Early this week ISS opened up its annual policy survey, the results of which will influence the new ISS policies and changes to existing policies for the 2019 proxy season (i.e., impacting shareholder meetings on or after February 1, 2019). Today, we will look a bit closer at the two surveys that ISS launched: the 2019 Governance Principles Survey, and the 2019 Policy Application Survey.
2019 Governance Principles Survey
There are five issues ISS is seeking input in on this survey:
- Auditor Independence: What factors should be considered in addition to non-audit services and fees as a percentage of total fees when evaluating independence of auditors?
- Audit Committee: What factors are important in evaluating the effectiveness of the Audit Committee?
- Director Accountability: Is it relevant for ISS to examine directors’ controversies on other boards when evaluating directors? If so, what would be relevant and what length of look-back period should be used?
- Board Gender Diversity: ISS here is repeating questions it asked last year on gender diversity to gauge whether it is concerning if there are no female directors on a board?
- One-Share, One-Vote Principle: Should ISS adjust vote results to show the results if all shares had equal voting rights? If so, should these adjusted results inform ISS’s board responsiveness review? What is the appropriate time period for a sunset provision on unequal voting rights?
2019 Policy Application Survey
The questions in this survey applicable to the U.S. are:
- Independent Chair: What factors are important when ISS determines its vote recommendation with respect to a shareholder proposal for an independent chair?
- Minimum Stock Ownership Requirements for Bylaw Amendments: Asks what the minimum ownership thresholds above the required SEC Rule 14a-8’s $2,000 stock holding requirement should be, and should multiple shareholder be able to aggregate holding to meet such threshold?
- Quantitative Pay-for-Performance Screens: ISS is considering supplementing or replacing the four (4) GAAP financial metrics used in its P4P analysis with Economic Value Added (EVA) for purposes of the Financial Performance Assessment. ISS is asking if the survey participant supports the use of EVA in the P4P analysis, and, if so, how it should be incorporated.
- Non-employee Director Pay: In 2018 ISS identified non-employee director (NED) pay outliers and will begin to recommend against compensation committees where elevated NED pay persists over multiple years without compelling justification. ISS is asking survey participants what should constitute a compelling justification.
- Board Qualifications Matrix: The New York City Pension Funds has advocated for the disclosure of a director matrix to help shareholders assess director fit and the mix of skills among all directors. ISS is asking survey participants what level of disclosure on directors skills they find most useful.
For links to these ISS surveys, please see my prior post:
Survey Closing Times
- 2019 ISS Governance Principles Survey closes on August 24, 2018 at 5 pm Eastern, and the
- 2019 ISS Policy Application Survey closes on September 21, 2018 at 5 pm Eastern.