As discussed in the November 8, 2010 issue of the Securities & Financial News to Note Bulletin, Institutional Shareholder Services, Inc. (ISS) previously announced the opening of its annual comment period for its 2011 proxy voting policies. On November 19, 2010, ISS issued its 2011 proxy voting policy updates. The U.S. topics covered included “say on pay” frequency and “say on golden parachute” proposals, independent chair proposals from shareholders, director attendance and authorized capital requests.
- Management say on pay frequency proposals. ISS adopted the proposed policy to vote in favor of companies providing for annual management say on pay proposals.
- Vote on golden parachute proposals. ISS adopted the proposed policy to vote on a case-by-case basis on proposals to approve a company’s golden parachute compensation.
- Independent chair shareholder proposals. ISS received comments that it should continue to evaluate these proposals on a case-by-case basis, taking into account whether the company has a robust counterbalancing governance structure and any problematic performance, governance, or management issues. Based on this feedback and other comments, ISS did not change its policy on independent chair proposals in 2011.
- Director attendance. ISS adopted the proposed policy to only consider reasons for poor attendance that are disclosed in the proxy or subsequent SEC filing. If it is not clear from the disclosure whether the director attended 75% of the aggregate of his or her board and committee meetings, ISS will recommend to withhold on that director. ISS will limit the number of reasons it will find acceptable for attendance below the 75% level to (i) medical issues/illness, (ii) family emergencies, and (iii) if the director’s total service was three meetings or less and the director missed only one meeting.
- Increase authorized capital proposals. Instead of adopting the proposed quantitative model with a threshold-based allowable increase, ISS is recommending (i) a vote for proposals to increase the number of authorized common shares where the primary purpose of the increase is to issue shares in connection with a transaction on the same ballot that warrants support, (ii) a vote against proposals at companies with more than one class of common stock to increase the number of authorized shares of the class of common stock that has superior voting rights, (iii) a vote against proposals to increase the number of authorized common shares if a vote for a reverse stock split on the same ballot is warranted despite the fact that the authorized shares would not be reduced proportionally, and (iv) voting on a case-by-case basis on all other proposals to increase the number of shares of common stock authorized for issuance, taking into account company-specific factors.
These policies will be in effect for shareholder meetings on or after February 1, 2011.