By Amy Wood
Each November, ISS updates its proxy vote recommendation policies for meetings held after February of the following year. As part of that process, ISS collects information from institutional stockholders and corporate issuers in the form of an annual survey. The survey questions are interesting because they often provide a first glance into certain policies that ISS is considering changing or adopting (though of course not all of the questions translate into policy updates and there are always policy updates that weren't reflected in the survey).
Here is a link to this year's survey. The deadline to respond is August 3 and individuals who respond to the survey will receive a copy of the results. Please feel free to respond to the survey or pass it along to anyone else who may be interested in responding.
A few items in the survey we found especially interesting are:
- Question 13 asking what level of opposition on a say-on-pay proposal should trigger an explicit response from the board regarding improvements to pay practices. The range of answers suggests that ISS may expect to see changes in compensation practices following a say-on-pay vote that failed or one that passed by an insignificant margin.
- Question 15 suggesting that ISS may be considering a more holistic or discretionary approach to equity plan proposals where certain factors might mitigate an otherwise excessive overhang cost.
- Question 17 suggesting ISS is still considering whether single-trigger change in control equity vesting acceleration should negatively affect vote recommendations for equity plan proposals (and perhaps other compensation proposals).
- Question 18 suggesting that ISS is still considering how to evaluate equity plan proposals submitted for the first time after an IPO solely for Section 162(m) purposes. As you may recall, ISS used to support these proposals regardless of other plan terms because it viewed Section 162(m) deductibility as in the stockholders' best interests but then earlier this year ISS suggested that it would review the proposals on a case-by-case basis to determine whether the Section 162(m) benefit was outweighed by other problematic provisions (e.g., permitting repricing without stockholder approval).
- Question 26 suggesting that ISS is considering changes to its policy to generally recommend voting against proposal to amend bylaws to adopt a company's jurisdiction of incorporation as the exclusive forum for certain legal disputes.
Please feel free to contact Amy Wood or Thomas Welk, Attorneys at Cooley LLP, with any questions. We woll keep you posted regarding the results of the survey and the ISS policy update process generally.