ISS Issues Draft 2019 Voting Policies for Comment

ISS Issues Draft 2019 Voting Policies for Comment

This morning, ISS posted its draft voting policies on its website (https://www.issgovernance.com/policy-gateway/2019-benchmark-policy-consultation/). Anyone interested in providing comments on these draft voting policies may do so before 5:00 p.m. Eastern on November 1, 2018 by emailing his/her comments to ISS at  policy@issgovernance.com. Comments will be made public by ISS when the final voting policies are released–expected the middle of November 2018.

For the US market, ISS issued two draft voting policies:

  • Board Gender Diversity, and
  • Financial Performance Assessment Methodology

Board Gender Diversity

ISS is proposing to  generally vote against or withhold from the chair of the nominating committee (or other directors who are responsible for the board nomination process on a case-by-case basis) at companies when there are no female directors on the board. Mitigating factors that may be considered include:

• a firm commitment, as stated in the proxy statement and/or other SEC filings to appoint at least one female director to the board in the near term (before the next annual general meeting);
• the presence of at least one female director on the board at the immediately preceding annual meeting; and/or
• any other compelling factors considered relevant on a case-by-case basis.

ISS is proposing to apply the policy for meetings on or after February 1, 2020 , which gives a 1-year phase-in period (roughly 2019).

ISS is interested in comments concerning: when it should recommend against directors other than chair of the nominating committee, whether there are any mitigating factors that should be considered, and, if so, what weight should be given to such factors, the appropriate time period for a commitment to appoint a female director to an all male board, and whether commenters agree with the one year transition period for this policy to take effect.

Financial Performance Assessment Methodology

ISS is proposing shifting away from using GAAP financial measures to Economic Value Added (EVA)-related metrics, such as EVA Spread, EVA Margin, and EVA Momentum. ISS indicates that companies would be provided these EVA metric data points free of charge prior to their annual meeting and ISS analysis.

ISS is not clear on when this proposed policy change would take effect.  So it might be for 2019 or 2020.

ISS is asking whether commenters believe the quantitative P4P tests should continue to emphasize TSR. ISS is also interested in finding out if the decision is made to implement the EVA measures whether people would still like the GAAP measures to be reported on an informational basis.

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