Institutional and Shareholder Services (ISS) issued a consultation on proposed changes to its UK & Ireland Proxy Voting Guidelines in late October.  At that time it sought feedback on the following:

  • the introduction of a policy recommending limits on the number of directorships that should be held (addressing what it terms "overboarding").The limits proposed are:
    • that executive directors should not hold any other executive or chairmanship position though they can hold up to 2 non-executive directorships
    • a Chairman should not hold an executive position or more than one other chairmanship position but may hold up to 3 other non-executive directorships 
    • a non-executive director (with no executive role or chairmanship) may hold up to 4 other non-executive directorships.
  • When considering whether the policy limits are being met, ISS will consider only publicly listed companies so there would be no limit on this number of unlimited directorships.
  • an update of its policy on general authority to issue shares without pre-emptive rights to align with the revised position set out in the Pre-emption Groups' guidelines of March 2015 (see ourarticle from April for more details).This states that a company may seek a general authority to issue shares with a disapplication of pre-emption rights up to 10% of the issued share capital, provided that the extra 5% is to be used only for the purposes of an acquisition or a specified capital investment. ISS would retain the right to issue a negative recommendation on the authority in the subsequent year if the authority was abused
  • its policy of recommending a vote against the remuneration of auditors where the ratio of non-audit to audit fees exceeds 100% should be extended to smaller companies.

A short period was given for comments to be given and ISS confirmed on 20 November that the revised Guidelines will be published in December 2015 and will apply to shareholder meetings taking place on or after 1 February 2016.

The three points raised in the October consultation (see above) will be incorporated into the Guidelines.  In addition the following changes are being made:

  • it will be made clear that calling general meetings on 2 weeks' notice will only be considered appropriate in circumstances where time is of the essence
  • the Guidelines will set out in more detail the specific issues ISS will take into account when recommending votes against the resolution to accept financial statements and statutory reports of smaller companies
  • a distinction will be drawn between a remuneration policy resolution and a remuneration report resolution for smaller companies
  • where a company has received a significant level of dissent on a resolution at a general meeting ISS will consider if, and how, the company has sought to understand the reasons behind the vote results and how the company has communicated with the dissenters.If the company has not adequately explained its reaction to the dissent, ISS may recommend a vote against the relevant resolution at a future general meeting.

A link to the 2016 Global Benchmark Policy Updates can be found here.