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Institutional Shareholder Services Releases 2011 Proxy Voting Guidelines
Practical Law Legal Update 9-503-9757 (Approx. 4 pages)
Institutional Shareholder Services Releases 2011 Proxy Voting Guidelines
by PLC Corporate and Securities
| Published on 22 Nov 2010 • USA (National/Federal) |
An update on Institutional Shareholder Services' (ISS) publication of its 2011 updates to its proxy voting guidelines.
On November 19, 2010, Institutional Shareholder Services (ISS) announced updates to its global proxy voting guidelines for 2011, addressing, among other things, the enhanced government regulation of corporations as a result of the Dodd-Frank Act. The 2011 US Corporate Governance Policy Updates change several of ISS's proxy recommendations, including in the following areas:
- Frequency of advisory vote on executive compensation. ISS has adopted a new policy recommending that stockholders vote in favor of annual advisory votes on executive compensation, to provide the highest amount of corporate accountability and communication between the company and stockholders. The Dodd-Frank Act requires these "say on pay" votes, as well as a vote on how often they must occur (for more information on say on pay, see Legal Update, SEC Proposes Rules Under Dodd-Frank On Stockholder Approval of Executive Compensation and Golden Parachutes).
- Advisory votes on golden parachutes. ISS has adopted a new policy recommending that stockholders vote on golden parachute compensation package proposals on a case-by-case basis. Stockholders should consider voting against a package if it includes, among other things:
- single-trigger payments that will happen immediately after a change in control;
- potentially excessive severance payments;
- changes that make packages look so attractive as to influence mergers that may not be in the best interests of stockholders; and
- the conditioning of a proposed transaction on stockholder approval of a golden parachute.
For more information on the advisory vote on golden parachutes, see Legal Update, SEC Proposes Rules Under Dodd-Frank On Stockholder Approval of Executive Compensation and Golden Parachutes. - Stockholder ability to act by written consent. ISS generally recommends that stockholders vote in favor of proposals giving stockholders the ability to act by written consent, but ISS has changed its policy to recommend a case-by-case analysis if, in addition to certain other factors, the company has the following stockholder rights provisions:
- unlimited right to call special meetings at a 10% threshold;
- a majority vote standard in uncontested director elections;
- no non-stockholder approved pill; and
- an annually elected board.
- Net operating loss protective amendments and poison pills. ISS has changed its policy to recommend voting against amendments designed to protect net operating losses (NOLs) or poison pills intended to protect a company's NOLs if the term of the amendments or the poison pill is longer than three years or the exhaustion of the NOLs. If the term of the proposed protective amendment or poison pill is shorter than three years or the exhaustion of the NOLs, ISS recommends a case-by-case analysis.
- Director attendance. ISS has changed its policy to recommend voting against directors who do not attend 75% of board and applicable committee meetings without an acceptable excuse. The updates provide more details on what constitutes an acceptable excuse for missing meetings.
The US updates will apply to stockholders' meetings on or after February 1, 2011.