ISS and Glass Lewis have updated their proxy voting guidelines for the 2016 proxy season. The following is a summary of the most significant updates applicable to U.S. public companies:

  • Unilateral Charter and Bylaw Amendments. ISS and Glass Lewis continue to be critical of unilateral amendments by the board of directors to a company’s charter or bylaws in a manner that they deem to “materially diminish” stockholder rights. For IPO companies, ISS will evaluate whether to recommend against directors based on pre-IPO amendments, taking into account a number of factors, including the level of impairment of shareholders’ rights, the board’s rationale for adopting the amendments, and future impacts on governance, including limits on stockholder rights to amend charters or bylaws, and the ability to hold directors accountable through annual elections.
  • Proxy Access. ISS posed several specific questions about the terms of proxy access bylaws in its policy survey. While ISS did not adopt any specific proxy access voting guidelines, it has issued two new FAQs which provide specific guidance on what it deems to be “overly restrictive” proxy access provisions and how it will evaluate proxy access nominees. Among other things, ISS highlights two types of proxy access provisions as “especially problematic”: counting individual funds within a mutual fund complex as separate shareholders for purposes of an aggregation limit; and the imposition of post-meeting shareholding requirements for the nominating shareholder. Glass Lewis will continue to review proxy access stockholder proposals and terms of proxy access bylaws on a case-by-case basis.
  • Exclusive Forum Provisions. Glass Lewis will continue to recommend against directors of public companies that adopt exclusive forum provisions (ISS generally does not) and will, in the case of IPO companies, evaluate the provision alongside other bylaw provisions, such as supermajority vote requirements and classified boards.
  • Overboarding. See the discussion above under “Increasing Director Responsibilities and Scrutiny of ‘Overboarding’”.

Complete copies of the ISS and Glass Lewis proxy voting guidelines and the ISS FAQs on U.S. proxy voting policies and procedures are available at www.issgovernance.com and www.glasslewis.com.