In a recent article, the Wall Street Journal highlighted a change in the standard that ISS will use to gauge the responsiveness of boards of directors to majority-supported shareholders starting in 2014.
Under the previous standard, ISS would potentially recommend against or withhold votes on directors if a board failed to respond sufficiently to a shareholder proposal that was supported either by a majority of the outstanding shares in the preceding year or by a majority of the votes cast in two out of the three preceding years. (Prior to 2013, the standard was just a majority of shares outstanding in the preceding year.) As ISS announced last year and recently confirmed, starting in 2014 the standard will switch to majority of votes cast in the preceding year. As the WSJ reports, this subtle change could have a big impact:
Starting in 2014, Institutional Shareholder Services Inc. is changing its guidelines to recommend ousting directors who don't implement a shareholder proposal that got a majority of the votes cast at the 2013 meeting. Previously, ISS recommended "no" votes on directors only if the proposal received a majority of all the shares outstanding—a more forgiving standard for directors because many shares go uncast....
At least two dozen of the largest 1,000 public U.S. companies will potentially be affected by the ISS change in the coming months because of shareholder initiatives that passed in 2013 with a majority of votes cast but short of the tougher standard, according the Conference Board, which tracks corporate voting habits.
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