News & Insights

Directors Governance Center

October 13, 2015

2015-2016 ISS Global Policy Survey Highlights

Institutional Shareholders Services (ISS) recently issued its 2015-2016 ISS Global Policy Survey, which reflects input from 109 institutional investors, 257 corporate issuers, and 20 consultants/advisors on key ISS policy matters. Highlights of the survey are as follows:**Proxy Access*: With respect to board-implemented proxy access rights that deviated from those proposed in a majority supported shareholder proposal:

*Survey responses were generally in line with the ISS benchmark voting policy adopted for 2015.

*72% of investors surveyed felt that managements adoption of a proxy access ownership threshold in excess of 3% warranted a negative ISS recommendation for director elections. This number increased to 90% if the proxy access ownership threshold exceeds 5%.

*Similarly, 90% of investors surveyed believed that a proxy access ownership requirement in excess of three years warranted a negative ISS recommendation for director elections.

2. Overboarding Thresholds : With respect to limits on the number of boards on which investors considered it appropriate for directors to sit:

*For non-CEO directors, 34% of investors surveyed believed that a limit of four directorships was acceptable, while 18% believed five was acceptable, and 20% believed six was acceptable. 28% of investors supported a different limit (commonly three total board seats) or no limit on the number of board seats on which a non-CEO director could serve.

*For active CEOs, investors indicated that far fewer directorships were appropriate, with 48% of investors stating that only two (including the CEOs own company) was an appropriate limit, while 32% of investors believed that three total board seats was acceptable.


Adjusted Performance Metrics : Investors were also asked how non-GAAP or other adjusted performance metrics should be viewed in terms of compensation performance metrics, and what types of adjustments to reported or GAAP metrics were appropriate for purposes of compensation. Investors responded as follows:

*81% of investors noted that adjusted metrics are sometimes acceptable, depending on the nature and extent of the adjustments and the degree to which disclosure of their purpose is transparent.

Of those 81% of investors, two-thirds believed that non-GAAP metrics are acceptable as long as performance goals and results are clearly disclosed and reconciled with comparable GAAP metrics in the proxy statement, and the reasons for the adjustments are adequately explained. 4. **Director Compensation* : In terms of the types of equity compensation investors considered to be appropriate for non-executive directors, investors responded as follows:

*71% of investors believed that payments of stock in lieu of cash for a directors retainer or a meeting fee was appropriate, but only 37% believed that performance-vesting equity was acceptable. In addition, the 2015-2016 ISS Global Policy Survey reports investors views on other key governance matters, such as the use of net operating loss poison pills, unilateral bylaw amendments, director independence and cooling off periods, controlled companies and capital allocation/share buybacks.