Posts Tagged ‘ISS’

Governance Priorities for 2014

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.

As the fallout from the financial crisis recedes and both institutional investors and corporate boards gain experience with expanded corporate governance regulation, the coming year holds some promise of decreased tensions in board-shareholder relations. With governance settling in to a “new normal,” influential shareholders and boards should refocus their attention on the fundamental aspects of their roles as they relate to the creation of long-term value.

Institutional investors and their beneficiaries, and society at large, have a decided interest in the long-term health of the corporation and in the effectiveness of its governing body. Corporate governance is likely to work best in supporting the creation of value when the decision rights and responsibilities of shareholders and boards set out in state corporate law are effectuated.

…continue reading: Governance Priorities for 2014

ISS QuickScore 2.0

Posted by David A. Katz, Wachtell, Lipton, Rosen & Katz, on Wednesday January 29, 2014 at 11:19 am
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Editor’s Note: David A. Katz is a partner at Wachtell, Lipton, Rosen & Katz specializing in the areas of mergers and acquisitions, corporate governance, and complex securities transactions. This post is based on a Wachtell Lipton memorandum by Mr. Katz, Sabastian V. Niles, and Francis J. Stapleton; the complete publication, including annex, is available here.

Institutional Shareholder Services Inc. (ISS) has announced the governance factors and other technical specifications underlying its new Governance QuickScore 2.0 product, which ISS will apply to publicly traded companies for the 2014 proxy season. Companies have until 8pm ET on Friday, February 7th to verify the underlying raw data and can submit updates and corrections through ISS’s data review and verification site. ISS will release company ratings on Tuesday, February 18th, and the scores will be included in proxy research reports issued to institutional shareholders. While previous QuickScore ratings remained static between annual meeting periods, ISS has now committed to update ratings on an on-going basis based on a company’s public disclosures throughout the calendar year.

…continue reading: ISS QuickScore 2.0

ISS Releases FAQs: Defensive Bylaw May Lead to Negative Vote Recommendations

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday January 26, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Rebecca Grapsas, senior associate in the Corporate Department of Weil, Gotshal & Manges LLP, and is based on a Weil alert.

Public companies that have recently adopted or are considering adopting bylaws that disqualify director nominees who receive compensation from anyone other than the company should be aware of new FAQs released yesterday by Institutional Shareholder Services (ISS) and the potential impact the FAQs may have on forthcoming director elections. Such bylaws typically operate in conjunction with advance notice bylaws that require proponents to disclose compensation arrangements with their nominees. Compensation payable by a third party for director candidacy and/or board service—for example, by an insurgent in a contested director election—may call into question a director’s undivided loyalty to the company and all of its shareholders.

…continue reading: ISS Releases FAQs: Defensive Bylaw May Lead to Negative Vote Recommendations

ISS To Revise QuickScore

Posted by Amy L. Goodman, Gibson, Dunn & Crutcher LLP, on Sunday January 19, 2014 at 9:00 am
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Editor’s Note: Amy Goodman is a partner and co-chair of the Securities Regulation and Corporate Governance practice group at Gibson, Dunn & Crutcher LLP. The following post is based on a Gibson Dunn alert by Ms. Goodman and Elizabeth A. Ising.

On January 8, 2014, Institutional Shareholder Services, Inc. (“ISS”) announced that it will launch a new version of QuickScore (“QuickScore 2.0”) on February 18, 2014. QuickScore benchmarks a company’s governance risk against other companies in the Russell 3000 Index based on a number of weighted governance factors. QuickScore 2.0 will use a different method to score companies’ governance risk and will automatically reflect changes in companies’ governance structures based on publicly disclosed information.

…continue reading: ISS To Revise QuickScore

ISS Publishes Guidance on Director Compensation (and Other Qualification) Bylaws

Editor’s Note: Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton memorandum by Mr. Lipton, Andrew R. Brownstein, Steven A. Rosenblum, Trevor S. Norwitz, David C. Karp, and Sabastian V. Niles.

In the latest instance of proxy advisors establishing a governance standard without offering evidence that it will improve corporate governance or corporate performance, ISS has adopted a new policy position that appears designed to chill board efforts to protect against “golden leash” incentive bonus schemes. These bonus schemes have been used by some activist hedge funds to recruit director candidates to stand for election in support of whatever business strategy the fund seeks to impose on a company.

…continue reading: ISS Publishes Guidance on Director Compensation (and Other Qualification) Bylaws

M&A Executive Compensation Enhancements and Impact on the Say-on-Golden-Parachute Vote

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday January 9, 2014 at 9:29 am
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Editor’s Note: The following post comes to us from Sullivan & Cromwell LLP, and is based on a Sullivan & Cromwell publication by Matthew M. FriestedtMarc Trevino, and Jane Y. Wang.

We have reviewed the 365 merger agreements that were announced during the two years after the “Say-on-Golden-Parachute” vote rule went into effect on April 25, 2011 and that were subject to the rule. [1] We found that 39 companies (11% of the total) substantively enhanced executive compensation arrangements in connection with the transactions.

Some of the more common executive compensation enhancements, which generally did not result in negative vote recommendations from Institutional Shareholder Services (“ISS”), were: granting deal closing bonuses (in 17 deals), granting retention bonuses (in 16 deals) and granting additional equity awards that vest on or post-closing (in 13 deals). However, the following executive compensation enhancements generally did result in negative vote recommendations from ISS: granting new excise tax gross-ups (three out of four deals received negative ISS recommendations), cashing-out severance or converting severance into a retention bonus without an actual termination of employment (five out of eight deals received negative ISS recommendations) and accelerating the vesting of equity awards when the stated performance hurdles were not achieved or were artificially low (five out of six deals received negative ISS recommendations).

…continue reading: M&A Executive Compensation Enhancements and Impact on the Say-on-Golden-Parachute Vote

ISS Advises Against By-Law Restricting Shareholder Compensation of Board Nominees

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday December 27, 2013 at 9:00 am
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Editor’s Note: The following post comes to us from Berl Nadler, partner at Davies, Ward, Phillips & Vineberg LLP, and is based on a Davies publication by Mr. Nadler, Alex Moore, and Andrew Cooley.

In proxy contests earlier this year involving the boards of Agrium Inc. (“Agrium”) and Hess Corporation (“Hess”), the compensation by activist shareholders of their proposed director nominees was heavily criticized both by the target boards and by third party commentators. The Agrium and Hess contests have given rise to a debate over the merits and propriety of nominee compensation generally, with some institutional shareholders and commentators calling for the prohibition of the practice. In the face of this critical commentary, the recent experience of Provident Financial Holdings, Inc. (“Provident”), a U.S. bank holding company, suggests that efforts by boards to prohibit the practice entirely are likely to meet resistance.

…continue reading: ISS Advises Against By-Law Restricting Shareholder Compensation of Board Nominees

Compensation Season 2014: Shareholder Engagement

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday December 20, 2013 at 10:11 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, Adam J. Shapiro, Jeremy L. Goldstein, and David E. Kahan.

For many public companies, the new year marks the beginning of compensation season. As in years past, we have set forth below some of our thoughts on what to expect from the current compensation environment. Unlike previous years, the upcoming proxy season is not marked by new legislative or regulatory developments. And, as described in our memorandum of November 26, 2013, discussed previously on this Forum, here, the Institutional Shareholder Services (ISS) voting policies regarding compensation matters have remained largely unchanged. The most significant development this proxy season is the continuation of a single trend: increasing levels of shareholder engagement.

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ISS Updates Proxy Voting Policies, Requests Peer Group Changes

Editor’s Note: Holly J. Gregory is a corporate partner specializing in corporate governance at Weil, Gotshal & Manges LLP. This post is based on a Weil Gotshal alert; the complete publication, including appendicies, is available here.

On November 21, 2013, Institutional Shareholder Services Inc. (ISS) released updates to its proxy voting policies for the 2014 proxy season, effective for meetings held on or after February 1, 2014. [1] In addition, ISS has requested that companies notify it by December 9, 2013 of any changes to a company’s self-selected peer companies for purposes of benchmarking CEO compensation for the 2013 fiscal year.

This post provides guidance to US companies on how to address ISS policy changes and also highlights recent developments regarding potential regulation or self-regulation of proxy advisory firms.

The amendments to ISS proxy voting policies for the 2014 proxy season relate to:

…continue reading: ISS Updates Proxy Voting Policies, Requests Peer Group Changes

Some Thoughts for Boards of Directors in 2014

Editor’s Note: Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. The following post is based on a Wachtell Lipton memorandum by Mr. Lipton, Steven A. Rosenblum, and Karessa L. Cain.

In many respects, the relentless drive to adopt corporate governance mandates seems to have reached a plateau: essentially all of the prescribed “best practices”—including say-on-pay, the dismantling of takeover defenses, majority voting in the election of directors and the declassification of board structures—have been codified in rules and regulations or voluntarily adopted by a majority of S&P 500 companies. Only 11 percent of S&P 500 companies have a classified board, 8 percent have a poison pill and 6 percent have not adopted a majority vote or plurality-vote-plus-resignation standard to elect directors. The activists’ “best practices” of yesterday have become the standard practices of today. While proxy advisors and other stakeholders in the corporate governance industry will undoubtedly continue to propose new mandates, we are currently in a period of relative stasis as compared to the sea change that began with the Sarbanes-Oxley Act and unfolded over the last decade.

In other respects, however, the corporate governance landscape continues to evolve in meaningful ways. We may be entering an era of more nuanced corporate governance debates, where the focus has shifted from check-the-box policies to more complex questions such as how to strike the right balance in recruiting directors with complementary skill sets and diverse perspectives, and how to tailor the board’s role in overseeing risk management to the specific needs of the company. Shareholder engagement has been an area of particular focus, as both companies and institutional investors have sought to engage in more regular dialogue on corporate governance matters. The evolving trend here is not only the frequency and depth of engagement, but also a more fundamental re-thinking of the nature of relationships with shareholders and the role that these relationships play in facilitating long-term value creation. Importantly, this trend is about more than just expanding shareholder influence in corporate governance matters; instead, there is an emphasis on the roles and responsibilities of both companies and shareholders in facilitating thoughtful conversations instead of reflexive, off-the-shelf mandates on corporate governance issues, and cultivating long-term relationships that have the potential to curb short-termist pressures in the market.

…continue reading: Some Thoughts for Boards of Directors in 2014

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