ISS announced the results of its annual Benchmark Policy Survey (see our prior reports here: "Society Submits Comments on ISS Annual Policy Survey" and here: "ISS Launches Annual Policy Survey for 2020 Proxy Season"), which garnered 396 responses (128 institutional investor representatives + 268 non-investors including 227 corporate executives). 60% of the respondents represented US-based organizations.
Key takeaways include:
- Board Gender Diversity: Globally, majorities of both investors (61%) and non-investors (55%) agreed that board gender diversity is an essential attribute of effective board governance regardless of company or market. As to US policy specifically, investor respondents were much less likely (41%) than non-investor respondents (62%) to say that other mitigating factors (such as adopting a Rooney rule-type procedure for candidate searches or committing to maintain an active search to add women to the board) should be considered and sufficient to avoid a negative ISS recommendation on directors.
- Director Overboarding (Global): Pluralities of investor respondents selected four public company boards as the appropriate maximum limit for non-executive directors (42%), and two total board seats as an appropriate maximum limit for CEOs (i.e., the CEO’s company plus one other) (45%). A plurality of non-investors responded that a general limit should not be applied to either non-executives (39%) or CEOs (36%), and that each board should consider what is appropriate and act accordingly.
- Combined CEO/Chair (U.S.): Investor respondents ranked poor company responsiveness to shareholder concerns as the #1 factor that most strongly suggests the need for an independent board chair, followed by governance practices that weaken or reduce board accountability to shareholders (such as a classified board, plurality vote standard, inability to call special meetings, lack of proxy access). For non-investors, the #1 factor was a poorly-defined lead director role, followed by poor company responsiveness to shareholder concerns.
- Climate Change Risk Oversight (Global): In response to the question: "Does your organization consider that climate change should be a high priority component of companies' risk assessments?", a majority (60%) of investor respondents (compared to 21% of non-investors) selected the survey's answer choice that all companies should be assessing and disclosing climate-related risks and taking actions to mitigate them where possible, whereas 68% of non-investors responded "maybe," i.e., that "each company's appropriate level of disclosure and action will depend on a variety of factors including its own business model, its industry sector, where and how it operates, and other company-specific factors and board members."
In response to the follow-on question: "What actions, if any, does your organization consider may be appropriate for shareholders to take at a company that is assessed to be not effectively reporting on or addressing its climate change risk?", both investors and non-investors ranked engagement #1.
The Annual Policy Survey is part of ISS's annual policy development process.
See ISS's release, and additional information & resources on our Proxy Advisors page. This post first appeared in this week's Society Alert!