ISS, the world’s largest proxy advisory firm, will adopt a ‘scorecard’ approach to evaluating equity plans in the US and alter its policy on director elections in Japan as part of the updates to its benchmark voting recommendation policies for 2015 proxy voting.
Changes will also affect ISS’ policy surrounding how investors are given notice of changes to the cooling-off period for former CEOS in Canada, which dictates how long former executives have to wait before serving on their company’s board. ISS is further encouraging companies in France to universally adopt one-shareholder, one-vote policies, the proxy adviser says in a press release. The changes will take effect for recommendations on companies with shareholder meetings on or after February 1 next year.
Under the scorecard approach to equity plan evaluation in the US, ISS will base its recommendations on the cost of the plan, its features and grant practices. The potential cost of plans will have a 45 percent weighting in any voting recommendations, while the grant practices will account for 35 percent and any features for 20 percent. According to ISS, each of the three weightings will be calculated based on around a dozen factors.
In Japan ISS will recommend not voting in favor of an independent director who attends less than 75 percent of board meetings in the year under review, or in favor of a top executive responsible for not implementing a shareholder proposal backed by a majority of votes. It will also not recommend a vote for a top executive if the board does not have at least one outsider on it after the shareholder meeting.
Under Canadian policy changes, ISS says it may consider ‘inadequate’ a standard five-year cooling-off period between the resignation of a CEO and his appointment to a board seat. Cases could include when the CEO has maintained substantial compensation ties or links that otherwise call into question the candidate’s independence.
For French companies with bylaws that don’t mention one-shareholder, one-vote policies, ISS says it will encourage adoption of the policy by supporting management and shareholder proposals that seek to prohibit double voting rights and recommending against re-election of directors based on their stance on the issue.
