ISS Launches Open Comment Period for 2021 ISS Benchmark Voting Policy Changes

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Stinson - Corporate & Securities Law Blog

ISS announced the launch of its annual benchmark voting policy comment period. ISS has made available for public comment a number of proposed changes to ISS’ benchmark voting policies for 2021. Key proposed changes for the U.S. are set forth below.

Director Elections: Racial/Ethnic Board Diversity

For companies in the Russell 3000 or S&P 1500 index, effective for meetings on or after Feb. 1, 2022, the proposal provides ISS will generally recommend a vote against or withhold from the chair of the nominating committee (or other directors on a case-by-case basis) where the board has no apparent racially or ethnically diverse members. Mitigating factors include the presence of a racial and/or ethnic minority on the board at the preceding annual meeting and a firm commitment to appoint at least one racial and/or ethnic diverse member.

Exclusive Forum Proposals

The proposal provides ISS will generally recommend a vote for federal forum selection provisions in the charter or bylaws that specify “the district courts of the United States” as the exclusive forum for federal securities law matters. ISS will generally recommend a vote against provisions that restrict the forum to a particular federal district court. Unilateral adoption (without a shareholder vote) of such a provision will generally be considered a one-time failure under the Unilateral Bylaw/Charter Amendments policy.

The proposal provides ISS will generally recommend a vote for charter or bylaw provisions that specify Delaware, or the Delaware Court of Chancery, as the exclusive forum for corporate law matters for Delaware corporations, in the absence of serious concerns about corporate governance or board responsiveness to shareholders. For states other than Delaware, the IRS proposes a vote case-by-case on exclusive forum provisions after taking into consideration a number of factors.

The proposal provides ISS will generally recommend a vote against provisions that specify a state other than the state of incorporation as the exclusive forum for corporate law matters, or that specify a particular local court within the state. Unilateral adoption of such a provision will generally be considered a one-time failure under the Unilateral Bylaw/Charter Amendments policy.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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