On September 29, Institutional Shareholder Services (ISS), a leading proxy advisory firm, published the results of its 2014–2015 global voting policy survey. The survey, which, according to ISS, received more than 370 responses from a combination of institutional investors, corporate issuers and other corporate governance stakeholders, is an important component in ISS’ voting policy formulation process. Key findings from the 2014–2015 survey include:
- Pay for Performance: The survey results suggest investor respondents were concerned about the magnitude of chief executive officer pay. According to ISS, 60 percent of investor respondents indicated that there is a threshold at which the magnitude of CEO pay merits concern, even if the company outperformed its peer group. According to ISS, support for potential remedies, such as absolute limits on CEO pay and proportionate limits based on peer group performance, varied among investor respondents. By contrast, 50 percent of issuer respondents chose the response “No, my organization does not consider the magnitude of CEO compensation when evaluating pay practices; other aspects (such as company performance and pay structure) are considered more important.”
- Unilateral Adoption of Bylaws: Investor respondents were, by a significant margin, opposed to unilateral adoption of bylaw amendments that diminish shareholder rights, according to the survey results. Of the investors that responded to the survey, 72 percent indicated that the board should never adopt bylaw or charter amendments that negatively affect investors’ rights without shareholder approval (20 percent chose “it depends”). Forty-four percent of issuer respondents indicated that the board should be free to unilaterally adopt any bylaw/charter amendments, subject to applicable law (34 percent chose “it depends”). A majority of issuer respondents and more than 85 percent of investor respondents who chose “it depends” indicated that directors’ track records, level of board independence, other governance concerns, the type of amendment and the vote standard for amendments by stockholders were all relevant factors for evaluating board accountability with respect to charter and bylaw amendments.
- Boardroom Diversity: A majority of all respondents, including issuers and investors, indicated that they consider overall diversity (including gender) when evaluating boards.
- Equity Plans: According to ISS, investor respondents indicated that they would weigh a combination of plan features and grant practices as, or more, heavily than plan cost alone in a scorecard approach to evaluating US equity-based compensation proposals. ISS plans to implement a “balanced scorecard” approach to evaluating plan proposals for US companies that weighs factors under three categories: cost, plan features and company grant practices.
- Risk Oversight/Audit: While a majority of investor respondents indicated that, when evaluating the board’s role in risk oversight, the role of the relevant risk oversight committee, the board’s risk oversight policies and procedures, board oversight action prior to incidents and board oversight after an incident were all “very” or “somewhat” important, the highest percentage (85 percent of investors) indicated that action subsequent to an incident was “very” important.
ISS expects to release draft voting policies in October. Typically, ISS publishes its final benchmark voting policies in November, and applies such policies to proposals voted on at meetings held on or after February 1 of the following year.
To view ISS’ complete summary of its 2014–2015 survey results, click here.