Posts Tagged ‘ISS’

ISS 2015 Independent Chair Policy FAQs

Posted by Carol Bowie, Institutional Shareholder Services Inc., on Monday January 26, 2015 at 9:16 am
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Editor’s Note: Carol Bowie is Head of Americas Research at Institutional Shareholder Services Inc. (ISS). This post relates to ISS independent chair voting policy guidelines for 2015.

1. How does the new approach differ from the previous approach?

Under the previous approach, ISS generally recommended for independent chair shareholder proposals unless the company satisfied all the criteria listed in the policy. Under the new approach, any single factor that may have previously resulted in a “For” or “Against” recommendation may be mitigated by other positive or negative aspects, respectively. Thus, a holistic review of all of the factors related to company’s board leadership structure, governance practices, and performance will be conducted under the new approach.

For example, under ISS’ previous approach, if the lead director of the company did not meet each one of the duties listed under the policy, ISS would have recommended For, regardless of the company’s board independence, performance, or otherwise good governance practices.

Under the new approach, in the example listed above, the company’s performance and other governance factors could mitigate concerns about the less-than-robust lead director role. Conversely, a robust lead director role may not mitigate concerns raised by other factors.

…continue reading: ISS 2015 Independent Chair Policy FAQs

Director Tenure: A Solution in Search of a Problem

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday January 23, 2015 at 9:02 am
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Editor’s Note: The following post comes to us from Scott C. Herlihy, partner in the Corporate Department at Latham & Watkins LLP, and is based on an article by Mr. Herlihy, Steven B. Stokdyk, and Joel H. Trotter that originally appeared in NACD’s Directorship magazine.

Director tenure continues to gain attention in corporate governance as term limits become a cause célèbre. Proponents argue directors should no longer qualify as independent after 10 years of service, even though no law, rule or regulation prescribes a maximum term for directors.

We believe director term limits would be misguided and counterproductive. Institutional Shareholder Services (ISS) has increased its focus on the issue. ISS’ governance rating system, QuickScore, views tenure of more than nine years as an “excessive” length that potentially compromises director independence. ISS’ more moderate proxy voting guidelines, while opposing proposals for director term limits and mandatory retirement ages, indicates that ISS will “scrutinize” boards whose average tenure exceeds 15 years.

…continue reading: Director Tenure: A Solution in Search of a Problem

ISS Releases 2015 Benchmark Policy Updates

Posted by Carol Bowie, Institutional Shareholder Services Inc., on Friday January 16, 2015 at 1:01 pm
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Editor’s Note: Carol Bowie is Head of Americas Research at Institutional Shareholder Services Inc. (ISS). This post relates to ISS global benchmark voting policy guidelines for 2015.

ISS recently issued updated guidelines for several of its benchmark global voting policies, which will be effective for analyses of publicly traded companies with shareholder meetings on or after Feb. 1, 2015. For the 10th year running, ISS gathered broad input from institutional investors, corporate issuers, and other market constituents worldwide as a key part of its policy development process. The 2015 updates reflect the time and effort of hundreds of investors, issuers, corporate directors, and other market participants who provided input through a variety of channels, including ISS’ annual policy survey, topical and regional roundtables, and direct engagements with staff.

…continue reading: ISS Releases 2015 Benchmark Policy Updates

Compensation Season 2015

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday January 9, 2015 at 9:02 am
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Editor’s Note: The following post comes to us from Michael J. Segal, partner in the Executive Compensation and Benefits Department of Wachtell, Lipton, Rosen & Katz, and is based on a Wachtell Lipton memorandum by Mr. Segal, Jeannemarie O’Brien, Andrea K. Wahlquist, Adam J. Shapiro, and David E. Kahan.

Boards of directors will soon shift attention to the 2015 compensation season. Key considerations in the year ahead include the following:

1. Be Prepared for Shareholder Activists. Companies today are more vulnerable to activist attacks than ever before. Companies should therefore ensure that they understand how their change in control protections function if an activist obtains a significant stake in the company or control of the board. A change in board composition can trigger the application of the golden parachute excise tax under Section 280G of the Internal Revenue Code and can result in negative tax consequences for executives and the company. In addition, in the age of performance awards and double-trigger vesting, clarity about the impact of a change in control on performance goals matters more than ever. Appropriate protections ensure that management will remain focused on shareholder interests during a period of significant disruption; inadequate protections can result in management departures at a time when stability is crucial.

…continue reading: Compensation Season 2015

Corporate Governance Issues for 2015

Posted by Holly J. Gregory, Sidley Austin LLP, on Friday December 12, 2014 at 9:00 am
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Editor’s Note: Holly J. Gregory is a partner and co-global coordinator of the Corporate Governance and Executive Compensation group at Sidley Austin LLP. This post is based on an article that originally appeared in Practical Law The Journal. The views expressed in the post are those of Ms. Gregory and do not reflect the views of Sidley Austin LLP or its clients.

Governance of public corporations continues to move in a more shareholder-centric direction. This is evidenced by the increasing corporate influence of shareholder engagement and activism, and shareholder proposals and votes. This trend is linked to the concentration of ownership in public and private pension funds and other institutional investors over the past 25 years, and has gained support from various federal legislative and regulatory initiatives. Most recently, it has been driven by the rise in hedge fund activism.

…continue reading: Corporate Governance Issues for 2015

ISS and Glass Lewis Update Proxy Voting Guidelines for 2015

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday November 29, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Yafit Cohn, Associate at Simpson Thacher & Bartlett LLP, and is based on a Simpson Thacher memorandum.

Institutional Shareholder Services Inc. (“ISS”) and Glass Lewis have both released updates to their respective proxy voting guidelines. [1] ISS’s revised policies will take effect for annual meetings occurring on or after February 1, 2015. Glass Lewis’s new policies will take effect for meetings occurring after January 1, 2015, while its clarifications of existing policies are effective immediately.

…continue reading: ISS and Glass Lewis Update Proxy Voting Guidelines for 2015

ISS and Glass Lewis Voting Guidelines for 2015 Proxy Season

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday November 20, 2014 at 9:39 am
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Editor’s Note: The following post comes to us from Edmond T. FitzGerald, partner and head of the Executive Compensation Group at Davis Polk & Wardwell LLP, and is based on a Davis Polk client memorandum by Kyoko T. Lin and Ning Chiu.

ISS and Glass Lewis, two influential proxy advisory firms, have both released updates to their policies that govern recommendations for how shareholders should cast their votes on significant ballot items for the 2015 proxy season, including governance, compensation and environmental and social matters.

ISS policy updates are effective for annual meetings after February 1, 2015. We understand that the new Glass Lewis policies are effective for annual meetings after January 1, 2015, but clarifications to existing policies are effective immediately.

…continue reading: ISS and Glass Lewis Voting Guidelines for 2015 Proxy Season

ISS Details Governance QuickScore 3.0 Updates

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday November 15, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Yafit Cohn, Associate at Simpson Thacher & Bartlett LLP, and is based on a Simpson Thacher memorandum.

Institutional Shareholder Services Inc. (“ISS”) has released a technical document detailing the factors and scoring methodology of Governance QuickScore 3.0, which ISS plans to launch on November 24, 2014. [1] Corporate issuers may verify, update or correct the data used to calculate their scores, via ISS’s data verification site, through 8:00 p.m. EST on November 14.

…continue reading: ISS Details Governance QuickScore 3.0 Updates

Executive Compensation in Controlled Companies

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday November 13, 2014 at 9:12 am
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Editor’s Note: Kobi Kastiel is a fellow at the Harvard Law School Program on Corporate Governance. His article, Executive Compensation in Controlled Companies, is forthcoming in the January 2015 issue of Indiana Law Journal and available here. Additional work from the Program on Corporate Governance on executive compensation includes Paying for Long-Term Performance by Lucian Bebchuk and Jesse Fried, discussed on the Forum here.

More than a decade ago, Professors Lucian Bebchuk and Jesse Fried published the seminal work on the role and significance of managerial power theory in executive compensation. Their work cultivated a vivid debate on executive compensation in companies with dispersed ownership. The discourse on the optimality of executive pay in controlled companies, however, has been more monolithic. Conventional wisdom among corporate law theorists has long suggested that the presence of a controlling shareholder should alleviate the problem of managerial opportunism because such a controller has both the power and incentives to curb excessive executive pay.

My Article, Executive Compensation in Controlled Companies, forthcoming in the Indiana Law Journal, challenges that common understanding by proposing a different view that is based on an agency problem paradigm, and by presenting a comprehensive framework for understanding the relationship between concentrated ownership and executive pay. On the theoretical level, the Article shows that controlling shareholders often have incentives to overpay professional managers instead of having an arm’s-length contract with them, and therefore it suggests that compensation practices in a large number of controlled companies may have their own pathologies.

…continue reading: Executive Compensation in Controlled Companies

ISS, Share Authorizations, and New Data Verification Process

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday November 9, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from John R. Ellerman, founding partner of Pay Governance, and is based on a Pay Governance memorandum by Mr. Ellerman.

Publicly traded companies are required by the SEC and the stock exchanges to obtain shareholder approval when such companies seek to implement a new long‐term equity plan or increase the share reserve pursuant to such plans.

Companies comply with this requirement by seeking shareholder approval through the annual proxy process. Institutional Shareholder Services (ISS), the large proxy advisory firm retained by many institutional investors for proxy voting advice, offers its services to institutional clients by evaluating such proposals. One of the tools used by ISS in developing its voting advice is a financial model referred to as the Shareholder Value Transfer (SVT) Model that attempts to assign a cost to each company’s equity plan. ISS’ proprietary SVT model contains numerous hidden values and algorithms a company cannot readily replicate. If the SVT Model results in an assigned cost that falls outside the boundaries of what is acceptable to ISS, ISS will submit a negative vote recommendation.

…continue reading: ISS, Share Authorizations, and New Data Verification Process

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