Institutional Shareholder Services Inc. (ISS), one of the major proxy service providers to mutual funds, recently released its 2012 updates to its benchmark proxy voting guidelines. These guidelines will be effective for shareholder meetings held on or after February 1, 2012. Significant updates to the guidelines include:
- Heightened Scrutiny for Say on Pay Votes. Anything less than a strong majority (at least 70% of votes) on a company's 2011 say-on-pay proposal will mean that the company's election of compensation committee members and management's 2012 say-on-pay proposal will be subject to a case-by-case analysis by ISS.
- New Pay-for-Performance Analysis. ISS has adopted a modified pay-for-performance analysis that attempts to provide a more robust view of the relationship between executive pay and company performance over a sustained time horizon. A recent Davis Polk memorandum analyzes the new approach in detail.
- Proxy Access. ISS will make recommendations on a case-by-case basis on any proposal to implement proxy access, taking into account: (1) company-specific factors; (2) proposal-specific factors; and (3) the method of determining which nominations appear on the ballot if multiple shareholders submit nominations.
- Board Independence in Japan. ISS will recommend against a company's top executive if the board does not include at least one outside director.
An executive summary of the revised ISS guidelines can be found here.
Davis Polk recently issued a client memorandum summarizing several of the key policy updates which can be found here.