ISS, the provider of corporate governance solutions, is seeking public comment on proposed changes to its benchmark proxy voting policies for the 2013 season, including new guidelines on majority-supported shareholder proposals, board nominee disclosure, say-on-golden-parachute proposals, and more.
‘A critical component of ISS’ annual policy formulation process, the comment period allows institutional investors, corporate issuers and governance market participants to provide feedback on ISS’ policy updates while they are still in draft stage,’ ISS says in a press release. ‘The comment period runs through October 31 and includes ISS’ US and international policies.’
One of the highest-profile changes to policy for the US is a proposal to strengthen its stance toward company directors who fail to respond to shareholder proposals that win majority support. ISS says 86 percent of institutional investors surveyed agree with the gist of the proposal.
‘ISS would recommend an against or withhold vote for the entire board… if it failed to act on a shareholder proposal that received the support of a majority of shares cast in the previous year,’ according to the draft proposals.
A proposal on say on pay would use a company’s ‘selected peers as an input to its peer group methodology, while maintaining an approach that includes company size and market capitalization constraints.’ It would also add the pledging of shares as a ‘factor that may lead to negative recommendations.’
ISS is further proposing an update to its policy regarding golden parachute payments arising from mergers, sales and other transactions. Under the proposed change, ISS would issue an against recommendation in cases of cash severance of more than three times the base salary and bonus.
It would also recommend an against vote for several other situations, including if a company said a proposed transaction was conditional on approval of a golden parachute.
ISS says its 2012-2013 policy survey shows that most ‘institutional investor clients feel payments resulting from problematic severance features, such as single-triggered equity, excise tax gross-ups and modified single-triggered cash severance are objectionable regardless of the timing of the arrangement.’
Another change to ISS’ global policy would also have the institution recommending against the election of company directors if the names of the nominees weren’t revealed ‘in a timely manner’ before the meeting in many regions and countries.
ISS says its survey indicates that more than 76 percent of institutional investors ‘would vote against the election of directors at all companies in Latin America, Eastern Europe and the Middle East/North Africa for failure to disclose nominee names.’
