Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...
By Michael Greene
Sept. 29 — Most investors think boards should never unilaterally adopt bylaws that diminish shareholder rights, according to an Institutional Shareholder Services Inc. survey released Sept. 29.
In evaluating board accountability, 72 percent of the investors surveyed indicated that “the board should never adopt bylaw/charter amendments that negatively impact investors' rights without shareholder approval.”
Additionally, 20 percent of the investors surveyed said “it depends,” and more than 90 percent of those respondents indicated that “unilateral bylaw/charter amendments regarding diminishing shareholder rights to call a special meeting/act by written consent and classifying the board would raise concern.”
In contrast, 44 percent of issuer respondents indicated that “the board should be free to unilaterally adopt any bylaw/charter amendment(s) subject to applicable law.” Additionally, 34 percent of the issuers answering this question chose ‘it depends.”
Although ISS didn't identify them specifically in plumbing the unilateral bylaw issue, fee-shifting bylaws, which allow enacting companies to recoup litigation expense from unsuccessful plaintiffs, have become an emerging tactic for corporate boards to use in deterring potential legal actions, especially in Delaware—where the Supreme Court has conceptually endorsed the measures (12 CARE 529, 5/16/14). There is a pending legal challenge to a provision that one company unilaterally adopted (see related story, this issue).
In other matters, most investors that ISS surveyed also appear concerned about the magnitude of CEO pay and how it is determined.
More than 60 percent of the investors surveyed indicated that “there is a threshold at which the magnitude of CEO pay warrants concern even if the company's performance is positive (e.g., outperforming peer group.)”
However, investors are divided on how to determine this threshold, “as 27 percent support relative proportional limits based on the degree of outperformance versus the company's peer group; 19 percent favor absolute limits on CEO compensation regardless of performance; and 14 percent advocate for proportional limits on compensation in relation to absolute company performance.”
A majority of investors (60 percent) and issuers (75 percent) indicated that they consider overall diversity on the board when evaluating boards. Notably, however, “17 percent of investor respondents and 7 percent of issuer respondents indicate that they do not consider gender diversity at all when evaluating boards.”
ISS's annual global voting policy survey was conducted between July 17 and Sept. 5. The survey garnered more than 370 total responses, including 105 from institutional investors and 255 from members of the corporate issuer community.
To contact the reporter on this story: Michael Greene in Washington at email@example.com
To contact the editor responsible for this story: Ryan Tuck at firstname.lastname@example.org
A link to the survey is available at http://www.issgovernance.com/file/publications/ISS2014-2015PolicySurveyResultsReport.pdf.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)