As described in our recent memorandum, ISS will be using other financial and operational metrics in addition to TSR in evaluating say-on-pay. In a recently updated FAQ on its executive compensation policies, this is called the Relative Pay and Financial Performance Assessment.

ISS will introduce this assessment for companies in the Russell 3000E beginning with meetings on or after February 1, 2017. The Russell 3000E Index includes the 4,000 largest publicly traded U.S. companies. According to the updated FAQ, a company’s proxy report will include a standardized comparison of CEO pay and a company’s financial and operational performance rankings relative to the ISS-defined peer group. Continue Reading

ISS has launched its data verification from October 31, 2016 to November 11, 2016 for the underlying data used in QuickScore (to be rebranded as QualityScore).  The data is also used by ISS in formulating its research reports that investors obtain to make voting decisions.

All requested changes must be accompanied by a publicly disclosed source.  QualityScores will be published on November 21.  Requests for changes can also be made after that time.

QualityScores cover U.S. companies in the S&P 500 and Russell 3000.  Companies that do not have a login already can request one at the email address listed here. Continue Reading

ISS has just released the results of its survey on potential policy changes.  We previously discussed the survey questions here. The global survey attracted 439 responses, from 417 organizations. 120 of the respondents were institutional investors, representing 115 organizations, including 73 asset managers or investment managers, 16 mutual funds, 15 government or state-sponsored pension funds, three foundations/endowments, three insurance companies (investment side), two alternative asset managers, and two labor union pension funds. Six responses were received from investor coalitions or consultants or NGOs with an investor perspective. 270 corporate issuers also took part in the survey.

In late October, ISS will release draft policies that will be subject to a public comment period before they are finalized. Continue Reading

In a strongly worded statement, Gary Retelny, President and CEO of ISS, testified before the House Committee on Financial Services about the Proxy Advisory Firm Reform Act. We previously covered the Act’s requirements here.

ISS believes that advisers themselves have become a proxy for the debate over the role of shareholders in the companies that they own, and that the proposed legislation heads in the wrong direction by turning away from an “investor-centric” federal regulatory regime to a “bureaucratic maze” that would ultimately allow corporations and their representatives to “pressure proxy advisers to back management positions.” According to ISS, proxy advisers have become an “outsized target in obsessive efforts by a small number of corporate managers and their representatives to discourage institutional investors from using their voice in the corporate governance debate.” Those individuals are trying to make it harder for investors to cast informed voting decisions by making it more expensive, cumbersome and time-consuming, so that if “information is equivalent to oxygen for proxy votes,” then “entrenched managers seek to cut off its supply.”

The firm annually covers more than 39,000 shareholder meetings in over 110 developed and emerging markets worldwide, and also implements custom voting policies for investors. Continue Reading

ISS has issued its voting policies for public comment, which are due by 6:00 p.m. EST on November 9. The comments will be published (unless otherwise requested). ISS will consider the comments in forming the final policies to be applied to meetings on or after February 1, 2016. Final policies are scheduled to be released on November 18.

Only a handful of policy matters that were addressed in the ISS public survey, which we previously discussed here, are raised for comment. That does not mean these will be the only changes made in the 2016 policies. For example, no comments have been specifically requested on how ISS should assess whether boards were responsive to proxy access shareholder proposals that passed during 2015, but the final policies are likely to indicate the factors that ISS will examine. Continue Reading

ISS counts Tempur Sealy as among the 28 proxy contests during the first six months of 2015, the busiest period for contests since 2009, even though the dissidents waged a “vote no” campaign instead of nominating alternative director candidates. The overall dissident “win rate” calculated by ISS decreased from 67% for all of 2014 to 46% for the first six months of 2015, particularly where the targeted company had a market cap above $1 billion. The firm believes that these results were affected by the absence of notable “heavyweights” in contests owing in part to settlements.

At Tempur Sealy, according to news reports, H Partners missed the company’s advance notice deadline to nominate its own slate and chose instead to urge investors to withhold votes for three of the company’s nominees, including the CEO, the chairman of the board and the chairman of the nominating and corporate governance committee. Continue Reading

ISS is evaluating equity plan ballot proposals under a new “scorecard” approach this season, which we previously discussed here. Through May 12, ISS has supported 85.9% of equity plan proposals covered under its S&P 500 and Russell 3000 models, higher than in past years. In 2014, of the 808 companies in those indexes that were reviewed, a little over 80% received favorable recommendations for their plans.

About 300 companies evaluated this year met the minimum thresholds. The primary reasons the plans faced “against” recommendations include excessive plan costs, which were often reason alone to warrant a negative view.

In terms of vote results, only 11% of companies that have held meetings received less than 80% of votes in favor, a significant decrease from the prior year. Continue Reading

Under its existing policy, ISS will recommend against the election of boards of directors who adopt bylaw or charter amendments that they view as materially diminishing shareholder rights without obtaining shareholder approval.

In a recent set of FAQs, ISS has clarified that some unilaterally adopted bylaw amendments are not considered materially adverse. Although the proxy advisory firm will evaluate them on a case by case basis, the adoption of exclusive forum provisions when the venue is the company’s state of incorporation, or director qualification bylaws that require disclosure of third-party compensation arrangements, are unlikely to affect ISS’ recommendations for the board. Continue Reading