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Institutional Shareholder Services Inc. will call out companies with no women on their boards, under a Nov. 16 update to the policies behind its voting advice for investors.
Putting a spotlight on all-male boards in the proxy adviser’s reports is meant to help investors that are pushing for more diverse directors.
ISS won’t factor a lack of gender diversity into its recommendations for voting on directors at companies’ next round of annual meetings, at least not in the U.S. Having no female directors will be taken into account in Canada, where securities regulators have told companies to disclose whether they have a written policy for identifying and nominating women to their boards.
More than two-thirds of investors told ISS in a recent survey that they consider all-male boards “problematic.” Its policy updates for the coming proxy season also covered issues such as board compensation and gender-based pay gaps.
Lawmakers, meanwhile, have set their sights on ISS and fellow proxy adviser Glass Lewis & Co. A bill (H.R. 4015) advanced by a House panel Nov. 15 would make the firms provide more disclosure on how they come up with their voting advice and analysis. The legislation from Rep. Sean Duffy (R-Wis.), on its third try since it was first introduced last year, would also require reporting on any potential conflicts of interest.
The bill’s backers say the firms need to be more tightly regulated given the influence they have over investors’ votes. A proxy adviser’s recommendation against company management can swing votes on directors and executive pay by anywhere from 6 to 25 percentage points, according to a government review of recent studies.
“That’s why we think there should be safeguards in place,” Ted Allen, vice president of strategic communications at the National Investor Relations Institute, told Bloomberg Law. The institute’s members represent more than 1,600 publicly traded companies.
ISS, which opposes the bill, said it would inhibit investors’ ability to make informed voting choices. “This is really an unprecedented effort to screen the research, data and analytics that our clients use to make their decisions,” Lorraine Kelly, head of the adviser’s proxy business, told Bloomberg Law.
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