On October 21, 2013, Institutional Shareholder Services Inc. (“ISS”) published its key draft policy changes for the 2014 proxy season (the “Draft Policies”). There are only two proposed updates for the US, neither of which represents sweeping reforms. The first modifies the existing pay-for-performance quantitative screen and the second clarifies ISS’s policy on board responsiveness to majority-supported shareholder proposals. The comment period closes on November 4, 2013, and ISS will publish comments as they are received. ISS’s final 2014 US and international policy updates are expected to be released during the week of November 18, 2013, and the final 2014 Global Policy Summary and Concise Guidelines are expected to be released in December. The 2014 policies will generally be effective for shareholder meetings of publicly-traded companies held on or after February 1, 2014.

Pay-for-Performance Quantitative Screen -

Under its current policies, ISS uses two principal quantitative screens to identify companies where a potential pay-for performance misalignment merits a deeper qualitative analysis of the pay program—absolute degree of alignment (“Absolute Alignment”) and relative degree of alignment (“RDA”). The Absolute Alignment screen measures alignment between CEO pay and company total shareholder return (“TSR”) over the prior five fiscal years. The RDA screen measures the degree of alignment between the company’s TSR and the CEO’s total pay, as compared against the company’s peers and as measured over one-year and three-year periods (weighted 40% and 60%, respectively).