Following the recent release of its global policy survey results (reported on here), ISS released today for public comment its proposed new 2020 voting policies, which include these three proposed changes for the US:
- Shareholder proposals on independent board chairs - The proposed update - which ISS indicates largely codifies its existing policy application - would specifically identify these factors as increasing the likelihood of an ISS "FOR" recommendation on an independent board chair proposal:
- Weak or poorly defined lead independent director role that fails to serve as an appropriate counterbalance to a combined CEO/chair role
- Presence of executive or non-independent chair in addition to the CEO; recent recombination of the CEO/chair roles; and/or departure from a structure with an independent chair
- Evidence that the board has failed to oversee & address material risks facing the company
- Material governance failure, particularly if the board has failed to adequately respond to shareholder concerns or if the board has materially diminished shareholder rights
- Evidence that the board has failed to intervene when management’s interests are contrary to shareholders' interests
- Sunset provisions for multi-class stock structures - The proposed update would add a distinct policy to address multi-class capital structures with unequal voting rights at newly public companies (i.e., companies that emerge from bankruptcy, spin-offs, direct listings, and traditional IPOs) to generally vote against or withhold votes from the entire board (except new nominees, who "should" be considered case-by-case) if - prior to or in connection with the company's IPO - a multi-class capital structure was implemented without a "reasonable" time-based sunset. These factors would be considered in assessing "reasonableness": (i) company’s lifespan, (ii) its post-IPO ownership structure, and (iii) board’s disclosed rationale for the sunset period, provided, however, that no sunset period of more than seven years from the date of the IPO will be considered reasonable.
- Share repurchase programs - The proposed update reportedly codifies ISS's existing approach, which generally reflects investor support for the appropriate use of buybacks. Added text enumerates specific "abusive" practices (e.g., use of buybacks to inappropriately manipulate incentive compensation metrics) that would thwart support for management proposals that grant authority to the board to engage in open market share repurchases.
The new policies - expected to be released in November - will apply to shareholder meetings on or after February 1, 2020. Comments should be submitted via email to policy@issgovernance.com, and will be made public. The comment period closes October 18th at 5 pm ET.
See the Society's comment letter on the Annual Policy Survey here, and access additional ISS resources on our Proxy Advisors page.