Following the recent release of its global policy survey results (reported on here), ISS released yesterday for public comment its proposed new 2021 voting policies, which include these proposed changes impacting US companies:
Board Diversity, Race and Ethnicity: Effective for meetings on or after February 1, 2022, ISS will recommend voting against the chair of the nominating committee (or other relevant directors on a case-by-case basis) at Russell 3000 and S&P 1500 companies where the board has no apparent racially or ethnically diverse directors. Mitigating factors - including the presence of presence of a racial and/or ethnic minority on the board at the preceding annual meeting and a firm commitment to appoint at least one racial and/or ethnic diverse member - will be considered.
Director Accountability: ISS's policy on Governance Failures, which provides for votes against or withhold from directors individually, committee members, or the entire board for - among other things - material failures of risk oversight, will include as an example of such failure "demonstrably poor risk oversight of environmental and social issues, including climate change."
Shareholder Litigation Rights (forum provisions)
- Federal: ISS will generally recommend a vote for federal forum selection provisions in the charter or bylaws that specify "the district courts of the United States" as the exclusive forum for federal securities law matters. ISS will recommend a vote against provisions that restrict the forum to a particular federal district court, and unilateral adoption (without a shareholder vote) of such a provision will generally be considered a one-time failure under ISS's Unilateral Bylaw/Charter Amendments policy.
- State: ISS will generally recommend a vote for charter or bylaw provisions that specify Delaware, or the Delaware Court of Chancery, as the exclusive forum for corporate law matters for Delaware corporations, in the absence of serious concerns about corporate governance or board responsiveness to shareholders. Exclusive forum provisions for states other than Delaware will be assessed on a case-by-case basis taking into account enumerated considerations. ISS will recommend a vote against provisions that specify a state other than the state of incorporation as the exclusive forum for corporate law matters or that specify a particular local court within the state. Unilateral adoption of such a provision will generally be considered a one-time failure under ISS's Unilateral Bylaw/Charter Amendments policy.
Subject to the proposed transition period relating to racial/ethnic board diversity, the new policies - expected to be released in November - will apply to shareholder meetings on or after February 1, 2021. Comments should be submitted via email to policy@issgovernance.com, and will be made public. The comment period closes October 26 at 5 pm ET.
See the Society's comment letter on the Annual Policy Survey and additional ISS resources on our Proxy Advisors page.