On 11 November 2019, the Institutional Shareholder Services group of companies (ISS) published updates to its 2020 benchmark proxy voting policies. The updated policies will generally be applied for shareholder meetings on or after 1 February 2020.
Amendments include changes to the following policies:
- Director elections: inclusion of a new policy on board gender diversity noting that both appointments and succession plans should be based on merit and objective criteria and, within this context, should promote diversity of gender, social and ethnic backgrounds and cognitive and personal strengths. The policy on chair tenure has also been amended to clarify that tenure will be considered as one of several key indicators relevant to the reelection of chairs.
- Board and committee composition: removal of the exception for companies below the FTSE 350 in relation to independent directors forming 50% of the board and the exception allowing chairs to sit on the audit committee. These reflect the changes made to the UK Corporate Governance Code in 2018.
- Remuneration: amendment of the pension contribution policy to provide that pension arrangements for new directors should be aligned with the wider workforce and that companies should disclose whether or not this is the case. For incumbents, contribution rates should be aligned with the workforce overtime. Changes were also made to the policy on service contracts, clarifying that long-term incentive awards should be pro-rated for time served as an executive and for performance.
- Remuneration report: The bonus policy has been amended so that where bonus targets are not disclosed, the ISS will normally (rather than may) recommend a vote against a remuneration report. A negative vote recommendation may occur where a company chooses to disclose one or more years in arrears after the relevant reporting year. The exit payments policy has been amended to state that generally formal notice should be served no later than the day on which the executive's leaving date is announced. If notice is not served at this time, an explanation for this should be provided in the subsequent remuneration report. The policy on the use of discretion by remuneration committees has also been amended to include disclosure of how environmental, social and governance matters are considered by the committee when determining remuneration outcomes.
The policy updates can be found here and an executive summary of the updates can be found here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
