Bylaw Amendment Restriction Policy Adopted in U.S., ISS to Recommend Opposing Unaccountable Advisory Posts in Japan
ROCKVILLE, MD (November 8, 2016) – Institutional Shareholder Services Inc. (ISS), the leading provider of governance and responsible investment solutions to the global financial community, today released 2017 updates to its benchmark proxy voting policies for the Americas, EMEA, and Asia-Pacific regions. The updated policies will generally be applied for shareholder meetings on or after Feb. 1, 2017.
To ensure its voting policies take into consideration the views of its institutional clients, as well as the perspectives of the broader corporate governance community, ISS gathers input each year from institutional investors, companies, and other market constituents worldwide through a variety of channels and mediums.
Key U.S. benchmark policy changes for 2017 include the adoption of a new policy to recommend withholding support for members of a company’s governance committee if the company’s charter imposes undue restrictions on shareholders’ ability to amend the bylaws. Separately, ISS’ policy on the assessment of newly-public companies with adverse governance features, including multi-class share structures with unequal voting rights, will now consider whether the adverse features are subject to a sunset provision when determining if those provisions would impact vote recommendations on the company’s directors.
In Canada, ISS is adopting a new policy on director compensation that will recommend opposing problematic non-employee director pay practices that include but are not limited to: excessive inducement or one-time initial equity grants to directors upon joining the board; performance-based equity grants to non-employee directors, and other significant problematic practices relating to director compensation.
Across Europe, ISS’ benchmark policy will consider pay-for-performance quantitative test outcomes when evaluating a company’s remuneration policies and practices while, separately, tightening the policies with regard to overboarded board chairs.
For the U.K. and Ireland, ISS’ policies will in 2017 recommend voting against the chair of the remuneration committee where there are ongoing concerns over compensation. ISS policy with respect to the assessment of smaller companies in these markets is being updated to require, beginning Feb. 1, 2018, that audit and remuneration committees be fully independent. Meanwhile, for companies in Continental Europe, the calculation of director independence levels under ISS policy will exclude employee shareholder representatives beginning Feb. 1, 2017. In addition, ISS’ policy will now generally recommend “against” all performance-based compensation for non-executive directors.
In Japan, ISS policy will be updated to recommend opposing the creation of new advisory posts unless the advisors will serve on the board of directors and thus be accountable to shareholders. Elsewhere, policy clarifications or new policies on board independence, attendance and/or overboarding will apply for India, Sri Lanka, Hong Kong, Bangladesh, Pakistan, Taiwan, beginning Feb. 1, 2017. In Singapore specifically, ISS has adopted a new policy to generally recommend voting against nomination committee members in certain circumstances if the board has no lead independent director or is less than 50 percent independent.
For Latin America, Brazilian companies listed on the Nivel 1 and Traditional listing segments will be subject to a new policy on board independence while companies in that market, more broadly, will see policy updates to expand the framework for analyzing nominees to the board and fiscal council, including minority nominees. Outside of Brazil, ISS is adopting a new policy on board independence for the markets of Argentina, Chile, Colombia, Mexico, and Peru.
With respect to cross-market issues and for U.S. domestic issuers incorporated outside the U.S., ISS will align voting recommendations of analogous compensation proposals required to be on the ballot by the foreign market to the U.S. say-on-pay recommendation.
For additional details on these and other ISS 2017 benchmark policy updates, please visit the ISS Policy Gateway.
To aid market participants in understanding the nature and scope of the 2017 policy updates as well as other developments shaping the governance landscape, please join ISS staff on December 7 at 4:00p.m. GMT (11:00a.m. EST | 8:00a.m. PST) for a one-hour informational webcast. To register, please click here.