Following the release in September of the results of its global policy survey, proxy advisory firm Institutional Shareholder Services Inc. has made available for comment its proposed draft policy changes for 2017.
For U.S. companies, the proposed changes cover several important governance and executive pay topics:
Unilateral Board Actions – Multi-Class Capital Structure at IPO
According to ISS, there has been a marked increase in the number of companies going public with multi-class capital structures in which the classes have unequal voting rights. Through Aug. 30 of this year, 17 companies held their first annual meeting with these types of share structures, says ISS. That being the case, ISS is seeking comment on “the inclusion of a reasonable sunset provision on the adverse capital structure or governance provision.”
Specifically, ISS would like feedback on the following:
Restrictions on Binding Shareholder Proposals
In an effort to protect shareholders’ ability to submit proposals to amend bylaws, ISS is contemplating a vote against or withholding votes from members of the governance committee if the company’s charter or articles of incorporation restrict shareholder’s right to amend the bylaws.
Specifically, ISS is seeking feedback on the following:
General Share Issuance Mandates for Cross-Market Companies (Listed in the U.S., But Incorporated Elsewhere)
According to ISS, a number of formerly U.S.-based companies, treated as U.S. domestic issuers by the SEC, have reincorporated in recent years to jurisdictions where shareholder approval is required for any share issuance. There is not currently, however, “a U.S. policy on general share issuance mandates, as companies incorporated in the U.S. are not required to seek approval for share issuances except in certain specified circumstances.”
This being the case, ISS is proposing to “recommend in favor of general share issuance authorities up to a maximum of 20 percent of currently issued capital, as long as the duration of the authority is clearly disclosed and reasonable.”
ISS is seeking feedback on the following:
Executive Pay Assessments (Cross-Market Companies)
According to ISS, “A growing number of companies around the world are incorporated in one country but listed in a different country (often the U.S.) and may be required to include multiple compensation proposals on the same ballot relating to the same pay program.” Under the changes proposed by ISS,
U.S. Domestic Issuers with multiple compensation proposals on ballot that pertain to the same pay program will be assessed on a case-by-case basis using the following guiding principle: (1) align voting recommendations so as to not have inconsistent recommendations on the same pay program, and (2) use the policy perspective of the country in which the company is listed (e.g. U.S. say-on-pay policy for proposals relating to executive pay). However, if there is a compensation proposal on ballot under which there is no applicable U.S. policy, then the policy of the country that requires it to be on ballot would apply. This is a limited carve out; for U.S.-listed companies, most markets' say-on-pay proposals would be viewed from a U.S. say-on-pay policy perspective, aligned to the U.S. Management Say-on-Pay vote recommendation.
With regard to this change, ISS would like to know the following:
All Comments are due by 6 p.m. ET on Nov. 10 and can be submitted to email@example.com. ISS will release its final 2017 voting policies the week of Nov. 14 and these policies will apply to shareholder meetings taking place on or after Feb. 1, 2017.
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