Just before Thanksgiving, ISS released its U.S. Corporate Governance Policy 2014 Updates. The updates are the result of what ISS describes as a “robust, inclusive, and transparent” process and will apply to shareholder meetings held on or after February 1, 2014. They are briefly described below:

Board responsiveness to majority-supported shareholder proposals:

Vote recommendations on director elections when the board has failed to act on a majority-supported shareholder proposals will be made by ISS on a case-by-case basis, rather than the previous stricter “vote against or withhold” standard. The description of the board’s rationale in the proxy statement will be one of the factors considered in ISS’s case-by-case analysis.

Pay for performance evaluation:

ISS will now calculate the difference between the company’s TSR rank and the CEO’s total pay rank over a three-year period, rather than perform its old weighted average calculation, which disproportionately weighted the most recent year. ISS believes this new calculation method provides for a smoother performance measure, less influenced by periods of volatility. It also helps alleviate timing mismatches in those cases where a company makes an award early in the year, before the corresponding performance period.


ISS has amended its “vote case-by-case” policy regarding requests for information on a company’s lobbying efforts to clarify the factors it considers.

Human rights assessment:

ISS has adopted a formal policy regarding the factors it considers in its case-by-case recommendations regarding shareholder proposals requesting that a company perform a human rights assessment or report on its human rights assessment process.


It’s fair to say that none of these changes are transformational. However, the amendment of ISS’s process for determining the degree of alignment between TSR and CEO total pay could be welcome news for companies experiencing unusual one-year spikes in either of those measures.

Also, it appears that ISS is continuing its shift to kinder and gentler policies, no doubt due to increasing regulatory scrutiny (for example, yesterday’s SEC roundtable) and public company outcry.