcoming policy change to companies in Poland, where ISS’ current policy does not differentiate between index and non-index issuers.

Note that ISS has already been recommending AGAINST director elections due to non-disclosure at main-index companies in some markets. While the proposed policy could result in nearly 100-percent AGAINST votes in these markets, that will be mostly due to the inclusion of smaller, non-index issuers.

Request for Comment

Please feel free to add any additional information or comments on the proposed policy change.  In addition, ISS is specifically seeking feedback on the following:

  • Does your organization believe that lack of nominee disclosure is acceptable in any emerging market? If yes, please specify which market.
  • Does your organization agree with ISS’ proposed one-year grace period for implementing the policy for Poland and Turkey?

To submit a comment, please send via e-mail to policy@issgovernance.com. Please indicate your name and organization for attribution. While ISS will consider all feedback that it receives, comments will not be published without attribution.

All comments received will be published as received, unless otherwise requested in the body of the e-mail submission.