Here’s a rundown of the dozen topics noted in this 40-page summary of responses from the recent ISS policy survey. It’s expected that ISS will drop policy updates in November:
1. Multiclass capital structures (all countries): Investors largely agree (71%) that non-common shares with superior voting rights should be treated similarly to common shares with multiple votes. Non-investors mostly disagree (62%).
2. Burden of proof for shareholder proposals (US): A significant portion of respondents (43% investors, 60% non-investors) believe proponents should always provide detailed, company-specific cases for shareholder proposals. An additional 24% of investors think this is necessary when proposals go beyond disclosure.
3. Independent board chair (US): Investors generally favor an independent board chair (43%), while non-investors (51%) prefer board flexibility unless there’s evidence of oversight failure.
4. Written consent (US): Investors (57%) support shareholders’ right to act by written consent as a governance tool. Non-investors (49%) are more skeptical, citing minimal practical benefit to minority shareholders.
5. Director overboarding (all countries): Opinions vary on maximum board roles:
- Investors favor limits (e.g., five or fewer total board seats).
- For CEOs, 55% of investors support only one external seat.
- More than 75% of investors see CEO roles as board chairs in other companies as a concern.
- Within-company group board seats are not generally seen as overboarding risks.
6. Non-executive director pay (US): Top investor concerns include:
- Inadequate disclosure of unusual payments (34%).
- Excessive perquisites or retirement benefits (32%).
- Non-executive director pay exceeding that of executives (33%).
- Some non-investors (25%) believe no single-year issue should trigger negative voting recommendations.
7. Equity-based executive incentives (all countries):
- Investors are split on using time-based equity.
- A mix of time- and performance-based awards is preferred (38% investors, 45% non-investors).
- Long-term vesting (five+ years) is seen as a way to justify time-based awards.
- Investors favor strong retention requirements (41% support 100% net share retention).
8. Say-on-pay responsiveness policy (US): A majority of respondents (64% investors, 88% non-investors) do not penalize companies that attempted but failed to obtain shareholder feedback. Most (80 – 91%) agree that positive pay changes can still be considered responsive.
9. Modifying ESG/DEI metrics in incentive plans (US, Canada): Investors (73%) oppose the removal of ESG/DEI metrics from in-flight awards without compelling reasons. Non-investors (76%) are more lenient, suggesting the removal alone is not necessarily problematic.
10. AI governance and risk management (all countries):
- Investors (58%) support global frameworks for AI risk management; non-investors (84%) believe it’s premature.
- Both groups favor disclosure only when AI is central to business strategy.
- Public disclosures don’t necessarily reflect board understanding.
- There’s no consensus on the necessity of dedicated AI expertise on boards.
11. Risk disclosures – biodiversity, cybersecurity, human rights:
- Investors see cybersecurity (79%) and human rights (73%) as highly important to disclose.
- Non-investors prioritize cybersecurity (51%) more than biodiversity or human rights.
12. Board diversity and DEI (US):
- Investors emphasize continued focus on board and workforce diversity and disclosure (29%).
- Non-investors prioritize diversity aligned with business needs (34%).
- Most respondents value skills, gender and tenure diversity over other factors.
Authored by
Broc Romanek