Included in this issue of our Governance & Compliance Update: ISS updates its proxy voting guidelines for use in 2020; Hampton-Alexander review: strongest year of progress for women on boards and more


Institutional Shareholder Services (ISS) has published updates to its Europe, Middle East and Africa Proxy Voting Guidelines (ISS Guidelines), which are effective for meetings on or after 1 February 2020. 

For companies listed in the UK and Ireland, the key changes largely reflect the application of the 2018 version of the UK Corporate Governance Code (2018 Code) and include:

Gender diversity

ISS will generally recommend a vote against the chair of the nomination committee (or other directors on a case-by-case basis) where there are no female directors on the board of widely-held companies. Mitigating factors include the presence of a female director on the board at the preceding annual meeting and a firm commitment, publicly available, to appoint at least one female director to the board within a year.

Chair's tenure

The 2018 Code states that ‘the chair should not remain in post beyond nine years from the date of their first appointment to the board. This period can be extended for a limited time, particularly in those cases where the chair was an existing non-executive director on appointment to facilitate effective succession planning and the development of a diverse board. ISS will consider such requests for re-election of the chair on a case-by-case basis, taking into account such factors as succession planning, diversity, and board independence, in addition to tenure.

Board and committee composition

One of the key changes in the 2018 Code was the removal of dispensations for 'smaller companies' – i.e. those outside the FTSE 350 - as regards certain areas of board composition. The ISS Guidelines have been updated accordingly.


Pension arrangements for new joiners should be aligned with those of the wider workforce, and companies should actively disclose whether or not this is the case. For incumbent directors, companies should seek to align the contribution rates with the workforce over time, recognising that many investors in the UK will expect this to be achieved in the near-term.

Bonus target disclosure

Bonus targets disclosure should take place immediately following the reporting year. Any company choosing to disclose one or more years in arrears would be 'out of step with wider market practice and may attract a negative vote recommendation'.

Exit payments to departing directors

In general, formal notice should be served no later than the day on which the departing executive’s leaving date is announced. If a company chooses not to serve notice at this time, it should explain its reasoning for this in the subsequent remuneration report.


Remuneration committees should disclose how they have taken into account any relevant environmental, social, and governance matters when determining remuneration outcomes.


The Hampton-Alexander Review has published its report for 2019. This shows that women now hold 32.4% of all FTSE 100 board positions, up from 30.2% last year – the FTSE 100 is therefore close to meeting the 33% target ahead of the 2020 deadline.

The FTSE 250 has had its 'strongest year yet' in terms of progress towards the 33% target, with women now holding 29.6% of all FTSE 250 board positions, up from 24.9% in 2018. If this rate of progress is maintained, the FTSE 350 will be on track to meet the 33% target by the end of the 2020 deadline.

The number of 'One & Done' boards – i.e. those with only one woman on the board – have reduced from 74 to 39 in the last 12 months. 28 companies remain at 'One & Done' for the second year running. Only two all-male boards remain. 

As for 'senior leadership' positions, female representation increased in the FTSE 100 from 27% to 28.6% this year, and from 24.9% to 27.9% in the FTSE 250. Approximately 175 companies remain 'well adrift' of the 33% target and 'surprisingly' there remain 44 all-male executive teams. This means that half of all available roles must go to women this year for the FTSE 350 to meet the 33% target by the end of 2020. 

Other notable findings include the fact that only 25 women have been appointed into the chair role and women in CEO roles remains 'incredibly low'.

The Chartered Institute of Personnel and Development (CIPD) has also published its views on the report. 


The Investment Association (IA) has published its final report setting out the IA’s ‘Responsible Investment Framework’ together with a glossary of industry-endorsed standard definitions for terms which are commonly used to describe and categorise investment approaches. 


The European Council (EC) has adopted a new regulation (SME Growth Markets Regulation) amending the Market Abuse Regulation (MAR) the Prospectus Regulation, with the aim of addressing the administrative burden and regulatory compliance costs placed on issuers on SME Growth Markets – such as AIM and the NEX Growth Market.

Changes to MAR include:

amending the 'market soundings' regime in relation to the disclosure of inside information to qualified investors for the purpose of evaluating a proposed private placement of bonds. Such disclosure is to be treated as being made in the normal exercise of a person's employment, profession or duties, and shall not constitute unlawful disclosure of inside information provided that an adequate non-disclosure agreement is in place;

where issuers on an SME Growth Market are permitted to delay disclosure of inside information under Article 17(4), they will still need to notify the competent authority of the decision to delay disclosure, but will only have to provide an explanation of the reasons for the delay upon request by the competent authority. This amendment will be of little practical benefit in the UK, which already exercises the discretion afforded in Article 17(4) to allow issuers to provide a written explanation only upon request by the Financial Conduct Authority; 

an option for SME Growth Market issuers to include in their insider lists only those persons who have regular access to inside information. This is, however, subject to the right of Member States to provide that the competent authority in a Member State can require insider lists to include all persons who have access to inside information;

a new format of insider list for SME Growth Market issuers which 'shall be proportionate and represent a lighter administrative burden' compared to the format used by issuers on other markets. ESMA – the European Securities and Markets Authority - is tasked with producing draft implementing technical standards; and 

changing the period within which issuers must disclose transactions by PDMRs and their closely associated persons from the current three business days after the transaction, to two business days from receipt of notification of the relevant transaction. 

Changes to the Prospectus Regulation include:

allowing the use of a simplified prospectus for issuers whose equity securities have been admitted to trading on either a regulated market or an SME Growth Market continuously for at least 18 months, in respect of an issue of securities that are fungible with equity securities previously issued;

allowing the use of a simplified prospectus for the admission to trading on a regulated market of securities fungible with securities which have been offered to the public and continuously traded on an SME Growth Market for at least two years, provided that the issuer has fully complied with its reporting and disclosure obligations throughout that period; and

allowing issuers seeking an IPO with a tentative market capitalisation below €200m to draw up an EU Growth Prospectus. 

The SME Regulation and the other texts adopted by the European Council on 8 November 2019 will be signed in the week of 25 November 2019 and then be published in the Official Journal of the EU. The changes to MAR do not apply until the date which is 12 months after entry into force of the SME Growth Markets Regulation which itself is 20 days after publication in the Official Journal – thus Brexit may have a part to play. Certain changes to the Prospectus Regulation will apply as from its entry into force.


The Institute of Directors (IoD) has published a manifesto for corporate governance addressed to the next Government. The manifesto contains ten policy initiatives which seek to reinforce the UK’s 'pre-eminent position' in global corporate governance and through which business can 'regain the trust of wider society while at the same time avoiding an extreme lurch to heavy-handed regulation or outright nationalisation'.

The policy initiatives seek to:

  • support the development of an industry-led Code of Conduct for directors providing greater accountability;
  • deliver proposed reforms to the regulation of auditors;
  • establish an independent Corporate Governance Commission which would focus on governance enabling the successor body of the Financial Reporting Council, the Audit, Reporting and Governance Authority, to focus on audit;
  • transform the operation and functioning of Companies House;
  • mandate minimum requirements for formal director training;
  • encourage the adoption of a Code of Practice for board evaluation;
  • create a framework through which companies can project their 'business purpose';
  • encourage a consistent approach to climate-related corporate disclosures;
  • explore opportunities to establish an ESG-oriented sovereign wealth fund; and
  • establish a newly-defined corporate form – the 'Public Service Corporation'. Such a legal entity would be constructed in order to ensure that the board maintains a balance between the interests and obligations relating to its various stakeholders, including shareholders, creditors, employees, pensioners and public sector clients.