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Proxy Access Proposals (U.S)

Background and Overview

On Sept. 20, 2011, the Securities and Exchange Commission's amendment to Rule 14a-8 providing that companies may not exclude from their proxy materials shareholder proposals for proxy access procedures took effect.  The commission lifted the stay on the amendment to Rule 14a-8 in conjunction with its decision not to appeal a decision by the D.C. Circuit Court striking down the commission's mandatory proxy access rule, Rule 14a-11.

In the wake of the commission's decision, several investors have indicated their intent to bring proxy access shareholder proposals in the coming months.

Key Changes Under Consideration

ISS' current policy on shareholder proposals asking for open or proxy access is to recommend on a Case-by-Case basis taking into account the ownership threshold proposed in the resolution and the proponent’s rationale for the proposal at the targeted company in terms of board and director conduct.

Under the proposed policy for 2012, ISS would continue to evaluate these proposals on a Case-by-Case basis in determining a vote recommendation taking into account additional factors. The proposed policy update is as follows:

Vote CASE-BY-CASE on shareholder proposals seeking proxy access, taking into account, among other factors:

  • The proponent's rationale for the proposal at the targeted company;
  • The ownership thresholds proposed in the resolution (e.g., percentage and duration);
  • The maximum number of directors that shareholders may nominate each year; and
  • The method of determining which nominations should appear on the ballot if multiple shareholders submit nominations.

Intent and Impact

The purpose of this proposed policy update is to include some of the additional factors that ISS will take into account when evaluating proxy access shareholder proposals. Although the enumerated factors are likely to be among the core features of shareholder proposals, the list is not intended to be exhaustive in ISS' evaluations.

Proxy access shareholder proposals were last seen in 2007, when Hewlett-Packard (42 percent support), UnitedHealth Group (45 percent support), and Cryo-Cell International (majority support) were the targets of such proposals. The impact of this proposed policy update is unknown. The number of proposals that will appear on company ballots in 2012 and the level of specificity those proposals will entail remain to be seen.

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 intend to generally support or oppose proxy access shareholder proposals? Would your organization’s view differ based on whether the proposal is a binding bylaw resolution versus a precatory (non-binding) one? If so, how?   
  • If your organization is likely to take a Case-by-Case approach on proxy access shareholder proposals, are there any additional factors not enumerated in ISS' proposed policy that your organization believes are central to the evaluation of these proposals? If yes, please specify.
  • Would your organization look for specific thresholds or limits when evaluating these shareholder proposals (e.g., a minimum or maximum ownership percentage or number of board seats)?  If yes, what specific parameters does your organization favor?
  • Would your organization oppose the shareholder proposal if it allowed 13D filers seeking a change in control to place candidates on ballots? If no, please explain.

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.