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ISS Wants to Know What You Think

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August 07, 2018 | Barbara Baksa

ISS Wants to Know What You Think

In preparation for updating its voting policies for the 2019 proxy season, ISS is conducting its annual policy survey. This year, the survey consists of two parts, a more general “Governance Principles Survey,” which covers high-level topics and a more detailed “Policy Application Survey,” which is deployed by geographic region.

Institutional investors, companies, corporate directors, and governance organizations are invited to participate in the survey. If ISS’s recommendations are important to your company, you might want to make sure your company participates in the survey. Start with the Governance Principles Survey; upon finishing that section of the survey, you’ll be directed to the Policy Application Survey.

Governance Principles Survey

This survey is fairly short and covers the following topics:

  • Audit Stuff: A couple of questions on auditors and audit committees that I skimmed over because snore.
  • Directors: If ISS has recommended against a director due to controversies, particularly shortfalls in oversight, should ISS note that in the proxy research of any other companies that the director serves on the board of? The survey also asks what types of behavior should trigger such disclosure and offers a “pattern of poor stewardship of compensation practices” as one of the choices.
  • Board Diversity: ISS asks if it is important for boards to include at least one female director and if yes, what actions are appropriate where boards don’t meet this guideline.
  • One Share, One Vote: ISS asks if they should provide an adjusted analysis of voting results for companies that have dual-class voting structures (i.e., an analysis showing what the vote results would have been if every share of stock provided for just one vote). ISS reports that in last year’s survey, 43% of investors said that “unequal voting rights structures may be appropriate in limited circumstances if they are subject to automatic sunset requirements.” As a follow-up to this ISS asks what sunset requirements would be appropriate.

Companies have until August 24 to complete the Governance Principles Survey.

Policy Application Survey

The policy application survey drills down on topics that are specific to various regions. The questions that relate to US companies cover the following issues:

  • Factors important to evaluating shareholder proposals that would require an independent board chair.
  • Minimum ownership requirements for shareholders proposing bylaw amendments.
  • Probably of most interest to my readers, the survey includes a question on whether ISS should continue to include a qualitative assessment of pay-for-performance and, if yes, whether that assessment should be tied to economic value added (EVA) or economic profit, rather than GAAP metrics.
  • Rationales for high nonemployee director compensation
  • How to evaluate board member qualifications

Companies have until September 21 to complete the Policy Application Survey.

- Barbara

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