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Sullivan & Cromwell's informative analysis of ISS negative recommendations against directors included in its "2018 Proxy Season Review" identified an "appreciable correlation" (at a minimum) between ISS negative recommendations against directors and lower director shareholder support levels, with the average level of voter support being about 97% if ISS recommends "for" a director and 78% if ISS recommends "against," but no significant impact on overall director elections resulting from those negative recommendations. ISS reportedly issued negative recommendations (in uncontested elections) against ~10% of directors in 2018, or over 1,600 directors at more than 500 Russell 3000 companies - compared to 1,095 directors last year.

An informative table on page 32 of the memo identifies for the Russell 3000 and S&P 500 the frequency of ISS negative director recommendations, the associated average shareholder vote, and the number of directors receiving less than majority support by issue/topic (such as independence, executive compensation, shareholder rights). As depicted and discussed in the memo, lack of responsiveness to shareholder concerns (e.g., failure to implement a successful shareholder proposal) was the most impactful recommendation, i.e., attained the lowest shareholder vote for directors (just 64%) in the face of an ISS withhold or against recommendation. The total number of directors in this category who received a negative recommendation increased from 26 in 2017 to 101 this year.

Additional noteworthy ISS-related takeaways include:

• Lack of responsiveness to a low say-on-pay vote was the second-most impactful recommendation, garnering average shareholder support of 70%. In addition, poor attendance - particularly at S&P 500 companies - continued to have a significant impact.
• The most common basis for a negative ISS recommendation (albeit with limited impact on voting support - averaging 88%) related to director independence issues. The second most common basis for a negative ISS recommendation related to adverse governance provisions at "newly public" companies not subject to a sunset. The average support level for directors in this category was 86%.
• New ISS policies on poison pills triggered many negative recommendations - 128 this year compared to 31 in 2017. Directors in this category received average shareholder support of 77%; four received less-than-majority support.

Also noteworthy year-over-year trends: (i) Significant increase in the percentage of E&S and political proposals withdrawn (35% voted vs. 45% withdrawn), with anti-discrimination proposals (predominantly gender pay equity) having the highest withdrawal rate, and (ii) More than twice the number of proposals (21 submitted in 2018 vs. 12 in 2017) seeking to link compensation to social issues (e.g., sustainability, social or environmental impact) - all of which garnered less than 20% support. 

The robust Executive Summary is itself sufficient to provide an overview of the season's top developments and trends, but also facilitates a deeper dive into particular proxy season statistics and trends for those seeking detailed information on specific issues.