Looks like it’s not just the SEC that’s evaluating whether to shake everything up as this year’s policy survey from ISS suggests it’s reassessing a number of important governance policies in light of evolving market practices. Many survey questions signal that ISS is evaluating whether existing voting policies should become either more flexible – or more stringent. Survey responses are due by August 14th.
Here’s a rundown of the survey questions applicable to companies in the US:
1. Board Elections: ISS is asking whether companies that elect directors as an entire slate – rather than allowing shareholders to vote on each director individually – should face adverse voting recommendations. The survey explores whether slate elections should be considered a governance concern globally – or only in markets where they are uncommon.
2. Director Independence and Tenure: One of the survey’s most significant governance questions asks whether long board tenure should become a factor in determining director independence, asking:
- Whether tenure should matter at all;
- After how many years (10, 12, 15, 20 or another period) independence should be questioned; and
- Whether ISS should evaluate only individual tenure or broader board refreshment factors.
3. Virtual Annual Meetings: The survey devotes extensive attention to virtual-only shareholder meetings, asking:
- Whether virtual-only meetings should replace in-person meetings;
- Whether hybrid meetings should become the preferred standard;
- Which agenda items make virtual-only meetings inappropriate; and
- What circumstances justify virtual-only meetings (emergencies, cost savings, environmental benefits, dispersed shareholders, etc.).
4. Reincorporations and Shareholder Rights: ISS asks how shareholders should evaluate companies that:
- Reincorporate into another jurisdiction;
- Amend governing documents after changes in corporate law; or
- Adopt governance provisions that may reduce shareholder rights.
The survey probes how investors should balance claimed business benefits against potential reductions in shareholder protections.
5. “Problematic” Governance Provisions: One question asks whether ISS should continue issuing ongoing (“perpetual”) negative vote recommendations against directors when companies retain governance provisions such as:
- Multi-class share structures,
- Supermajority voting requirements,
- Restrictions on shareholder proposals, or
- Other long-term limitations on shareholder rights.
It also asks whether adverse recommendations should target only committee chairs or expand to additional directors over time.
6. Semiannual vs. Quarterly Reporting: The survey directly references the recent SEC proposal which would allow companies to report semiannually instead of quarterly. Respondents are asked whether they believe:
- Semiannual reporting would benefit companies;
- It would increase market risks by reducing disclosure frequency;
- It is appropriate only for smaller or early-stage companies; or
- It should generally be avoided.
7. Executive Pay Practices and Disclosure: ISS asks numerous questions about executive pay, including:
- Whether discretionary bonus plans at financial institutions should remain a governance concern;
- How ISS should respond if more companies become exempt from say-on-pay votes under proposed SEC rules;
- Appropriate board responsiveness thresholds when say-on-pay is unavailable; and
- Whether compensation committee members should continue to bear accountability in those situations.
The survey also examines whether companies should be permitted to withhold future long-term incentive performance goals because disclosure could cause competitive harm. It also asks whether relative performance goals deserve different treatment from absolute performance goals.
A new compensation topic are hybrid LTIP structures combining time-based and performance-based awards. ISS asks:
- Whether these plans should generally be supported;
- Under what circumstances they are appropriate;
- Which design features are essential (performance weighting, holding periods, clawbacks, etc.); and
- Whether hybrid plans are preferable to simply increasing traditional incentive opportunities.
8. Audit Oversight and Assurance Accountability: Several questions focus on strengthening accountability for:
- Companies that fail to respond to concerns raised by sustainability assurance providers under the EU Corporate Sustainability Reporting Directive (CSRD); and
- External auditors with significant audit-quality deficiencies.
ISS asks who shareholders should hold accountable – auditor, audit committee, the full board or some combination – and whether escalation should occur if problems persist.
9. Board Accountability: Across nearly every topic, the survey repeatedly asks whether accountability should fall on:
- Individual committee chairs,
- Entire committees,
- The full board,
- External auditors, or
- Some escalating combination depending on the seriousness and persistence of the governance concerns.
This reflects ISS’s continuing emphasis on using director elections as the primary mechanism for enforcing governance standards.
Authored by
Broc Romanek