Executive Compensation and Corporate Governance | FTI Consulting

Executive Compensation and Corporate Governance Alert

ISS Releases Policy Changes for the 2019 Proxy Season

Corporate Finance & Restructuring

December 7, 2018

Institutional Shareholder Services (“ISS”) recently released its policy updates for its 2019 proxy voting guidelines, effective for meetings on or after February 1, 2019. Key changes include a new ISS policy in regard to gender diversity on boards and updated ISS policy on the magnitude of non-employee director pay.

Key ISS Policy Changes

  • Board Gender Diversity (New Policy) – Beginning in 2018, ISS began noting companies whose boards lacked gender diversity, however ISS did not issue any adverse voting recommendations as a result. Beginning in 2020 (one year grace period), ISS will begin issuing adverse voting recommendations against the nominating committee chairperson, as well as potentially against other members of the nominating committee, for boards that have no female directors. Exceptions to the adverse voting recommendation may be made in exceptional circumstances where the absence of gender diversity could be temporarily explained and/or excused. This policy applies ONLY to companies in either the Russell 3000 or S&P 1500 Indices.
  • Director Compensation (Policy Update) – In 2018, ISS began identifying companies with non-employee director compensation near or at the top of their respective industry and stated they may issue an Against voting recommendation for compensation committee members if non-employee director pay (as a group or by individual) is identified as “excessive” for multiple years in a row (i.e., two or more consecutive years; meaning the first Against recommendation could potentially occur in the 2019 proxy statement). ISS has delayed the implementation of this new policy pending a revised methodology for identifying outliers. As a result, 2020 will be the first year in which an Against recommendations could be issued.

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