"ISS Opens Comment Period for 2014 Proxy Voting Policy Changes"

by Skadden, Arps, Slate, Meagher & Flom LLP

On October 21, 2013, Institutional Shareholder Services (ISS) issued draft policy changes for 2014 that, if adopted, would become effective for shareholder meetings taking place on or after February 1, 2014. ISS is soliciting comments from interested parties, which may be submitted through November 4, 2013. The two proposed changes to ISS’s U.S. voting policy relate to its pay-for-performance quantitative screen and board responsiveness to majority-supported shareholder proposals.

Pay-for-performance quantitative screen. ISS uses several pay-for-performance metrics to gauge the alignment between executive compensation and performance. ISS’s Relative Degree of Alignment (RDA) measure compares a company’s total shareholder return (TSR) rank with its CEO total pay rank within the company’s peer group over a one-year period (weighted 40 percent) and a three-year period (weighted 60 percent). ISS is proposing to eliminate the one-year timeframe and to compare compensation and TSR over three years for purposes of its pay-for-performance quantitative screen.

In addition to general comments, ISS has solicited responses to the following questions:

  • Are there circumstances under which performance or pay from the most recent year should weigh more heavily in a pay-for-performance analysis?
  • Are there any unintended consequences from using a simple, unweighted three-year pay and performance measure as the basis for the RDA screen?

The full proposal and request for comment can be found here.

Board responsiveness to majority-supported shareholder proposals. As previously communicated by ISS, in 2014 the company will recommend that shareholders vote against or withhold votes from individual directors, committee members or the entire board of directors, as appropriate, if the board failed to act on a shareholder proposal that received the support of a majority of the shares cast in the previous year. Responses that involve less than full implementation will be considered on a case-by-case basis, taking into account:

  • the subject matter of the proposal;
  • the level of support and opposition provided to the resolution in past meetings;
  • disclosed outreach efforts by the board to shareholders in the wake of the vote;
  • actions taken by the board in response to its engagement with shareholders;
  • the continuation of the underlying issue as a voting item on the ballot; and
  • other factors that ISS deems appropriate.

The proposed policy change would clarify that, with respect to evaluating board responsiveness to majority-supported shareholder proposals that are not fully implemented, ISS’s voting recommendations with respect to whether to withhold votes from individual directors, committee members or the entire board will be decided on a case-by-case basis. In addition, ISS would add the board’s rationale for less than full implementation, as disclosed in the proxy statement, as a factor to be considered in its case-by-case analysis.

ISS has solicited responses to the following questions:

  • In addition to the factors listed by ISS to be considered if a board does not fully implement a majority-supported shareholder proposal, what factors does your organization consider in evaluating board responsiveness to majority supported shareholder proposals?
  • If a company does not fully implement a majority-supported shareholder proposal, what points should a board’s rationale include in explaining its responsiveness to shareholders?

The full proposal and request for comment can be found here.

Submission of comments. Comments may be submitted via email to policy@issgovernance.com. If you wish to have your comment published, you must submit your name and organization for attribution.

Download PDF

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.

© Skadden, Arps, Slate, Meagher & Flom LLP | Attorney Advertising

Written by:

Skadden, Arps, Slate, Meagher & Flom LLP

Skadden, Arps, Slate, Meagher & Flom LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.