The ISS voting guidelines for the US market will take effect on February 1
Guidelines of ISS, the global corporate governance solutions provider, will include consideration of existing golden parachute clauses with executives and change the way it makes say on pay for performance calculations and recommendations in the US for the 2013 season.
The ISS voting guidelines to take effect on February 1, 2013 also expand on the organization’s stance against board members who repeatedly fail to attend board meetings and increase flexibility in making recommendations against boards for lack of responsiveness.
Under new guidance regarding golden parachute clauses, ISS says it will include existing agreements when formulating voting recommendations in the coming year, and not just focus on new or extended agreements. ISS says it made the change because most existing golden parachute agreements in the US were made before SEC regulations regarding them took effect in April of last year.
In cases where boards fail to act on majority-supported proposals, ISS will start using a ‘majority of shares cast in one year as the trigger to evaluate a company’s response to majority supported shareholder proposals’.
As before, ISS can recommend shareholders vote ‘against’ or ‘withhold’ from the entire board of directors, with the possible exception of new directors, for failure to respond. For 2013, ISS increased its flexibility so it can recommend against only specific members of a board and evaluate lack of responsiveness on a case-by-case basis.
Stating that ‘investors expect directors to attend their board and committee meetings,’ the new ISS guidelines also acknowledge that poor attendance is a primary reason directors receive majority withhold or against votes.
In 2013, recommendations of ‘against’ or ‘withhold’ will generally be made against directors who ‘attend less than 75 percent of the aggregate of their board and committee meetings for the period for which they served’.
Acceptable reasons for absence include medical issues and family emergencies. ISS will not necessarily recommend ‘against’ a director who misses only one meeting on a board that has held only three.
ISS guidelines concerning pay for performance recommendations will now use the ‘company's selected peers as an input to its peer group methodology, while maintaining an approach that includes company size and market capitalization constraints’ and ‘potentially incorporate a comparison of realizable pay to grant date pay as part of the qualitative evaluation of pay-for-performance alignment when relevant to the analysis in large cap companies.’
The new ISS guidelines also introduce changes to Voto di Lista guidance for Italy, overboarded directors and board tenure for Hong Kong and Singapore, quantitative and qualitative pay for performance evaluation for Canada and pledging of company stock in the US.
