Institutional Shareholder Services Releases 2012 Proxy Voting Policies

Focus on U.S. Pay-for-Performance, European Equity-Based Remuneration, and Japanese Board Independence

Rockville, MD - November 17, 2011 – Institutional Shareholder Services Inc. (ISS), a leading provider of corporate governance solutions to the global financial community, today released 2012 updates to its U.S., Canadian, European, and international benchmark proxy voting guidelines.

These global updates are the culmination of an extensive consultation process that included outreach to and input from institutional investors and corporate issuers worldwide. ISS analysts will begin applying the updated policies to all publicly-traded companies with shareholder meetings on or after February 1, 2012. To learn more about the policy updates, please visit the ISS Policy Gateway.

To ensure its voting policies take into consideration the perspectives of the corporate governance community and the views of its institutional clients, ISS gathers broad input each year from institutional investors, issuers, and other market constituents through policy surveys, issue-specific roundtables, and an open comment period. ISS is the only corporate governance and proxy voting advisor that undertakes such a broad, transparent, and inclusive process to gather, assess, and incorporate market feedback into its institutional proxy voting policies, and ISS remains committed to this approach.

"ISS firmly believes that incorporating multiple views on corporate governance issues is critical for effective policy formulation," said Martha Carter, ISS' Head of Global Research. "It was helpful to hear from both investors and issuers as we developed a more robust pay-for-performance policy and evaluated how we will assess board responsiveness to say-on-pay votes."

One of the most significant updates is ISS’ revised U.S. pay-for-performance policy. During the policy process, both clients and issuers indicated, in particular, that pay-for-performance alignment should be viewed in a long-term context rather than the most recent year. In light of this guidance, ISS’ new approach will provide clients with a more robust view of the relationship between executive pay and company performance over a sustained time horizon. Specifically, ISS will consider the relative alignment between the company's total shareholder return and the CEO’s total pay rank within a peer group, as measured over one and three years, as well as absolute alignment (the alignment between CEO pay and a company’s share return over the prior five years). If alignment appears weak, further in-depth analysis will determine if there are mitigating factors.

ISS strives to make its policies as transparent as possible. ISS will provide additional guidance on its pay-for-performance methodology in December 2011. ISS also intends to disclose its peer group methodology and rationale, allowing investors and issuers to understand how peer groups are constructed by ISS.

Other key policy updates include:

Board responsiveness to earlier say-on-pay votes: In line with investor feedback, ISS will make recommendations on a case-by-case basis on compensation committee members and the management say-on-pay proposal if the company's previous say-on-pay resolution received less than 70 percent support from all votes cast, taking into account the company's response; disclosure of engagement with major investors; specific actions taken to address the compensation issue(s) that caused the significant dissent; whether the issue(s) raised is recurring or one-time; and the company's ownership structure. Cases where support was less than 50 percent will warrant the highest degree of responsiveness.
Proxy access: While the revised policy remains case-by-case, ISS will expand the factors that will be examined. ISS will consider various company-specific and proposal-specific aspects, including the ownership thresholds proposed (i.e., percentage and duration); the maximum proportion of directors that shareholders may nominate each year; and the method of determining which nominations should appear on the ballot if multiple shareholder groups submit nominations.
European equity compensation: ISS will adopt France-specific guidelines that include: an increased focus on performance criteria in line with local best practice; an increase in the allowable volume of capital that could be reserved for equity plans to 10 percent of share capital; and the introduction of a burn rate criterion to measure use of capital.
Board independence in Japan: ISS will recommend against a company's top executive if the board does not include at least one outside director. In light of existing substandard industry practices, no negative recommendations under this policy will be made until 2013.

On December 6, at 2:30 p.m. GMT (3:30 p.m. CET), ISS will host a webcast to review its European policy updates. On December 7, at 11:00 a.m. EST, ISS will conduct a webcast to discuss its U.S. policy updates. These webcasts also will provide valuable insight about the key corporate governance issues facing investors and companies in 2012. To register for these webcasts, please click here. Also in December, ISS will release its Global Policy Summary and Concise Guidelines.

About ISS

ISS, founded in 1985 as Institutional Shareholder Services Inc., is the world's leading provider of proxy advisory and corporate governance solutions to financial market participants. ISS' services include objective proxy research and analysis, end-to-end proxy voting and distribution solutions, turnkey securities class-action claims management, and reliable governance data and modeling tools. More than 1,700 clients rely on ISS' expertise to help them make informed corporate governance decisions. ISS is located in financial centers worldwide and is a subsidiary of MSCI Inc., a leading provider of investment decision support tools to investors globally. For more information, please visit www.issgovernance.com.

ISS Media Contacts

Cheryl Gustitus
cheryl.gustitus@issgovernance.com
+1.301.556.0395

Sarah Ball
sarah.ball@issgovernance.com
+44.207.618.2275

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