On October 27, 2010, Institutional Shareholder Services, Inc. (ISS) announced the opening of its annual comment period for its 2011 proxy voting policies. The comment period, part of ISS’ policy development process, offers institutional investors, corporate issuers and industry constituents the opportunity to provide feedback on ISS draft policy updates. The comment period runs through November 11, 2010, and solicits feedback on updates to ISS’ proxy voting policy guidelines in markets worldwide. Topics covered include:
- Management say on pay frequency proposals. ISS is proposing to adopt a new policy to vote in favor of companies providing for annual management say on pay proposals.
- Vote on golden parachute proposals. ISS is proposing to adopt a new policy under which it will vote on a case-by-case basis on proposals to approve a company’s golden parachute compensation, and will consider a variety of features including whether it includes potentially excessive severance payments and recently adopted or amended agreements that include excise tax gross-up provisions.
- Independent chair shareholder proposals. Beginning in 2011, ISS is proposing to recommend a vote for shareholder proposals requiring that the chairman’s position be filled by an independent director absent compelling, company-specific circumstances that challenge the efficacy of appointing an independent chair and a robust counterbalancing governance structure.
- Director attendance. To improve transparency for all shareholders, ISS is proposing to only consider reasons for poor attendance that are disclosed in the proxy or subsequent SEC filing and 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 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. ISS is proposing a quantitative model with a threshold-based allowable increase. For most issuers, the allowable increase would be 100% of existing authorized shares, but the allowable could be only 50% or 25% of existing authorized shares for certain issuers.