RiskMetrics Group (formerly ISS) has published for 2008 policy updates and clarifications to ISS Governance Services US benchmark guidelines. These guidelines are utilized by institutional and other investors in connection with voting their shares in public companies.
Two of the key topics addressed in this update are “Poor Pay Practices” and “Product Safety.”
With respect to poor pay practices, the current policy position for ISS is the recommendation of a withholding/against vote on compensation committee members, CEO’s and potentially the entire board of directors if the company has poor compensation practices, as well as a vote against equity plans if the plan is a vehicle for poor compensation practices.
The new policy position adds additional clarifications including the recommendation of withholding/against votes in cases where cautionary language has previously been applied but such poor pay practices have not been remedied. Examples of poor pay practices are expanded to include guaranteed multi-year base salary increases as part of an employment contract and perquisites for former executives such as car allowances, personal use of corporate aircraft or other “inappropriate” arrangements. Finally, a category of “poor disclosure” has been added, and base salary will now be used as a relative measure to determine if certain perks are deemed excessive.
ISS’s current policy position for product safety is to support resolutions requesting companies to disclose its policies related to toxic materials, unless substantial information is already provided by the company. ISS does not support resolutions requiring a company to reformulate its products.
The new ISS policy position will recommend a “FOR” vote on a proposal requesting the company to report on its policies, initiatives/procedures and oversight mechanisms related to toxic materials (including certain product line toxicities and/or product safety in its supply chain) unless the company already disclosed similar information or the company has formally committed to such initiatives and the Company has not been involved in any recent violations or controversies. (RiskMetrics Group, US Corporate Governance Policy, 2008 Updates, 11/19/07)