Update Adds Six New Factors and Creates New Board Diversity Subcategory
ROCKVILLE, Md. (November 29, 2018) — Institutional Shareholder Services Inc. (ISS), a leading provider of end-to-end governance and responsible investment solutions to the global financial community, today announced the release of methodology enhancements to its ISS Governance QualityScore global corporate profiling solution.
Effective today, the Governance QualityScore methodology will be enhanced to provide users with deeper actionable insights, particularly in the areas of board composition and controversies. Notably, ISS has created a new Diversity subcategory to better distinguish companies with significant diversity on their board and among named executive officers (NEOs). The new Diversity subcategory will include existing factors on gender diversity, director refreshment, and tenure, while adding new factors looking at the number of women in board and committee leadership positions, diversity by age and tenure of directors, and the number of female NEOs.
Additionally, ISS is enhancing the ability in most of the markets covered by QualityScore to identify potential shareholder concerns regarding management’s performance with the addition of two new Board Controversy factors related to shareholder support for the CEO as well as the board chair. Factors that identify the lowest level of shareholder support for directors and voting support levels for a company’s most recent say-on-pay/remuneration proposal will be applied to a broader set of global markets, including the U.S.
An analysis of the new factors finds notable trends in the U.S. market when it comes to female NEOs. Roughly 67 percent of Russell 3,000 companies, excluding those in the S&P500, have no female NEOs, while 27 percent have one, and 6 percent have two or more. Meanwhile, S&P 500 companies show a greater proportion of female senior executives with 36 percent of those companies having one female NEO and 7 percent having two or more.
A recent study by ISS Analytics, the data intelligence arm of Institutional Shareholder Services, finds gender-diverse executive teams exhibit superior performance whether the CEO is female or male. Conversely, companies with no women in their top five executive roles or companies where the CEO is the only woman in the C-suite show the worst levels of performance, risk, and valuation.
“Companies that combined gender diversity in both the C-Suite and on the board showed the best overall results in terms of risk-adjusted quality of performance,” said John Roe, Head of ISS Analytics. “It appears C-Suite diversity is associated with strong economic performance, while board diversity may help companies better manage risk.”
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