Expansive, Secondary Survey Covered Wide Range of
Topics Across Global Capital Markets
ROCKVILLE, M.D. (19 October 2017) – Institutional Shareholder Services Inc. (ISS), a leading provider of corporate governance and responsible investment solutions to financial market participants, today released the results of its 2017 Policy Application survey, which ran from August 3 through October 6.
ISS received 328 total responses to the survey, of which 77 were from institutional investors and organizations representing them, as well as 251 from members of the corporate community, including companies, consultants/advisors to companies, corporate directors, and other trade organizations representing companies. Respondents were domiciled across the globe, with the bulk located in the U.S. (200), Europe (55) and Canada (30).
This year, survey topics were split into two parts, with an initial, high-level survey covering a small number of fundamental and high-profile topics. Findings from the initial survey, which ran from August 3 to August 31, were initially reported on September 25, 2017, and can be accessed here.
Key findings from the secondary, more expansive and geographically diverse Policy Application survey that are being announced today, include:
- European Board Elections. When asked whether certain governance criteria should be considered when evaluating board elections at smaller, more closely held companies based in Europe, institutional and corporate respondents were sharply split. For example, 69 percent of investor respondents said the combination of combined chairman and CEO roles should be considered as part of any evaluation, with just 27 percent of corporates agreeing. Similarly, 62 percent of investor respondents called for evaluations that consider whether the company has elected a former chairman as CEO, compared with just 28 percent of corporates. Moreover, while less than one-half (45 percent) of corporate respondents believe the presence of over-boarded directors should be considered when evaluating board elections at smaller European companies, just over three-quarters (76 percent) of investor respondents would like to see such information factored into board election evaluations.
- Director Pay in the U.S. Survey respondents were asked which factors should be considered in determining whether a director pay program presents a governance concern with respect to high pay magnitude. Tops for investors was measuring director pay relative to a four-digit GICS peer group, followed by stock market index peers, and, third, measuring a director pay program relative to all companies. Corporate respondents, meanwhile, deemed the measurement of pay relative to a stock market index most appropriate, followed next by pay measurements relative to a four-digit GICS industry peer group. When asked which factors should be considered in determining whether a pay program presents a governance concern with respect to problematic pay structure, both groups agreed that excessive perquisites was most problematic.
- S. Gender Pay Gap. Over the past two years, shareholders have filed proposals asking for a report on gender pay equity at numerous U.S. companies. ISS’ survey asked whether companies should be disclosing their gender pay gap information, with 60 percent of investor respondents answering affirmatively, compared with 17 percent for corporates. Of the just over one-quarter (27 percent) of investor respondents suggesting the need for such disclosures would “depend” on certain considerations, most indicated they would deem it favorable if the practice became an industry norm and/or the company was lagging its peers.
- Board Independence in Japan. The Japanese Corporate Governance Code recommends that at least one-third of the board should be comprised of independent directors. ISS is considering updating its benchmark voting policy on director independence for the Japanese market to require at least one-third of the board to be independent outsiders at companies with a three-committee structure or an audit committee structure. Nearly nine in 10 respondents overall supported ISS’ proposed position, with 93 percent of investors backing the one-third independent threshold and 88 percent of corporates voicing similar support.
Download a summary of ISS’ Policy Application survey results here.