Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

ISS is requesting feedback on a change to its voting policy on independent chair shareholder proposals.  ISS’ current policy is to generally recommend for independent chair shareholder proposals unless the company satisfies all of the following criteria:

  • The company designates a lead director, who is elected by and from the independent board members with clearly delineated and comprehensive duties.
  • The board is at least two-thirds independent.
  • The key board committees are fully independent.
  • The company has disclosed governance guidelines.
  • The company has not exhibited sustained poor TSR performance (defined as one- and three-year TSR in the bottom half of the company’s four digit industry group, unless there has been a change in the CEO position within that time).
  • The company does not have any problematic governance issues.

ISS proposes to update the “Generally For” policy by adding new governance, board leadership, and performance factors to the analytical framework and to look at all of the factors in a holistic manner. Notably, the policy update would add new factors that are not considered under the current policy including the absence/presence of an executive chair, recent board and executive leadership transitions at the company, director/CEO tenure, and a longer (five-year) TSR performance period.

ISS probably chose this policy for attention because calls for independent board chairs were the most prevalent type of shareholder proposal offered for  consideration at U.S. companies’ annual meetings in 2014. As of June 30, 2014, 62 of these proposals have come to a shareholder vote, up from 55 resolutions over the same time period in 2013. According to ISS, the number of proposals calling for independent board chairs has more than doubled over the past five years. Under the current policy formulation, ISS says it recommended against 32 of these 62 proposals in 2014. In line with results from recent seasons, independent chair proposals received average support of 31.2 percent of votes cast at 2014 meetings. Only four of these proposals received the support of a majority of votes cast.


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