ISS announced today the launch of its 2018 benchmark voting policy consultation period that will inform its voting policies for the 2018 proxy season for shareholder meetings on or after February 1st. The open comment period runs through 5:00 pm ET on November 9th.
US-specific proposed new policies or policy changes are as follows:
I. Non-Employee Director Compensation
Key Changes Under Consideration: The proposed new policy would explicitly provide for adverse vote recommendations for board committee members who are responsible for approving/setting NED compensation when there is a pattern (i.e. two or more consecutive years) of excessive NED pay magnitude without a compelling rationale or other mitigating factors.
Request for Comment: While ISS appreciates any comments on this topic, it is specifically seeking feedback on the following:
- In your view, what are the circumstances for which large NED pay magnitude would merit support on an exceptional basis (e.g., one-time onboarding grants to new directors)?
- If a company's proxy disclosure does not clearly indicate which board committee is responsible for setting and/or approving director pay, which board members should be held accountable?
- In calculating average/median pay, should ISS include outsized pay packages provided to NED board chairs, lead directors or other board members who receive outsized boardroom pay?
II. Gender Pay Gap Shareholder Proposals
Key Changes Under Consideration:
The proposed new policy is as follows:
Generally vote case-by-case on requests for reports on a company's pay data by gender, or a report on a company’s policies and goals to reduce any gender pay gap, taking into account:
- The company's current policies and disclosure related to both its diversity and inclusion policies and practices and its compensation philosophy and fair and equitable compensation practices;
- Whether the company has been the subject of recent controversy or litigation related to gender pay gap issues ; and
- Whether the company's reporting regarding gender pay gap policies or initiatives is lagging its peers.
Request for Comment: While ISS appreciates any comments on this topic, it is specifically seeking feedback on the following:
- Are there other factors ISS should consider when assessing proposals requesting disclosure on a company's gender pay gap?
III. Poison Pills
Key Changes under Consideration: ISS is proposing to update its current policies, and recommend against all board nominees, every year, at companies that maintain a long-term poison pill that has not been approved by shareholders. Therefore annually-elected boards would receive adverse recommendations on an annual basis, rather than every 3 years. Commitments to put a long-term pill to a vote the following year would no longer be considered a mitigating factor. The boards with the 10-year pills currently grandfathered from 2009 would no longer be exempt and would receive against recommendations. With the proposed removal of grandfathering, there will also be no need to have an explicit policy regarding deadhand or slowhand features, as the few remaining deadhand/slowhand pills are not approved by shareholders and would be covered under the proposed policy.
Short-term pill adoptions would continue to be assessed on a case-by-case basis, but the proposed policy update would focus more on the rationale for their adoption than on the company’s governance and track record. Renewals or extensions though, as with the current policy, will not receive the case-by-case assessment.
Request for Comment: While ISS appreciates any comments on this topic, it is specifically seeking feedback on the following:
- Should ISS continue to grandfather the directors whose boards adopted 10-year pills in 2008 and 2009 given that they will expire under their terms over the next few years?
- Regarding short-term pills (1-year term or less), is the rationale for adoption (e.g. an unsolicited takeover offer) the most important factor for consideration when voting on directors who adopted the pill? If not, please specify other factors.
- Should one factor for the consideration of short-term pill adoptions be a commitment that any renewals or extensions of the pill will be put to a shareholder vote?
Comments should be submitted to policy@issgovernance.com.
See also our prior Society Alert reports: "ISS Policy Survey Results Portend Potential Policy Changes" and "ISS Survey: Investors Will Use Pay Ratio Data & Accept Virtual Meetings," and numerous additional resources on our Proxy Advisors topical page.