Corporate Governance — ISS & STOXX Glossary
About This Section
This glossary covers board structure, proxy voting, executive compensation, shareholder rights, anti-takeover provisions, and governance scores. Terms are sourced from STOXX and ISS Governance official documentation.
~66 terms across multiple sources.
A
Activist Investor
▰▰▰ 25
Quote
“Activist investors are the market’s immune system. They target companies where management is destroying value and force a reckoning.”
— Carl Icahn, activist investor
An individual or entity (often a hedge fund) that acquires a significant stake in a public company with the explicit goal of influencing corporate strategy, governance, board composition, capital allocation, or operational decisions. Activist investors may pursue their objectives through private engagement, public campaigns, shareholder proposals, or proxy contests to replace incumbent directors.
Note
an activist investor is a shareholder who buys enough stock to demand changes — whether that means replacing board members, forcing a sale of the company, or pushing for share buybacks. ISS evaluates activist campaigns on their merits and may recommend supporting dissident nominees when the activist makes a compelling governance case.
ISS QualityScore Pillar: Board Structure, Shareholder Rights
Related Terms
Source excerpts (5)
ourt decisions have encouraged companies to take a closer look at their bylaw provisions to ensure that broad language does not provide loopholes for activist investors. Specifically, companies are including language designed to provide more detailed advance notice provisions and to ensure full disclosure of economi
— Sri Us Voting Guidelines (PDF), p. 29
for boards of CEFs by allowing CEFs to defend themselves against investors using measures permitted under state corporate law. In recent years, some activist investors have targeted CEFs to extract profits by pushing for actions such as fund liquidations or conversions of CEFs into open-end funds. As such, CEF boar
— Sri Us Policy Updates (PDF), p. 23
Given the coalition’s majority, it is very likely that the new law will enter into force next year. Notable Meetings in Austria Activist investor and owner of Cube Invest GmbH, Alexander Proschofsky, filed two shareholder proposals at Conwert Immobilien Invest SE‘s general meeting, held on May
— Engagement in the 2014 U.S. Proxy Season | ISS
“Shareholders and directors need to better understand the significant boardroom transformations that occur when activist investors target companies.” Among the key findings of the report are that activism: - Drives down director ages and tenure.
— Activism at Public Companies Erodes Gender, Racial and Ethnic Diversity, but …
Clearly, investors make up their own minds. MYTH: Proxy advisers such as ISS are minority activist investors trying to use corporate governance voting mechanisms as a way to advance a social and cultural agenda that may be inconsistent with many investors’
Advisory Vote
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A non-binding vote presented to shareholders at a company’s annual or special meeting, most commonly used for executive compensation matters (say-on-pay). While the result does not legally compel the board to act, it serves as a powerful signal of investor sentiment.
Note
an advisory vote lets shareholders voice approval or disapproval on a topic — typically CEO pay — without the result being legally enforceable. Boards that ignore a significant “against” vote risk reputational damage and proxy advisor downgrades.
ISS QualityScore Pillar: Compensation
Related Terms
Source excerpts (5)
Executive Compensation Disclosure by Externally Managed Issuers (EMIs)” to the list of practices that may result in an adverse recommendation on the advisory vote on executive compensation. This refers to an EMI’s failure to provide sufficient disclosure to enable shareholders to make a reasonable assessment of
— 2016 Public Fund Us Policy Updates (PDF), p. 6
Proxy Voting Guidelines - 45 - Transparency. Inclusiveness. Global Expertise 6a-3. Advisory Vote on Golden Parachutes in an Acquisition, Merger, Consolidation, or Proposed Sale This is a proxy item regarding specific advisory votes on “golden par
— 2014Isscatholicusaguidelines (PDF), p. 46
Furthermore, we note that the US and UK SOP policies are not truly inconsistent—the US policy is a non-binding advisory vote while the UK policy is binding. ISS should specifically clarify that if a company is listed in the US but incorporated in the UK or another country t
: Vote case-by-case on ballot items related to executive pay and practices, as well as certain aspects of outside director compensation. Vote against Advisory Votes on Executive Compensation (Management Say-on-Pay—MSOP) if: › There is a significant misalignment between CEO pay and company performance (pay for pe
— 2017 Sustainability Us Voting Guidelines (PDF), p. 40
Please see the 2013 U.S. Proxy Voting Policies and Procedures FAQ for more insight on ISS policy in this regard. Advisory Vote on Golden Parachutes (SOGP) - An event has technically triggered a change in control according to the company’s formal definition; however the compan
Annual General Meeting (AGM)
▰▰▰ 41
The mandatory annual gathering of a company’s shareholders at which the board of directors presents financial results, directors stand for election (or re-election), auditor appointments are ratified, executive compensation may be voted on, and shareholder proposals are considered. AGMs are a legal requirement in most jurisdictions and represent the primary occasion for shareholders to exercise their voting rights.
Note
the AGM is the yearly meeting where shareholders get to vote on the people and policies that govern the company. It is the central event of proxy season and the moment when all of ISS’s research and vote recommendations are put into action.
ISS QualityScore Pillar: Foundational to all pillars
Related Terms
Source excerpts (5)
Acts (BCAs) to submit their financial statements and the auditor’s report, which is included in the company’s annual report, to shareholders at every Annual General Meeting (AGM). This routine item is almost always non-voting. Ratification of Auditors General Recommendation: Generally vote for proposals to ratify auditors, unl
— 2015Canadaventurevotingguidelines (PDF), p. 4
132D of the Companies Act, 1965 prohibits share issuances, except with shareholder approval. Such approval is valid until the conclusion of the next annual general meeting (AGM). In addition, Chapter 6.03 Part C of the Listing Requirements of the Exchange prohibits share issuances which, when aggregated with issuances during
— 2016 Asia Pacific Policy Updates (PDF), p. 24
Change in Company Fiscal Term Vote FOR resolutions to change a company’s fiscal term unless a company’s motivation for the change is to postpone its annual general meeting (AGM). Discussion Companies routinely seek shareholder approval to change their fiscal year end.
— 2013Isstafthartleyadvisoryservicesinternationalguidelines (PDF), p. 13
Register below for trial access to ISS governance research as we enter the peak of the annual general meeting season in markets across the globe. REGISTER NOW ISS Governance Research Trial Access Thank you for your interest.
— ISS Governance Research Trials | ISS
This is complemented by governance data, research and voting solutions to help with all of your operational needs throughout the Swiss annual general meeting proxy voting season, starting in April. See why leading Swiss investors turn to ISS and ISS-Ethix for help in navigating the complex and rapidly unfo
— ISS’ 2017 Switzerland Benchmark Policy and Key Governance Issues Briefin…
Anti-Takeover Provision
▰▰ 7
A mechanism embedded in a company’s charter, bylaws, or adopted by the board that is designed to discourage or prevent hostile acquisition attempts. Common examples include poison pills (shareholder rights plans), staggered boards, supermajority vote requirements, and dual-class share structures.
Note
anti-takeover provisions are defensive shields a company puts in place so that an unwanted buyer cannot easily gain control. ISS generally views excessive anti-takeover protections negatively because they can entrench management and reduce shareholder value.
ISS QualityScore Pillar: Shareholder Rights
Related Terms
Source excerpts (5)
For example, accountability may lead to board and management entrenchment. For example, the existence of several anti-takeover provisions* has the cumulative effect of the existence of several anti-takeover provisions* has the cumulative effect of deterring legitimate tender offers, me
— Taft Hartley Us Policy Updates (PDF), p. 9
amendments to their bylaws to opt out of these Florange Act provisions which will otherwise automatically introduce the effectively unlimited use of anti-takeover provisions without specific shareholder approval. Such bylaw amendments are the main way in which shareholders may maintain requirements for shareholder approv
— 1 2015 Sustainability International Policy Updates (PDF), p. 11
A governance structure that discourages director accountability may lead to board and management entrenchment. For example, the existence of several anti-takeover provisions* has the cumulative effect of deterring legitimate tender offers, mergers, and corporate transactions that may have ultimately proved beneficial to
— 2013Isstafthartleyadvisoryservicesusguidelines (PDF), p. 12
For example, accountability may lead to board and management entrenchment. For example, the existence of several anti-takeover provisions* has the cumulative effect of the existence of several anti-takeover provisions* has the cumulative effect of deterring legitimate tender offers, me
— Taft Hartley Us Policy Updates (PDF), p. 9
For example, accountability may lead to board and management entrenchment. For example, the existence of several anti-takeover provisions* has the cumulative effect of the existence of several anti-takeover provisions* has the cumulative effect of deterring legitimate tender offers, me
Audit & Risk Oversight
▰▰ 12
The board-level function — typically exercised through an audit committee — responsible for overseeing financial reporting integrity, internal controls, external audit processes, and enterprise risk management. ISS evaluates the independence, expertise, and meeting frequency of audit committees as part of its governance assessment.
Note
this is the board’s job of making sure the company’s financial statements are accurate and that significant business risks are identified and managed. A weak audit committee is a red flag for investors and can trigger negative ISS recommendations.
ISS QualityScore Pillar: Audit & Risk Oversight
Related Terms
Source excerpts (5)
verned and responsible companies that excel in managing governance risks across four key areas: Board Structure, Compensation, Shareholder Rights and Audit & Risk Oversight. US DIVERSITY INDEX Good corporate governance is a foundation for the responsible management of business risks and opportunities. ISS ESG US DIVERSIT
ing solution designed to enable quality reviews of corporate governance across four key areas: Board Structure, Compensation, Shareholder Rights, and Audit & Risk Oversight. The scores provide an indication of relative risk and range from 1 (low risk) to 10 (high risk). The SDG Impact Rating provides a holistic measureme
— Sustainability Gateway | ISS
insight they need to assess governance attributes categorized under four pillars: Board Structure, Shareholder Rights, Compensation/Remuneration, and Audit & Risk Oversight. GOVERNANCE EXCHANGE Clients also receive access to Governance Exchange, an innovative, secure and robust online community focused on corporate gover
— Governance Advisory Services | ISS
folio governance risk at the overall company level and across four broad pillars: board structure, compensation/remuneration, shareholder rights, and audit & risk oversight. Notably, subscribers have the ability to access and analyze the underlying data from which the scores are generated, allowing them to custom screen
— ISS Expands Governance QuickScore to China, India, & South Korea | ISS
ance QualityScore is a data-driven scoring and screening solution designed to enable quality reviews of corporate governance across four key areas: - Audit & Risk Oversight - Board Structure - Compensation - Shareholder Rights
B
Board Classification (Classified Board)
▰▰▰▰▰ 786
A board structure in which directors are divided into multiple classes (typically three), with only one class standing for election each year. This means a full board turnover requires two or more annual election cycles, making it more difficult for shareholders to replace a majority of directors in a single vote.
Note
a classified (or “staggered”) board slows down shareholder ability to change board composition. ISS generally recommends declassifying boards because classified structures can insulate directors from accountability.
ISS QualityScore Pillar: Shareholder Rights, Board Structure
Related Terms
Source excerpts (5)
outside the Russell 3000 universe is defined as underperforming peers or index on the basis of one-, three-, and five-year total shareholder returns. Classified Boards ~ Annual Elections The ability to elect directors is the single most important use of the shareholder franchise, and all directors should be account
— Public Fund Us Voting Guidelines (PDF), p. 14
Annually elected boards provide the best governance system for accountability to shareholders. A classified board is a board that is divided into separate classes, with directors serving overlapping terms.
— 2016 Taft Hartley Advisory Services Us Guidelines (PDF), p. 15
In the U.S., poison pills do not require shareholder approval. However, shareholders must approve charter amendments, such as classified boards or supermajority vote requirements. In brief, the very existence of defensive measures can foreclose the possibility of tenders and hence, opportuni
— Sri Us Voting Guidelines (PDF), p. 26
Upon going public, a company should have a “one share, one vote” structure, simple majority vote requirements, independent board leadership and a non-classified board. CII expects newly public companies without such provisions to commit to their adoption over a reasonably limited period through sunset mechanisms. M
— Council Of Institutional Investors (PDF), p. 1
Schwartz, Corporate Legacy, 5 HARV. BUS. L. REV. 237, 244, 248 tbl.1 (2015) (reporting that 89% of contemporary IPO companies go public with a classified board); WilmerHale 2015 M&A Update 4, https://www.wilmerhale.com/uploadedFiles/Shared_Content/Editorial/Publications/Documents/2015-WilmerHale- MA-Report.p
Board Diversity
▰▰▰▰▰ 341
Quote
“Diversity is not a favour to underrepresented groups. It is an investment in better decision-making. Homogeneous boards produce homogeneous thinking.”
— Nell Minow, co-founder of The Corporate Library, co-author of Corporate Governance
The representation of varied demographic backgrounds — including gender, race, ethnicity, age, nationality, and professional expertise — among the directors serving on a company’s board. ISS and STOXX indices increasingly incorporate board diversity metrics as a measure of governance quality.
Note
board diversity means the board is not composed entirely of people with the same background. Diverse boards are associated with better decision-making and reduced groupthink. ISS may recommend voting against nominating committee members at companies that lack sufficient diversity.
ISS QualityScore Pillar: Board Structure
Related Terms
Source excerpts (5)
2030: An Odyssey to Thirty-Percent Board Diversity FEBRUARY 15, 2018 Many public company boards of directors may need to focus more closely on the Earthly concerns of board composition, as investors a
— 2030: An Odyssey to Thirty-Percent Board Diversity | ISS
Are there any other factors that ISS should consider when contemplating the proposed policy change? Comment – there is little academic evidence that board diversity improves company performance. However, the inverse is also true and since diversity in itself is a desirable social outcome we should support the pol
— Syz Asset Management (PDF), p. 1
“It appears C-Suite diversity is associated with strong economic performance, while board diversity may help companies better manage risk.” For more on ISS Governance QualityScore, please click here.
— ISS Enhances Methodology for Governance QualityScore | ISS
, risk management, legal, government, CSR, and human resources. 3) Gender diverse boards are the market norm. According to the 2017 U.S. Board Study: Board Diversity Review, in 2017 and at the time of their annual meetings, 99 percent of the firms in the S&P 500, 90 percent of the S&P 400, and 77 percent of the S&
— Americas Policy Updates (PDF), p. 5
ics impacting the investment community. ISS provides research on a variety of topics, ranging from global regulatory developments, season highlights, board diversity, executive compensation, and more. ISS brings decades of experience in proxy voting and corporate governance to provide innovative, comprehensive, an
Board Independence
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Quote
“The bedrock of good governance is an independent board. Directors who owe their positions to management cannot hold management accountable.”
— Robert Monks, corporate governance pioneer, co-author of Corporate Governance
The proportion of directors on a board who have no material financial, familial, or professional relationship with the company or its management beyond their board service. Independent directors are expected to provide unbiased oversight and protect shareholder interests.
Note
an independent director is someone who does not work at the company, is not related to executives, and has no business deals with the firm that could cloud their judgment. ISS expects a majority of independent directors on most boards and fully independent audit, compensation, and nominating committees.
ISS QualityScore Pillar: Board Structure
Related Terms
Source excerpts (5)
“non-widely held” firms) are currently exempt from the main voting policy on board independence. Many European codes of best practice, however, now recommend that small companies maintain a minimum level of board independence.
— 7 2017 Comment Period Template Europe Director Elections Board Independence A… (PDF), p. 1
icy survey, ISS asked market actors if it is a reasonable expectation that companies listed as Nivel 1 and Traditional should have a minimum level of board independence, even though current regulations do not include board independence among these groups’ requirements.
— Brazil Board Independence (PDF), p. 2
. Key Changes: › Redraft the current board independence policy on widely-held companies and on companies with a majority shareholder. › Harmonize the board independence policy for widely held companies (unless there is a majority shareholder), when, according to legal requirements, directors are not elected by shareh
— 1 2015 Sustainability International Policy Updates (PDF), p. 8
Such a policy development will reflect an improving governance framework and better assist investors in assessing board independence in their portfolio companies in the MEA region. ISS analysis will focus on the most relevant non-independence criteria in light of the level of strin
— Mea Director Independence (PDF), p. 1
As of February 2015, there are 184 signatories, which include major Japanese asset managers. Board independence While a mandatory requirement to appoint outside directors has not yet been implemented, an increasing number of Japanese companies are introducing o
Board Refreshment
▰▰▰▰ 86
The ongoing process of introducing new directors to a board over time, ensuring a balance between institutional knowledge (through longer-tenured members) and fresh perspectives (through newer members). ISS evaluates whether boards have appropriate turnover mechanisms and whether long average tenure suggests entrenchment rather than continuity.
Note
board refreshment is about making sure the board does not become stale. If the same directors have served for decades with no new additions, ISS and investors worry the board may be too cozy with management to provide effective oversight. Refreshment can occur through retirement policies, term limits, or board evaluations.
ISS QualityScore Pillar: Board Structure
Related Terms
Source excerpts (5)
Board Refreshment: Finding the Right Balance AUGUST 10, 2018 For the better part of this decade, governance practitioners and investors have paid significant attention
— Board Refreshment: Finding the Right Balance | ISS
m composition. Largely missing from this debate is hard data on: (1) the scope of the perceived problem, (2) the most effective methods for promoting board refreshment, and (3) the benefits and possible side-effects of adopting them. Key Findings – Efforts Beginning to Pay Off According to the ISS press release on t
— Board Refreshment Trends at S&P 1500 Firms | ISS
on Thursday, February 23rd at 1 PM ET to Review Findings NEW YORK, NY (January 24, 2017) – The intense focus that investors and others have placed on board refreshment has begun to pay off. But, structural trends and governance practices that encourage longer tenures could slow, or even reverse this progress over th
— New Study Provides Comprehensive, Hard Data on Hot Topic of Corporate Board R…
However, the company’s existing policies regarding responsible use of company stock will be considered. Board Refreshment Board refreshment is best implemented through an ongoing program of individual director evaluations, conducted annually, to ensure the evolving needs
— Us Voting Guidelines (PDF), p. 18
The 12-year tenure cap on independence seeks to balance the importance of board refreshment with allowing independent board members to build company-specific knowledge. ISS’ Pay-for-Performance Model – no methodology change for 2019, update
— Executive Summary Of Iss Policy Updates And Process (PDF), p. 8
Board Structure
▰▰▰▰▰ 631
The overall composition, organization, and governance framework of a company’s board of directors, including its size, committee architecture, leadership model (combined vs. separated chair/CEO roles), director tenure, meeting frequency, and independence levels.
Note
board structure is the big picture of how the board is set up and operates. ISS QualityScore dedicates an entire pillar to evaluating board structure, looking at factors such as whether the board is the right size, has proper committees, and maintains sufficient independence.
ISS QualityScore Pillar: Board Structure
Related Terms
Source excerpts (5)
GOVERNANCE QUALITYSCORE INDEX SERIES Identify well-governed and responsible companies that excel in managing governance risks across four key areas: Board Structure, Compensation, Shareholder Rights and Audit & Risk Oversight. US DIVERSITY INDEX Good corporate governance is a foundation for the responsible manage
EP-MEDEF Code as code of reference, whatever their legal structure is (i.e., public limited company with a one-tiered board structure or a two-tiered board structure, partnership limited by shares, or European company), will provide such say-on-pay resolution(s) at their AGMs to be held from Jan. 1, 2014. [PAGE 2
— Issfranceremunerationfaq (PDF), p. 1
Problematic provisions include but are not limited to: provisions include but are not limited to: › A classified board structure; › A classified board structure; › A supermajority vote requirement; › A supermajority vote requirement; › Either a plurality vote standard in uncont
— Americas Policy Updates (PDF), p. 9
11 11. Classified Board structure policy: When does ISS apply the classified board structure policy? 11 12. Poison Pills: What modification must be made to a pill that has a dead hand or slow hand provision to address an ISS withhold recommen
— Us Policies And Procedures Faq April 2017 (PDF), p. 2
INST proposals to alter board structure or size in the context of a fight for control of the company or the board. Discussion Resolutions relating to board structures range from fixing the number of directors or establishing a minimum or maximum number of directors to introducing classified boards and director ter
— 2013Isstafthartleyadvisoryservicesinternationalguidelines (PDF), p. 25
Board Tenure
▰▰▰ 29
The length of time a director has continuously served on a company’s board, measured from initial election to the present. ISS tracks individual director tenure and average board tenure as governance indicators; excessively long tenures may signal reduced independence, while very short average tenures may suggest instability or lack of institutional knowledge.
Note
board tenure is how long each director has been on the board. ISS flags boards where the average tenure is very long (e.g., 15+ years) because long-serving directors may develop loyalties to management that compromise their independence. A healthy board blends experienced and newer members.
ISS QualityScore Pillar: Board Structure
Related Terms
Source excerpts (5)
ctors; › if requested by major shareholders, ensures that he or she is available for consultation and direct communication. 73. How will ISS consider board tenure? Board tenure will not be a primary factor in determining a vote recommendation for independent chair shareholder proposals, but will be considered i
— Us Procedures And Policies Faq (PDF), p. 32
This paper provides inter-sectoral comparisons of average director ages and board tenures, outside seats and attendance levels, and director and officer holdings for firms in the S&P 1500 index.
— Industry Impacts on Director Attributes: The Expected and the Unexpected | ISS
rds, including board independence standards; › There is a lack of independence on the board and/or its key committees; › There are concerns that long board tenures could compromise the independence and objectivity of board members. Non-executive board members with long-tenures may be classified as non-independe
— 2015 Taft Hartley Advisory Services International Guidelines (PDF), p. 10
and the reasons for non- where a board is at or near 50% independent and the reasons for non- independence of certain directors may include excessive board tenure independence of certain directors may include excessive board tenure greater than 12 years). greater than 12 years). Rationale for Change: The update
— Australia Policy Updates (PDF), p. 5
The new guidelines recognize the value in having a diverse board in respect of board tenure. ISS revised its policy for Australia whereby: “A non-executive director who has served 12 or more years may be classified as non-independent.” Clien
Burn Rate
▰▰▰▰▰▰ 1,052
The rate at which a company grants equity awards (stock options, restricted stock units, performance shares) to employees and executives, expressed as a percentage of total shares outstanding. ISS uses burn rate benchmarks to evaluate whether equity plan dilution is excessive relative to industry peers.
Note
burn rate measures how fast a company is handing out shares to employees. A high burn rate means shareholders are being diluted more quickly, which ISS views unfavorably. Companies whose burn rates exceed ISS-calculated peer benchmarks may receive negative recommendations on equity plan proposals.
ISS QualityScore Pillar: Compensation
Related Terms
Source excerpts (5)
options. A company’s annual VABR is calculated as follows: WWW.ISSGOVERNANCE.COM 3 of 7 UNITED STATES FAQ: GICS UPDATES AND VALUE-ADJUSTED BURN RATE Annual Value-Adjusted Burn Rate = ((#%20of%20options%20*%20option’s%20dollar%20value%20using%20a%20Black-Scholes%20model) + (# of full-value awards * stock price)) / (We
— Us Gics Changes Value Adjusted Burn Rate Faq (PDF), p. 4
The total number of outstanding convertible vehicle, vested or unvested should be clearly disclosed in the company’s proxy statement or 10-K. Burn Rate Policy - How does ISS calculate the burn rate and annual stock price volatility? The annual burn rate is calculated as follows: Annual Burn rate = (#
— 2013 Comprehensive US Compensation Policy | ISS
In addition, year- over-year burn-rate benchmark changes will be limited to a maximum of two (2) percentage points plus or minus the prior year’s burn-rate benchmark. 6a-4(e). Liberal Definition of Change-in-Control Generally vote against equity plans if the plan provides for the acceleration of vesting
— 2015 Us Sri Voting Guidelines (PDF), p. 49
See the U.S. Equity Compensation Plans FAQ for the benchmarks. For meetings held prior to February 1, 2023, a company’s adjusted burn rate is calculated as follows: Burn Rate = (# of appreciation awards granted + # of full value awards granted * Volatility Multiplier) / Weighted average
— Us Voting Guidelines (PDF), p. 47
The typical new grant would have a ten-year term, new vesting restrictions, and a lower exercise price reflecting the current lower market price. Burn Rate The annual burn rate is a measure of dilution that illustrates how rapidly a company is deploying shares reserved for equity compensation plans.
C
Capital Allocation
▰▰ 14
The strategic process by which a company’s board and management decide how to deploy the firm’s financial resources — including reinvestment in the business (capital expenditures, R&D), acquisitions, debt repayment, dividends, and share repurchases. ISS and institutional investors evaluate capital allocation decisions for alignment with long-term shareholder value creation.
Note
capital allocation is how a company spends its money. Shareholders and proxy advisors care whether the company is investing wisely, returning cash to shareholders, or wasting resources on value-destructive acquisitions. Poor capital allocation is a frequent catalyst for activist investor campaigns.
ISS QualityScore Pillar: Compensation (as it relates to incentive metrics), Shareholder Rights
Related Terms
Source excerpts (5)
Climate change is a systemic and urgent global challenge and also one that will significantly disrupt capital allocations and returns.” Craig Baker, Willis Towers Watson’s Global Chief Investment Officer “By curating data from multiple sources, the CTI takes a unique ap
— Willis Towers Watson and Qontigo launch pioneering STOXX Global Index Series …
Among these three, there is also what would appear to be substantial first-hand experience with capital allocation As shareholders are replacing most of the other incumbent directors, however, and budgeting, and to some extent with the capital markets.
ly, think long-term and apply the inventiveness of management teams to change the way their businesses operate.” Indices as a mechanism to accelerate capital allocation and risk pricing Moreover, indices can act as a powerful mechanism beyond the simple use in investment portfolios, the panelists argued.
— A view from COP26: navigating the climate transition with investable indices …
P 26, alongside record inflows into ESG funds, underscored the increasing importance of sustainability, social responsibility and sound governance in capital allocation. Since then, the Russian invasion of Ukraine in early 2022 caused energy prices to surge, resulting in solid outperformance of oil and gas stocks.
— Fossil fuels: Driver or drag on portfolio returns? | Blog posts | STOXX
Smaller companies are better positioned to acquire market share from their competitors. Their less diversified businesses allow for more efficient capital allocation to growth opportunities, and their leaner set-ups help them respond to changing market dynamics more quickly.4 The size premium may also be a reward
Clawback Policy
▰▰▰ 36
Quote
“Clawback provisions ensure that executives cannot keep bonuses earned on the back of misstated financials. They align long-term incentives with long-term truth.”
— Mary Schapiro, former SEC Chair, on Dodd-Frank clawback rules
A formal company policy that allows the board to recoup previously awarded incentive compensation from executives in the event of a financial restatement, misconduct, or other triggering circumstances. Dodd-Frank and subsequent SEC/exchange listing rules have made clawback policies mandatory for listed companies, but ISS evaluates the robustness and scope of these policies beyond minimum requirements.
Note
a clawback policy says: “If we discover the numbers were wrong or you misbehaved, we can take back your bonus.” ISS looks for policies that go beyond the regulatory minimum — for example, those that cover misconduct triggers, not just restatements.
ISS QualityScore Pillar: Compensation
Related Terms
Source excerpts (5)
… 19 50. What is needed in order for ISS to consider a clawback policy “robust,” as displayed in the “Executive Compensation Analysis” section of the research report? …
— Us Compensation Policies Faq (PDF), p. 3
2 October 29, 2014 may still be mid-cycle – have longer vesting or stronger performance contingencies? How will ISS give credit for a clawback policy? Will meeting SOX requirements be enough, or will it require something closer to Dodd-Frank Act requirements? Will net settlement of options be con
— Peal Mayer & Partners (PDF), p. 2
by market trends, making a substantial proportion of top executives’ equity awards subject to specific performance conditions is a best practice. ▪ A clawback policy that includes equity grants – clawback policies potentially mitigate excessive risk-taking that certain compensation may incentivize, including large
— Us Equity Compensation Plans Faq (PDF), p. 17
st policy Anti-pledging policy Company has a robust policy Pledging of at least 1,000 shares of No company stock by NEOs or directors Risk Mitigators Clawback policy beyond SOX Yes CEO stock ownership guideline 5X Stock options: Until stock ownership guidelines are met Stock holding requirements Restricted Stock:
etween time-based equity awards and performance-based cash awards, the CEO Performance Ratio would be zero percent. ■ Whether the company maintains a clawback policy. The relevance and purpose of this factor in the context of an equity plan proposal is unclear.
Compensation Committee
▰▰▰▰▰▰ 1,393
A committee of the board of directors, composed entirely or predominantly of independent directors, responsible for setting and overseeing executive pay programs, reviewing compensation philosophy, and making recommendations on say-on-pay and equity plan proposals.
Note
the compensation committee decides how much executives get paid and in what form (salary, bonus, stock). ISS scrutinizes whether committee members are truly independent and whether their pay decisions align with company performance.
ISS QualityScore Pillar: Compensation, Board Structure
Related Terms
Source excerpts (5)
Executive audit committee members may compromise the integrity of the independent audit, and the presence of executives on the compensation committee means that executives are allowed to select the directors who determine their pay.
— 2015 Sustainability International Voting Guidelines (PDF), p. 12
Thus, except in extenuating circumstances, a “new” CEO will not exempt the company from consideration under the methodology since the compensation committee is also accountable when a company is compelled to significantly “overpay” for new leadership due to prior poor performance. ISS’ 2013 Canadian TSX P
— 2013Isscanadiantsxguidelines (PDF), p. 27
– dissatisfaction with compensation practices can be expressed by voting against the MSOP proposal rather than voting AGAINST or WITHHOLDING from the compensation committee. However, if there is no MSOP on the ballot, then the negative vote will apply to members of the compensation committee.
— 2013Isscatholicfaith Baseduspolicy (PDF), p. 44
16 Proxy Voting Policies (Canada) Hugessen Consulting is a leading provider of independent executive compensation consulting advice to the boards and compensation committees in Canada and the United States. We appreciate the opportunity to comment on the proposed update (published October 26, 2015) introducing the Equity
— Hugessen Consulting (PDF), p. 1
Given this feedback, a double-triggered overboarding policy is deemed appropriate for the Canadian market. Former CEO/CFO on Audit/Compensation Committee General Recommendation: Vote withhold for any director who has served as the CEO of the company within the past five years and is a member of the aud
Contested Election
▰▰▰▰▰ 856
A director election in which one or more dissident candidates are nominated in opposition to the board’s recommended slate, requiring shareholders to choose between competing nominees. Contested elections typically arise from activist investor campaigns and are decided through proxy solicitations by both the management and dissident sides.
Note
a contested election is a director race with competing candidates — the board’s picks versus an activist’s picks. ISS analyzes both sides and issues recommendations on each nominee, often influencing the outcome given ISS’s reach among institutional investors.
ISS QualityScore Pillar: Board Structure, Shareholder Rights
Related Terms
Source excerpts (5)
Directors Sustainability Policy Recommendation: Generally vote for management proposals to adopt a majority of votes cast standard for directors in uncontested elections. Vote against if no carve-out for a plurality vote standard in contested elections is included. Generally vote for precatory and binding shareholder
— 2017 Sustainability Us Voting Guidelines (PDF), p. 23
Based on these considerations, Taft-Hartley Advisory Services’ framework for the evaluation of contested elections has the ultimate goal of increasing long-term value for shareholders. Taft Hartley Advisory Services’ guidelines 2013 Taft-Hartley International Pro
— 2013Isstafthartleyadvisoryservicesinternationalguidelines (PDF), p. 21
PAGE 17] Canada Proxy Voting Guidelines for TSX-Listed Companies As indicated at the beginning of the guidelines for Voting on Director Nominees in Uncontested Elections, board responsiveness is a fundamental principle that should apply when determining votes on director nominees. Rationale: Follow-up action or respo
— Canada Tsx Voting Guidelines (PDF), p. 17
“Enhanced Quorum”). Rationale: With Enhanced Quorum, the ability to hold a shareholders’ meeting is subject to management’s pre- determination that a contested election to replace a majority of directors is the singularly most important corporate issue, thus justifying a significantly higher shareholder (or proxy) pr
— 2015Canadaventurevotingguidelines (PDF), p. 16
Because the requirements for nominating a director are the same as those for other shareholder proposals, ISS currently analyzes contested elections on a case-by-case basis, in line with our guidelines on shareholder proposals.
Corporate Social Responsibility (CSR)
▰ 4
Quote
“The social responsibility of business is to increase its profits — but only within the rules of the game.”
— Milton Friedman, The New York Times Magazine (1970), the foundational critique that shaped the CSR debate
A broad framework under which companies voluntarily integrate social, environmental, and ethical considerations into their business operations and stakeholder interactions, beyond what is required by law. CSR encompasses community engagement, environmental stewardship, labor practices, human rights, and philanthropic activity. ISS evaluates CSR-related shareholder proposals and incorporates social factors into its ESG assessments.
Note
CSR is a company’s effort to be a good corporate citizen — treating workers fairly, reducing environmental harm, and contributing positively to communities. Shareholders increasingly file proposals asking for better CSR disclosure, and ISS often supports transparency-oriented CSR proposals.
ISS QualityScore Pillar: Not directly scored, but intersects with Board Structure (oversight) and Shareholder Rights (proposal support)
Related Terms
Source excerpts (4)
As CAO, he is also responsible for other key functions, including Project Management, Sales Operations, Corporate Services, Procurement, and Corporate Social Responsibility. Prior to his appointment as COO, Allen served from 2014 to 2023 as ISS’ Chief Financial Officer, helping to guide and integrate 17 acquisitions whil
he objective to provide a framework that can help companies and stakeholders address environmental risks and opportunities.[1] “Nature is no longer a corporate social responsibility issue, but a core and strategic risk management issue alongside climate change.
— TNFD recommendations set path for nature-related disclosure standards, suppor…
ny in your portfolio - Knowledgeable analysts with expertise in areas such as board practices, executive compensation, proxy access, labor-driven and corporate social responsibility issues.
- Monitoring of new and emerging trends and new types of shareholder proposals, to help you adapt your policy guidelines Enhanced Custom Rese
— Custom Policy & Specialty Research | ISS
ng or based on, linked to, tracking or otherwise derived from the Information; (v) used to develop, prepare, create, implement, support or maintain a corporate social responsibility (CSR) program(s) or the like; (vi) used in connection with internal corporate governance activities; or (vii) used to assist, support, contribute to or oth
Cumulative Voting
▰▰▰▰▰ 526
A voting method in director elections that allows shareholders to aggregate all of their votes and cast them for a single candidate (or distribute them among candidates in any proportion), rather than being limited to one vote per share per seat. This system strengthens minority shareholders’ ability to elect at least one representative to the board.
Note
cumulative voting lets smaller shareholders pool their votes to support one director candidate, increasing the chance that minority viewpoints gain board representation. ISS generally supports cumulative voting rights as a shareholder-friendly mechanism.
ISS QualityScore Pillar: Shareholder Rights
Related Terms
Source excerpts (5)
umulative voting is once again a focal point for the debate around corporate governance in Asia’s fourth largest economy. Market observers often view cumulative voting as a necessary reform to ensure minority shareholder rights and help narrow the so-called “Korea discount.” This paper suggests that cumulative votin
— Cumulative Voting in South Korea: Necessary Reform, Conditional Impact | ISS
Policy: Mechanics of the Cumulative Voting System in Russia and Kazakhstan Mechanics of the Cumulative Voting System in Russia and Kazakhstan Under a cumulative voting system, each share represents a number of votes Under a cumulative voting system, each share represents a number of votes equal to the size of the bo
— Emea Policy Updates (PDF), p. 34
Cumulative voting and majority voting are two different voting mechanisms designed to achieve two different outcomes. While cumulative voting promotes the interests of minority shareholders by allowing them to get some representation on the board, majority voting promotes a democratic elect
— Public Fund Us Voting Guidelines (PDF), p. 17
Vote against proposals to adopt a supermajority voting requirement for the removal of directors or internal auditors. Cumulative voting Generally vote against proposals to introduce a provision that will prohibit the use of cumulative voting in director elections. Golden parachute cla
— 2014Isskoreaguidelines (PDF), p. 4
Cumulative voting can increase minority shareholders’ chances to elect one or more nominees to the board of directors. ▪ A request for cumulative voting presented by a minority shareholder may indicate that negotiations with the company for the inclusion of specific minority candidates for election ma
D
Director Data
▰▰ 9
Comprehensive biographical and professional information maintained by ISS on individual board members across global public companies, including tenure, independence status, committee memberships, other board seats, demographic data, attendance records, and voting results. ISS Director Data feeds into governance scoring and overboarding analysis.
Note
director data is the detailed dossier ISS keeps on every public-company board member worldwide. Investors use this data to evaluate whether directors are qualified, over-committed, or have conflicts of interest.
ISS QualityScore Pillar: Board Structure
Related Terms
Source excerpts (5)
SUSTAINABILITY SOLUTIONS / SUSTAINABILITY RAW DATA Director Data Generate a complete picture of board-level decision makers to inform investment and sustainability decision making. Access important and non-traditio
Clients can gain insights by combining these factors with other subscribed datasets, including ISS QualityScore, director data and other financial and non-financial datasets. Here are just a few reasons why ISS-Ethix’s Norm-Based Research is the industry benchmark for assessi
— 2017 Norms-Based Research Methodology Changes | ISS
ne-year transition period has been proposed to allow TSX reporting issuers adequate time to address overboarding issues if they choose to do so. ISS’ director data for all TSX-listed issuers covered by ISS for the one-year period of August 1, 2016 to July 31, 2017 indicates that had the proposed policy change be
— 4 2017 Comment Period Template Canada Director Elections Overboarded Directors (PDF), p. 1
iographical data In addition, ISS also uses third parties for certain specialist data sets, including index constituent data, and regional (Japanese) director data. Engagement with Issuers and Third-Parties. Please see above. Q. Does ISS maintain policies and procedures regarding how it identifies and addresses
— Iss Guidance Faq Document (PDF), p. 7
gement, as evidenced by our offerings via the Open:FactSet Marketplace.” Additional data sets will be added over the coming months covering corporate director data, executive pay metrics, shareholder voting results, carbon and climate impacts, carbon ratings, corporate and thematic ratings and materiality indica
— ISS ESG to Provide Robust Data Sets Through the Open:FactSet Marketplace | ISS
Director Election
▰▰▰▰▰▰ 1,185
The ballot item at a shareholder meeting through which individual director nominees are voted upon for appointment or reappointment to the board. ISS evaluates each nominee against multiple criteria — independence, attendance, overboarding, responsiveness to prior low vote support, committee service, and diversity — and issues individual vote recommendations.
Note
director elections are how shareholders decide who sits on the board. ISS may recommend voting against a specific director for reasons such as poor attendance, too many outside board seats, failure to address a governance concern, or lack of board diversity.
ISS QualityScore Pillar: Board Structure
Related Terms
Source excerpts (5)
Asia ex-Japan Policies - Director Elections Background and Overview ISS is considering harmonizing the following voting guidelines with existing policies for other Asia ex- Japan markets. Dire
— Asia Exjp Director Elections (PDF), p. 1
gian, Danish, and Finnish corporate governance codes and (iii) rising investor support for applying the overboarding policy at companies with bundled director elections. The reason for the exclusion of the Nordics in the past was that the majority of director elections were bundled.
— 9 2017 Comment Period Template Europe Nordics Region Director Elections Overb… (PDF), p. 1
irectors and up to 148 non-CEO directors would have warranted a withhold recommendation for a total of 315 nominees or 5.7 percent of total director election votes over the period, which is up from a mere 14 nominees in accordance with the current policy. Request for Comment While we appreciate any comment
— 4 2017 Comment Period Template Canada Director Elections Overboarded Directors (PDF), p. 2
ended to give companies sufficient time to recruit qualified outside director candidates. This approach is consistent with the implementation of ISS’ director election policy in 2013 requiring companies to have at least one outsider, and in 2016 requiring at least two outsiders, both implemented with a one-year tran
— 10 2017 Comment Period Template Japan Director Elections Outside Directors (PDF), p. 2
osed policy would come into effect in February 2019 following a one-year transition period. In 2018, warning language would appear in the analysis of director elections at non-widely held companies where the board does not meet the minimum independence threshold foreseen for 2019. Intent and Impact The proposed intr
— 7 2017 Comment Period Template Europe Director Elections Board Independence A… (PDF), p. 1
Dual-Class Shares
▰ 1
Quote
“Dual-class stock is the governance equivalent of taxation without representation. Public shareholders supply the capital but have no proportionate voice.”
— John C. Coffee Jr., Columbia Law School, The Future as History: The Prospects for Global Convergence in Corporate Governance
A capital structure in which a company issues two or more classes of common stock with unequal voting rights. Typically, insiders and founders hold a superior-vote class (e.g., 10 votes per share) while public investors hold an inferior-vote class (1 vote per share), allowing insiders to maintain control with a minority economic stake.
Note
dual-class shares let founders or insiders keep outsized voting power even after an IPO. ISS considers this a significant governance concern because it disconnects economic ownership from voting control and can entrench management.
ISS QualityScore Pillar: Shareholder Rights
Related Terms
Source excerpts (1)
In light of a surge in restrictive governance structures at younger firms, such as dual-class shares and classified boards, investors realize that the path to better board accountability is not a fixed trajectory towards progress.
E
EEO-1 Data
▰▰ 14
Workforce demographic data collected by the U.S. Equal Employment Opportunity Commission (EEO-1 Report / Component 1), breaking down employees by job category, race/ethnicity, and gender. Increasingly, institutional investors and proxy advisors reference EEO-1 disclosure as a measure of a company’s commitment to transparency on diversity.
Note
the EEO-1 report is a government form that shows the racial and gender makeup of a company’s workforce. Shareholder proposals requesting EEO-1 disclosure have become common, and ISS often supports such proposals as a governance and social transparency matter.
ISS QualityScore Pillar: Not directly scored, but intersects with Board Structure (diversity) and Shareholder Rights (proposal support)
Related Terms
Source excerpts (5)
s diversity policies or initiatives, or proposals requesting disclosure of a company’s comprehensive workforce diversity data, including requests for EEO-1 data. Generally vote FOR proposals seeking information on the diversity efforts of suppliers and service providers. Enabling the financial community to ma
— 2017 Sustainability Us Voting Guidelines (PDF), p. 60
s diversity policies or initiatives, or proposals requesting disclosure of a company’s comprehensive workforce diversity data, including requests for EEO-1 data, unless: › The company publicly discloses equal opportunity policies and initiatives in a comprehensive manner; › The company already publicly disclo
— 2016 Us Summary Voting Guidelines 23 Feb 2016 (PDF), p. 62
s diversity policies or initiatives, or proposals requesting disclosure of a company’s comprehensive workforce diversity data, including requests for EEO-1 data. Generally vote for proposals seeking information on the diversity efforts of suppliers and service providers. Gender Identity, Sexual Orientation, a
— Sustainability Us Voting Guidelines (PDF), p. 71
s diversity policies or initiatives, or proposals requesting disclosure of a company’s comprehensive workforce diversity data, including requests for EEO-1 data. Generally vote FOR proposals seeking information on the diversity efforts of suppliers and service providers. Gender Identity, Sexual Orientation, a
— Climate Us Voting Guidelines (PDF), p. 60
s diversity policies or initiatives, or proposals requesting disclosure of a company’s comprehensive workforce diversity data, including requests for EEO-1 data. Generally vote FOR proposals seeking information on the diversity efforts of suppliers and service providers. Gender Identity, Sexual Orientation, a
Engagement Suite
▰ 3
A digital platform and service offering from ISS that enables institutional investors to manage, track, and document their stewardship engagements with portfolio companies on governance, environmental, and social topics. The Engagement Suite supports workflow management, correspondence tracking, and reporting for regulatory stewardship codes.
Note
the Engagement Suite is ISS’s tool for investors who want to have structured conversations with companies about governance improvements and keep records of those interactions. It helps investors meet stewardship code requirements by documenting their engagement efforts.
Related Terms
Source excerpts (2)
ent activity based on various criteria – topic tags, engagement health, date range, portfolios, watchlists, issuers, and more. Investors can use ISS’ Engagement Suite to: - Input new or upload historical issuer engagement information for storing all data within one place - Track engagements with ‘traffic light’ hea
nd companies. - Improve transparency and performance on priority issues. Our focus themes include Net Zero, Water, Biodiversity, and Gender Equality. Engagement Suite Simplify shareholder engagement. Strengthen transparency. Engagement Suite is a web-based platform that helps stewardship and governance teams manage
Equity Plan
▰▰▰▰▰▰ 2,051
A shareholder-approved program through which a company grants stock-based compensation (stock options, restricted stock units, performance shares, stock appreciation rights) to employees, officers, and directors. ISS evaluates equity plans using the Equity Plan Scorecard (EPSC), which weighs plan cost, plan features, and grant practices.
Note
an equity plan is a company’s program for giving employees ownership stakes. When companies ask shareholders to approve a new plan or add shares to an existing one, ISS scores the proposal on cost (dilution), features (e.g., repricing, evergreen provisions), and past grant practices (burn rate).
ISS QualityScore Pillar: Compensation
Related Terms
Source excerpts (5)
Resurgence of Evergreen Features in IPO Equity Plans Restrict Investor Say MARCH 15, 2021 KEY TAKEAWAYS - The ability to assess and vote on equity plans is an important shareholder right in the U.S.
— Resurgence of Evergreen Features in IPO Equity Plans Restrict Investor Say | ISS
This example assumes that: › The company has 1,000,000 shares outstanding at the time the plan is proposed; › The equity plan in question is a 10 percent rolling equity plan (i.e. bearing an initial reserve of 100,000 shares); and › The company has no equity awards outstandi
— Canadian Equity Plan Scorecard Faq (PDF), p. 13
5 17. What are the data sources that ISS uses in collecting and/or verifying equity plan data? … 5 18. How will my company know if our Equity Plan Data Verification submission was reviewed?
— Equity Plan Data Verification (PDF), p. 2
For non-employee director plans, vote FOR the plan if certain factors are met (see Director Compensation section). The cost of the equity plans is expressed as Shareholder Value Transfer (SVT), which is measured using a binomial option pricing model that assesses the amount of shareholders’
— 2014 Iss Usa Sustainability (PDF), p. 45
ISS presents the more costly scenario in our proxy analysis. Plan Duration 102. How does ISS calculate the probable duration of a proposed equity plan share request? Probable duration is calculated as: New shares requested + Shares remaining available for grant, divided by 3-year average unadjus
Executive Compensation
▰▰▰▰▰▰ 1,865
Quote
“Executive pay is the acid test of corporate governance. If the board cannot get compensation right, you can be sure they are not getting much else right either.”
— Lucian Bebchuk, Harvard Law School, Pay Without Performance
The total remuneration package awarded to a company’s senior officers, including base salary, annual cash incentives, long-term equity awards, pension contributions, perquisites, and severance arrangements. ISS evaluates executive compensation for pay-performance alignment, peer benchmarking, problematic pay practices, and structural concerns.
Note
executive compensation is everything a top executive receives for doing their job — cash, stock, bonuses, retirement benefits, and perks. ISS looks at whether the pay package makes sense relative to how the company has performed and what peers are paying.
ISS QualityScore Pillar: Compensation
Related Terms
Source excerpts (5)
basis against peers in the RDA test, and it is measured on an absolute 5-year basis in the PTA test. ISSGOVERNANCE.COM 7 of 21 CANADA FAQ: EXECUTIVE COMPENSATION Additionally, the financial performance assessment (FPA) quantitative screen evaluates companies across four EVA-based metrics that compares financia
— Canada Executive Compensation Faq (PDF), p. 8
ark global executive compensation practices. Unparalleled breadth of compensation data, including proprietary data points used in our Proxy analysis. EXECUTIVE COMPENSATION DATA Allows investors, as well as sustainability and governance professionals, to analyze executive compensation plan design, better understand execu
— Executive Compensation Data | ISS
ISS define Total Compensation (Pay) for the pay for performance methodology? In accordance with the National Instrument Form 51-102F6 - Statement of Executive Compensation, each annual meeting Management Information Circular (“proxy circular”) must disclose an array of compensation data, with a three year look- back, fo
— Canada Executive Compensation Faq Dec 2015 (PDF), p. 6
9, the SEC announced that it had voted 3-2 in favor of proposing new rules requiring increased disclosure on the link between company performance and executive compensation. The proposed rules would implement a requirement mandated by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
— SEC Announces New Rules on Executive Compensation Disclosure | ISS
In Focus: Board Elections and Executive Compensation in the 2023 U.S. Proxy Season August 8, 2023 As of June 15, 2023, median shareholder support for board nominees at Russell 3000 Index companies had d
— In Focus: Board Elections and Executive Compensation in the 2023 U.S. Proxy S…
Extraordinary General Meeting (EGM)
▰▰ 11
A shareholder meeting convened outside the regular annual meeting cycle to address urgent or extraordinary matters that cannot wait until the next AGM, such as a proposed merger, removal of a director, emergency capital raise, or charter amendment. EGMs may be called by the board or, where permitted, by shareholders meeting a specified ownership threshold.
Note
an EGM is a special shareholders’ meeting called on short notice for matters too important or time-sensitive to wait for the annual meeting. ISS supports shareholders’ right to call EGMs and may recommend against governance provisions that unduly restrict this right.
ISS QualityScore Pillar: Shareholder Rights
Related Terms
Source excerpts (5)
rights in this regard are to receive information about a company’s performance and to vote on resolutions put before an annual or, where applicable, extraordinary general meeting. Under current legislation in Australia, items typically put before a meeting of security holders can be characterized as follows: › Consideration of
— Australia Voting Guidelines (PDF), p. 4
rights in this regard are to receive information about a company’s performance and to vote on resolutions put before an annual or, where applicable, extraordinary general meeting. Under current legislation in Australia, items typically put before a meeting of security holders can be characterized as follows: › Consideration of
— 2016 2017 Australia Voting Guidelines (PDF), p. 4
rights in this regard are to receive information about a company’s performance and to vote on resolutions put before an annual or, where applicable, extraordinary general meeting. Under current legislation in Australia, items typically put before a meeting of security holders can be characterized as follows: › Consideration of
— New Zealand Voting Guidelines (PDF), p. 4
rights in this regard are to receive information about a company’s performance and to vote on resolutions put before an annual or, where applicable, extraordinary general meeting. Under current legislation in Australia, items typically put before a meeting of security holders can be characterized as follows: › Consideration of
— Australia Voting Guidelines (PDF), p. 4
rights in this regard are to receive information about a company’s performance and to vote on resolutions put before an annual or, where applicable, extraordinary general meeting. Under current legislation in Australia, items typically put before a meeting of security holders can be characterized as follows: › Consideration of
F
Fiduciary Duty
▰▰▰▰ 100
Quote
“Fiduciary duty is the highest standard of care in equity. A fiduciary must act solely in the interest of the beneficiary, not in his own.”
— Tamar Frankel, Boston University School of Law, Fiduciary Law (2011)
The legal obligation of a company’s directors and officers — and of institutional investors managing assets on behalf of beneficiaries — to act in good faith, with care, loyalty, and in the best interests of shareholders or beneficiaries. In the governance context, fiduciary duty requires directors to exercise informed judgment, avoid conflicts of interest, and prioritize the long-term health of the enterprise over personal gain.
Note
fiduciary duty means directors and fund managers must put the interests of shareholders and beneficiaries ahead of their own. When ISS evaluates board decisions — whether on executive pay, related-party transactions, or takeover defenses — it is implicitly assessing whether the board has fulfilled its fiduciary obligations.
ISS QualityScore Pillar: Foundational to all pillars
Related Terms
Source excerpts (5)
chmark data available, nor standards or methodology, to actually be able to figure out the real impact of ESG performance on our asset class.” ESG as fiduciary duty Draeger also commented on the evolving notion of fiduciary duty and said that financial market participants who fail to integrate ESG issues are incr
— Qontigo Summit: ‘Europe Must Lead in Standardization of ESG Data’ | Blog post…
Generally, we oppose a required minimum vesting period. Such a requirement represents an undue restraint on a board’s exercise of its fiduciary duty to fashion equity awards in a manner that is in the best interests of the company and shareholders.
— Meridian Compensation Partners (PDF), p. 5
We have to. The question is the speed at which we get to that point. The other important driver will be the fiduciary duty role of asset owners. We need to strengthen fiduciary duty responsibility, and this has been mentioned in the European Commission’s Action Plan on Su
— Q&A: CDP’s Babikian on Climate Action, Investor Duty | Blog posts | STOXX
t, shareholders are taking an active role, engaging on responsible investment issues to mitigate risks and create positive change, in line with their fiduciary duty. Our USCCB Collaborative Engagement solution enables investors to participate in a joint dialogue with companies on material ESG themes that are alig
— Collaborative Engagement Services | ISS
eceiving the most points is the “winner”. In my opinion, ISS’ adoption of the proposed changes would be both wildly irresponsible and a breach of its fiduciary duty to its clients. By way of background, I previously served as California’s Commissioner of Corporations and in that capacity administered and enforced
Form N-PX
▰ 4
An SEC-mandated annual filing in which registered investment companies (mutual funds, ETFs) and certain institutional investment managers disclose how they voted on proxy proposals for portfolio companies during the preceding twelve-month period. Form N-PX data feeds into ISS Voting Analytics and is a primary source for vote disclosure research.
Note
Form N-PX is the public filing where fund managers reveal how they voted at shareholder meetings. Investors and researchers use these filings to evaluate whether asset managers are voting consistently with their stated policies and stewardship commitments.
Related Terms
Source excerpts (3)
13 and Standard No. 20 in Australia - Stronger Super Reforms (RG 252) in Australia Form N-PX Vote Disclosure Solution ISS provides a turnkey, outsourced reporting preparation solution to help investors comply with SEC rules for Form N-PX disc
— ISS Proxy Voting - Vote Disclosure Services
e their capital stewardship objectives. ISS provides a turnkey, outsourced reporting preparation solution to help investors comply with SEC rules for Form N-PX disclosure of proxy voting records. Our services leverage our deep corporate governance track record, global scale and presence, state-of-the-art dat
— ISS Governance Research and Proxy Voting Solutions
results and institutional voting patterns. ISS Provides Extensive Coverage & Insight Vote Results for Russell 3000 Data from 2003 onward Mutual Fund Form N-PX Vote Records Data from 2007 onward Vote Records covering 700+ institutions and 20,000+ funds, including select non-US asset managers that disclose vo
G
Global Meeting Results
▰ 4
A comprehensive ISS dataset capturing vote outcomes from shareholder meetings worldwide, including votes for and against each proposal, abstentions, broker non-votes, and pass/fail results. The data covers director elections, say-on-pay, shareholder proposals, M&A votes, and other ballot items across global markets.
Note
Global Meeting Results is ISS’s database of what happened at every shareholder meeting — how each proposal was voted on and whether it passed or failed. Investors use this data to spot governance trends and benchmark company results against peers.
Related Terms
Source excerpts (3)
Easily access recent contentious meeting results and ‘against management’ votes as part of workflow analysis of upcoming meetings. Click here to view Global Meeting Results Key Datapoints - Pass/Fail summary for each voting agenda item. - Indicator of the level of results disclosed by the Issuer. - Number of shares voted
— Global Meeting Results | ISS
u need to understand the impact that your corporate governance and voting decisions have in the broader context of final meeting results. BENEFITS OF GLOBAL MEETING RESULTS SERVICE REPORTING Transparency for voting clients, underlying clients, proxy committees, portfolio managers and compliance teams. TREND ANALYSIS Indi
— ISS Proxy Voting - Global Meeting Results Service
ons that allow custodians and other intermediaries to differentiate their offerings, reduce risk and save costs. From proxy distribution services, to global meeting results, to proxy voting solutions that address the nuances of key local markets, ISS partners with custodians and other intermediaries to advance their goal
Golden Parachute
▰▰▰▰▰ 427
Quote
“Golden parachutes reward executives for losing control of their company. They transfer wealth from shareholders to departing management at the worst possible moment.”
— Nell Minow, governance expert, on change-in-control severance
A contractual provision guaranteeing substantial severance payments and accelerated vesting of equity awards to senior executives upon termination following a change-in-control event (merger, acquisition, or takeover). ISS evaluates golden parachute arrangements as part of its say-on-pay and M&A vote analysis, and may recommend against them when the payouts are excessive relative to performance or include problematic features such as excise tax gross-ups.
Note
a golden parachute is the big payout an executive receives if the company is sold and they lose their job. ISS scrutinizes these packages to determine whether the amounts are reasonable and whether they include features — like tax gross-ups or single-trigger vesting — that disproportionately benefit executives at shareholders’ expense.
ISS QualityScore Pillar: Compensation
Related Terms
Source excerpts (5)
Change in control is defined as a change in the company ownership structure . › Vote for shareholder proposals to all have golden parachute agreements submitted for shareholder ratification. Director Compensation Shareholder Ratification of Director Pay Programs Public Fund Advisory Servi
— Public Fund Us Voting Guidelines (PDF), p. 33
Proxy Voting Guidelines - 45 - Transparency. Inclusiveness. Global Expertise 6a-3. Advisory Vote on Golden Parachutes in an Acquisition, Merger, Consolidation, or Proposed Sale This is a proxy item regarding specific advisory votes on “golden parachute” arrangements
— 2014Isscatholicusaguidelines (PDF), p. 46
Which practices are most likely to result in an adverse SOGP recommendation? ▪ Golden parachute excise tax gross-ups are estimated to be paid (based on amounts reported in the golden parachute tables of the merger proxy); ▪ Cash severance paymen
— Us Compensation Policies Faq (PDF), p. 26
VERNANCE.COM 53 of 72 UNITED STATES 2020 CLIMATE PROXY VOTING GUIDELINES ▪ Any other relevant factors. Severance Agreements for Executives/Golden Parachutes Climate Policy Recommendation: Vote for shareholder proposals requiring that golden parachutes or executive severance agreements be submitted for sh
— Climate Us Voting Guidelines (PDF), p. 54
Please see the 2013 U.S. Proxy Voting Policies and Procedures FAQ for more insight on ISS policy in this regard. Advisory Vote on Golden Parachutes (SOGP) - An event has technically triggered a change in control according to the company’s formal definition; however the company continues to exist
Governance Exchange
▰▰ 12
An ISS platform that facilitates communication between institutional investors and corporate issuers on governance, compensation, and ESG topics, particularly in advance of annual meetings. Governance Exchange provides a structured channel for companies to share their governance story and for investors to convey expectations.
Note
Governance Exchange is a bridge ISS built between companies and their shareholders so they can talk about governance issues in a more organized way, especially during proxy season. Companies can explain their governance practices and investors can flag concerns.
Related Terms
Source excerpts (5)
Bridging the governance community. An industry first, Governance Exchange provides subscribing members with the latest news and developments, in-depth reports on governance and compensation trends globally, frequent educati
ess governance attributes categorized under four pillars: Board Structure, Shareholder Rights, Compensation/Remuneration, and Audit & Risk Oversight. GOVERNANCE EXCHANGE Clients also receive access to Governance Exchange, an innovative, secure and robust online community focused on corporate governance.
— Governance Advisory Services | ISS
—ISS Canadian Research Team The foregoing is an excerpt from ISS’ 2014 Canada Postseason Report. To read the full article, download the report on Governance Exchange For more articles like this, get a complimentary subscription to Governance Weekly.
— A Review of Canadian Pay Trends | ISS
Comments can be submitted to i9review@sec.gov and the agency will post publicly all comments received.–Subodh Mishra, Governance Exchange
— SEC Releases Draft Rules on Hedging | ISS
h opposition at firms with all-insider boards are regarded as applying pressure on those boards to appoint outside directors.–ISS Japan Research Team Governance Exchange members can find a full copy of the 2015 Japan Proxy Season Preview here.
Governance QualityScore
▰▰▰▰ 68
A proprietary ISS scoring system that rates companies on governance practices across four pillars: Board Structure, Compensation/Remuneration, Shareholder Rights, and Audit & Risk Oversight. Scores are expressed as decile rankings (1 = lowest governance risk, 10 = highest governance risk) relative to regional and index peers. QualityScore is derived from approximately 200+ data points per company.
Note
Governance QualityScore is ISS’s report card for how well a company is governed. A score of 1 means the company’s governance practices are among the best compared to peers, while a 10 means they are among the worst. The four pillars cover board quality, pay practices, shareholder protections, and audit oversight.
ISS QualityScore Pillar: All four pillars — Board Structure, Compensation, Shareholder Rights, Audit & Risk Oversight
Related Terms
Source excerpts (5)
(December 2, 2019) — ISS ESG, the responsible investment arm of Institutional Shareholder Services Inc., today announced methodology enhancements to Governance QualityScore to provide users with deeper, actionable insights, particularly with respect to sustainability factors. Methodology enhancements include a Shareholde
— ISS ESG Enhances Governance QualityScore Methodology with Sustainability Fact…
SUSTAINABILITY SOLUTIONS / RATINGS & RANKINGS Governance QualityScore Identify corporate governance risk within your portfolio. Corporate governance risk can expose a company and its stakeholders to legal, regulatory, a
— Governance QualityScore | ISS
EVA and Governance QualityScore – Emerging Markets FEBRUARY 10, 2022 In a post-pandemic world, investors are focusing on identifying the right governance and ESG topics.
— EVA and Governance QualityScore – Emerging Markets | ISS
Allows for screening of multi-level fund holdings, fully extendable to underlying fund-in-fund structures. Governance QualityScore Governance QualityScore provides data and scores for companies across board structure, compensation/remuneration, shareholder rights, and audit & ris
— Screening, Research & Analytics | ISS
VA Margin), medium to high ESG performance, and adherence to key international norms and controversial weapons frameworks. Learn more about EVA here. GOVERNANCE QUALITYSCORE INDEX Good corporate governance is a foundation for the responsible management of business risks and opportunities. ISS ESG GOVERNANCE QUALITYSCORE I
I
Independent Director
▰▰▰▰▰▰ 1,856
Quote
“An independent director’s value is the willingness to say ‘no’ when the CEO says ‘yes.’ Without that independence, the board is a rubber stamp.”
— Michael Jensen, Harvard Business School, “The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems”
A member of the board of directors who has no material relationship with the company — whether as an officer, employee, significant shareholder, business partner, family member of management, or service provider — that could compromise the exercise of independent judgment. Listing exchanges (NYSE, Nasdaq) and ISS each maintain independence standards, with ISS standards often being more stringent.
Note
an independent director is an outsider who can make objective decisions because they have no financial or personal ties to the company beyond their board role. ISS may classify a director as non-independent even when the exchange considers them independent, based on ISS’s stricter criteria.
ISS QualityScore Pillar: Board Structure
Related Terms
Source excerpts (5)
The Corporate Governance Code of Japan recommends that all companies appoint at least two independent directors, and at the same time, the Code refers to one-third independence, depending on each company’s circumstances, including governance structure. This ne
— Asia Pacific Policy Updates (PDF), p. 6
The current policy to recommend against one executive director or non-executive non-independent director will be changed to recommend against all non-independent director nominees when the board represents less than the higher of three independent directors or 30 percent of the board. › Director attendance will be cons
— 2016 Asia Pacific Policy Updates (PDF), p. 26
For example, in France, the Middlenext Code3 recommends that small companies have at least two independent directors on their boards. This effectively means that, if the proposed policy were to be implemented, ISS would in some cases apply negative voting recommend
— 7 2017 Comment Period Template Europe Director Elections Board Independence A… (PDF), p. 2
n system for the election of directors, vote AGAINST all directors. Rationale for Update: The nomination system is mandatory only for the election of independent directors in Taiwan. Many companies are still using a “non-nomination” system for the election of non-independent directors, which means that shareholders can
— 2013Internationalpolicyupdates (PDF), p. 9
Exceptional factors may include: may include: ▪ Whether a non-independent director represents a substantial ▪ Whether aexcept if the non-independent director represents a shareholder owning at least 15 percent of the company’s shares and substantial shareholder owning at least 15 percent of the company’s w
ISS Benchmark Policy
▰▰▰▰ 63
The default set of proxy voting guidelines published annually by ISS for each major market (U.S., Europe, Asia-Pacific, etc.), outlining how ISS will recommend votes on common ballot items including director elections, compensation proposals, capital structure changes, M&A transactions, and shareholder proposals. Benchmark policies are updated each year through a public comment process.
Note
the ISS Benchmark Policy is the “standard playbook” ISS uses to decide whether to recommend a “for” or “against” vote on proxy proposals. Most institutional investors who subscribe to ISS either follow these recommendations directly or use them as a starting point for their own policies.
Related Terms
Source excerpts (5)
1, 2018, ISS benchmark policy was updated to also require In addition, as of Feb. 1, 20178, ISS benchmark policy was updated to will also a minimum of at least one independent director for companies listed under the require a minimum of at least one board indepe
— Americas Policy Updates (PDF), p. 19
There will be no change to that approach. However, in the limited number of markets where the ISS benchmark policy discourages “virtual-only” meetings and where the use of such an approach is already allowed by law without requiring any amendment of bylaws, we wil
— Iss Policy Guidance For Impacts Of The Coronavirus Pandemic (PDF), p. 5
Voting instructions submitted for both fiscal council election scenarios would result in votes being rejected. 21. Are there any changes in the ISS benchmark policy guidelines regarding the election of directors in light of the changes implemented by the CVM Instruction 614/2019? No.
— Brazil Remote Voting Card Faq (PDF), p. 7
Kathy Belyeu From: Jett, Jennifer jjett@sempra.com Sent: Saturday, October 19, 2019 1:03 AM To: Policy Subject: ISS Benchmark policy comment period Dear ISS, Thank you for the opportunity to provide feedback on ISS’s proposed policy changes.
However, we agree this is not the right time to dramatically increase the independence standard in the ISS benchmark policy for those companies. Japan Policy: Poison Pills We agree with the change in process, but we would hope the outcome remains the same, i.e. recommendat
ISS Voting Policy
▰▰ 6
A broader term encompassing all ISS proxy voting recommendation frameworks, including the Benchmark Policy, Sustainability Policy, Taft-Hartley Policy, Catholic Values Policy, Public Fund Policy, and custom policies built for individual institutional clients. Each policy reflects a different set of investor values and priorities.
Note
ISS does not have just one voting policy — it offers a menu. The Benchmark policy is the most widely used, but investors with specific mandates (e.g., faith-based investing, public pensions, sustainability-focused funds) can choose an alternative lens through which ISS evaluates proxy proposals.
Related Terms
Source excerpts (5)
Dear Sirs, An email about asking the comments of ISS voting policy in 2017 was received by me last Friday. After reading them, I have the following comments/opinions as below: 1.
— First Financial Holding (PDF), p. 1
ciate (non-voting) members include a range of asset managers with more than $20 trillion in assets under management.1 We focus this input on proposed ISS voting policy updates affecting IPO companies with multi-class capital structures.2 In 2016 CII’s members approved a statement on core, accountability-oriented inv
— Council Of Institutional Investors (PDF), p. 1
the UK Euro Stoxx and Australia ASX 200; - Methodology has been enhanced to align scores with quantitative modeling, global governance standards and ISS voting policy; - New data sets are available to subscribers comprising additional governance factors, including a new compensation pillar in Japan; and - New event
— Institutional Shareholder Services Releases QuickScore 2.0 | ISS
ting option is not ideal. For Japanese companies who chose the adjourned meeting option for 2020, the following additional changes will be applied to ISS voting policy application: • Income allocation/Dividends For companies whose articles require shareholder approval to pay final dividends, in normal times, dividen
— Japan Policy Guidance Impacts Of Covid 19 (PDF), p. 3
ased to take the opportunity to comment on the proposed changes to the ISS benchmark voting policy. We have taken note of the proposed changes to the ISS voting policy on the maximum limit on board terms for Germany and Austria. As a German company, Commerzbank applies the German Corporate Governance Code (GCGC) as
L
Lead Independent Director
▰▰▰▰ 54
A senior independent board member designated to serve as a counterbalance when the roles of CEO and board chair are combined (CEO duality). The lead independent director typically presides over executive sessions of independent directors, serves as a liaison between independent directors and the chair/CEO, and may have authority to call board meetings and approve agendas.
Note
a lead independent director is the “independent voice” on the board when the CEO is also the chair. ISS views a strong lead independent director with clearly defined duties as a partial (though not complete) substitute for full separation of the chair and CEO roles.
ISS QualityScore Pillar: Board Structure
Related Terms
Source excerpts (5)
Only 9 percent of non-investors responded that awarding inducement grants to NEDs is not an acceptable practice. Appointment of Lead Independent Director (Singapore) The Singapore Code of Corporate Governance calls for the appointment of a lead independent director in certain designated situations wher
— 2016 2017 Iss Policy Survey Results Report (PDF), p. 8
Services 31 of 37 FAQ: US Proxy Voting Research Procedures & Policies ISS will generally consider a lead director role to be robust if the lead independent director is elected by and from the independent members of the board (the role may alternatively reside with a presiding director, vice chairman, or rotating
— Us Procedures And Policies Faq (PDF), p. 32
already a negative presumption which should not be made in the final policy for the reasons stated below. Institutional Investors Agree That a Strong Lead Independent Director Can Provide Independent Board Leadership. Perhaps the most important factor in ISS’ existing policy is the presence of a lead independent director wi
crease the likelihood of a FOR recommendation: The following factors will increase the likelihood of a FOR recommendation: § A weak or poorly defined lead independent director role that fails to serve as § A weak or poorly defined lead independent director role that fails to serve as an appropriate counterbalance to a combi
— Proposed Benchmark Policy Changes 2020 (PDF), p. 7
at require an independent Board chair or separation of the chair and CEO roles, absent mitigating factors such as poor governance or lack of a strong lead independent director. We understand that some shareholders prefer that the Board Chair and CEO roles be separate; however, it has not been established that there is a sin
Lobbying Disclosure
▰ 3
The voluntary or shareholder-requested reporting by a company of its direct and indirect lobbying activities, expenditures, trade association memberships, and the governance processes overseeing lobbying decisions. Shareholder proposals requesting lobbying disclosure have become among the most frequently filed proposal types, and ISS evaluates them based on materiality, current disclosure levels, and peer practices.
Note
lobbying disclosure proposals ask companies to reveal how much they spend trying to influence government policy, which trade groups they fund, and whether their lobbying aligns with their stated values. ISS often supports these proposals when a company’s lobbying disclosure lags behind peers.
ISS QualityScore Pillar: Not directly scored, but intersects with Shareholder Rights (proposal support)
Related Terms
Source excerpts (2)
Resolutions associated with one of the two larger political issue campaigns, political contributions disclosure and lobbying disclosure, accounted for more than two-thirds of all resolutions filed (95 proposals). New this year was an increase in the variety of smaller political issue
— Group Presses on Political Spending Disclosures | ISS
118 resolutions) settled for second place after seasons of dominance as proponents shied away from filing proposals that diverged from the two large lobbying disclosure and political contributions campaigns. A number of new and novel climate change proposals that focused on climate change drew mixed results.
— 2015: U.S. Voting Season Review – Environmental & Social Issues | ISS
Long-Term Incentive Plan (LTIP)
▰▰▰ 36
A compensation program that awards executives and key employees equity-based or cash-based incentives tied to multi-year performance goals (typically three or more years), designed to align management interests with long-term shareholder value creation. Common LTIP vehicles include performance share units, restricted stock units with performance conditions, and cash-based performance awards.
Note
an LTIP is the part of an executive’s pay that they earn only if the company hits targets over several years. ISS favors LTIPs with rigorous, disclosed performance metrics and views them as superior to time-based awards because they tie pay directly to results.
ISS QualityScore Pillar: Compensation
Related Terms
Source excerpts (5)
initial testing period; • Plan allows for excessive dilution; • Company failed to disclose adequate information regarding any element of the scheme. Long-Term Incentive Plan Amendments ISS recommendation: CASE-BY-CASE When evaluating amendments to existing plans ISS initially uses its long-term incentive plan guidelines (
— 2013Issaustraliaguidelines (PDF), p. 17
less of whether the shares are newly issued or purchased on-market. Long Term Incentive Plan and Share-Based Grant Considerations The elements of the long-term incentive plan (and proposed grants of equity awards) are evaluated by ISS according to the following criteria: Options › Two different types of options should be d
— Australia Voting Guidelines (PDF), p. 24
restricted stock (units), actual performance shares delivered under the expressed as a percentage of total basic common shares outstanding as of the long-term incentive plan or earned deferred shares, to employees and directors record date. The dilution figure typically excludes employee stock purchase plans divided by we
or other aspects of the remuneration policy such as pensions, severance terms, and discretionary payments; ▪ Concerns exist surrounding the company’s long-term incentive plan(s), including but not limited to, dilution, vesting period, and performance conditions; ▪ Excessive severance arrangements/payments; ▪ Overly generou
— Public Fund International Voting Guidelines (PDF), p. 33
of the approach to resolutions seeking approval for termination benefits to executives generally and under equity plans). Remuneration of Executives: Long-Term Incentive Plan Amendments General Recommendation: Vote case-by-case on amendments to long-term incentive plans. Evaluate amendments to existing plans initially usin
M
Majority Voting
▰▰▰▰▰ 228
Quote
“Majority voting makes director elections real elections. Under plurality voting, a director could be elected with a single vote — that is not accountability.”
— ISS, U.S. Benchmark Voting Policy rationale
A director election standard under which a nominee must receive more votes “for” than votes “against” (or “withheld”) to be elected. Under a plurality standard, by contrast, a nominee needs only the most votes among candidates, meaning an unopposed director could theoretically be elected with a single vote. ISS generally favors majority voting standards because they give shareholders meaningful power to reject underperforming directors.
Note
majority voting means a director must win the support of more than half the voting shareholders to keep their seat. If they fail, most companies require them to tender a resignation. ISS views this as a basic shareholder right.
ISS QualityScore Pillar: Shareholder Rights
Related Terms
Source excerpts (5)
These latter may in fact have more total “FOR” votes than the candidates on the other card—but will still fail to be elected under the majority voting standard. And not only, in a failed election, do all the incumbents hold over—but in an election where some seats are not filled by a nominee receivi
— Majority Voting As a Potential Entrenchment Device | ISS
G GUIDELINES Majority Vote Standard for the Election of Directors General Recommendation: Vote for resolutions requesting that: (i) the board adopt a majority voting director resignation policy for director elections or (ii) the company amend its bylaws to provide for majority voting, whereby director nominees are
— Canada Venture Voting Guidelines (PDF), p. 16
The effort broke the 50 percent average support barrier just 3 years after the starter’s pistol fired off. Since 2004, when the sprint for majority voting began with just 4 proposals, shareholders have seen about 480 majority voting proposals on ballot, which have received 53.9 percent average support.
— The Latest in Governance Reform - Proxy Access | ISS
While cumulative voting promotes the interests of minority shareholders by allowing them to get some representation on the board, majority voting promotes a democratic election of directors for all shareholders and ensures board accountability in uncontested elections.
— Public Fund Us Voting Guidelines (PDF), p. 17
. Furthermore, disclosures regarding these policies should be made available to shareholders (similar to shareholder proposal deadline disclosures or majority voting policy disclosures) because they are substantive changes that may impact shareholders’ ability to nominate director candidates.
Majority Voting Standard
▰▰ 9
A specific implementation of majority voting that requires director nominees to receive more “for” votes than “against” votes (a majority of votes cast) to be elected, as distinct from a plurality standard where only the most votes among candidates are needed. Companies adopting a majority voting standard typically pair it with a director resignation policy under which a director who fails to receive majority support must tender their resignation for board consideration.
Note
a majority voting standard is the rule that says a director must win genuine majority approval — not just more votes than a rival. ISS strongly favors companies adopting this standard because it gives shareholders a real mechanism to reject directors they consider unfit.
ISS QualityScore Pillar: Shareholder Rights
Related Terms
Source excerpts (5)
These latter may in fact have more total “FOR” votes than the candidates on the other card—but will still fail to be elected under the majority voting standard. And not only, in a failed election, do all the incumbents hold over—but in an election where some seats are not filled by a nominee receiving majori
— Majority Voting As a Potential Entrenchment Device | ISS
hareholder meeting; • Adoption of a majority vote standard with director resignation policy for uncontested elections OR public commitment to adopt a majority voting standard with director resignation policy for uncontested elections if the controlling shareholder ceases to control 50 percent or more of the common shares;
— 2013Isscanadianventureguidelines (PDF), p. 9
holder meeting; and › Adoption of a majority vote standard with director resignation policy for uncontested elections OR public commitment to adopt a majority voting standard with director resignation policy for uncontested elections if the controlling shareholder ceases to control 50 percent or more of the common shares.
— 2015Canadaventurevotingguidelines (PDF), p. 10
hareholder meeting; • Adoption of a majority vote standard with director resignation policy for uncontested elections OR public commitment to adopt a majority voting standard with director resignation policy for uncontested elections if the controlling shareholder ceases to control 50 percent or more of the common shares9.
— 2013Isscanadiantsxguidelines (PDF), p. 9
er meeting; and • Adoption of a majority vote standard with a director resignation policy for uncontested elections OR a public commitment to adopt a majority voting standard with a director resignation policy for uncontested elections if the controlling shareholder ceases to control 50 percent or more of the common shares
O
Overboarded Director
▰▰▰▰ 147
A director who serves on an excessive number of public company boards, raising concerns about their ability to devote sufficient time and attention to each board role. ISS applies specific numerical thresholds: generally, a non-CEO director is considered overboarded if they sit on more than four public company boards, and a sitting CEO is overboarded at more than two total boards (including their own).
Note
an overboarded director has too many board seats. ISS worries they cannot attend enough meetings, review enough materials, or provide adequate oversight when stretched across too many companies. ISS may recommend voting against overboarded directors.
ISS QualityScore Pillar: Board Structure
Related Terms
Source excerpts (5)
all publicly-listed boards, regardless of whether they have a parent/subsidiary relationship, are counted when determining a director’s status as an overboarded director. In situations where an overboarded director is CEO of a parent company board or any of the controlled subsidiaries (defined as >50 percent ownership
— 4 2017 Comment Period Template Canada Director Elections Overboarded Directors (PDF), p. 2
However, recommendations against directors will generally be made only in cases where the overboarded director also fails to attend at least 75 percent of the meetings where s/he is expected to be present. Externally-Managed Issuers ISS has also adopted a new
— ISS Releases 2016 Benchmark Policy Updates | ISS
Potentially confusing language as well as spelled out exceptional circumstances have been removed to clarify the policy. Overboarded Directors Current Sustainability Policy, incorporating changes: New Sustainability Policy: Sustainability Policy Recommendation: In Austria, Belgium, Denmark,
— Sustainability International Policy Updates (PDF), p. 13
013, period, found that 70 percent of the boards had staggered terms and 70 percent of the firms required supermajority votes to amend their bylaws.2 Overboarded Directors Current Catholic Advisory Services Recommendation: Vote against or withhold from individual directors who: › Sit on more than six public company boa
— 2016 Catholic Us Policy Updates (PDF), p. 5
Board independence IV. Disclosure of Names of Nominees V. Combined Chairman/CEO VI. Election of a Former CEO as Chairman of the Board VII. Overboarded Directors VIII. Voto di Lista (Italy) IX. One Board Seat per Director X. Composition of Committees XI.
P
Pay-for-Performance Alignment
▰▰▰▰▰ 282
Quote
“Pay without performance is the central problem in executive compensation. When CEOs collect fortunes while shareholders lose money, the system is broken.”
— Lucian Bebchuk & Jesse Fried, Pay Without Performance: The Unfulfilled Promise of Executive Compensation
The degree to which executive compensation outcomes correlate with company financial and stock-price performance over short- and long-term horizons. ISS conducts a quantitative pay-for-performance analysis comparing a company’s CEO pay ranking to its total shareholder return (TSR) ranking within a peer group, flagging companies where a significant disconnect exists (e.g., high pay combined with poor performance).
Note
pay-for-performance alignment asks a simple question: is the CEO being paid like a top performer when the company is actually underperforming? ISS’s quantitative screens compare pay and performance rankings among peers, and a significant misalignment can trigger an “against” recommendation on say-on-pay.
ISS QualityScore Pillar: Compensation
Related Terms
Source excerpts (5)
Already in 2012 ISS introduced a robust quantitative methodology to assess pay-for-performance alignment for the US market. With similar attention for payout levels in Europe, the 2014 ISS policy survey suggested that 83 percent of investors would be sup
— Europe U.K. Ireland European Pay For Performance Methodology (PDF), p. 1
, Canadian and European models are three measures of alignment between executive pay and company performance: two relative measures where a company’s pay-for-performance alignment is evaluated in reference to a group of comparable companies, and one absolute measure, where alignment is evaluated independently of other companies
— Emea P4P Faq June 2016 (PDF), p. 7
Start date is the disclosed date the executive began employment as the CEO. 10. For Pay-for-Performance alignment, how will ISS treat CEOs who have not been in the position for three years? Enabling the financial community to manage governance risk for the benefi
— Australian Pay For Performance Faq (PDF), p. 6
1.3.3. Discretionary payments, if applicable. 2. Maintain appropriate pay-for-performance alignment with emphasis on long- 2. Maintain appropriate pay-for-performance alignment with emphasis on long- term shareholder value: term shareholder value: 2.1. The structure of the company’s short-term incentive plan shall be 2.1.
— Israel And South Africa Policy Updates (PDF), p. 12
The pay-for-performance evaluations are based on multiple measures, each of which assesses a company’s pay-for-performance alignment from a distinct perspective. ▪ Provide robust and standardized information about pay-for-performance concerns to investors and issuers. The evaluatio
Poison Pill
▰▰▰▰▰▰ 1,078
Quote
“The poison pill is the most powerful anti-takeover device ever invented. It single-handedly shifted the balance of power from shareholders to boards.”
— Martin Lipton, Wachtell, Lipton, Rosen & Katz, inventor of the poison pill (1982)
A shareholder rights plan adopted by a board (typically without shareholder approval) that is triggered when an acquirer crosses a specified ownership threshold (commonly 10-20%). The pill allows existing shareholders to purchase additional shares at a steep discount, massively diluting the hostile bidder’s stake and making the takeover prohibitively expensive.
Note
a poison pill is a defense mechanism that makes it extremely costly for anyone to buy the company without the board’s blessing. ISS generally recommends against pills that are adopted without shareholder approval or have terms exceeding three years.
ISS QualityScore Pillar: Shareholder Rights
Related Terms
Source excerpts (5)
will not receive the case-by- case assessment. Intent and Impact The intent of this proposed policy update is to simplify ISS’ approach to poison pills, and strengthen the principle that poison pills should be approved by shareholders. ISS’ vote recommendations under the proposed policy would be imp
— 3 2017 Comment Period Template Us Director Elections Poison Pills (PDF), p. 2
The most common defenses are the shareholders rights protection plan, also known as the poison pill, and charter amendments that create barriers to acceptance of hostile bids. In the U.S., poison pills do not require shareholder approval.
— Sri Us Voting Guidelines (PDF), p. 26
Attempting to mandate equal pay is akin to mandating successful marriages. 3. Poison Pills: I am supportive of your proposals. It is a difficult area as it often pits entrenched management and boards against corporate pillagers.
TAKEOVER DEFENSE PLANS (POISON PILLS) General Recommendation: Generally vote against the approval of takeover defense plans (poison pills), unless: (Necessary conditions) › Independent directors who meet ISS guidelines on attendance comprise at least 1/3 of the board after the sharehol
— Japan Voting Guidelines (PDF), p. 11
12 15. Why does ISS review annually-elected boards and classified boards differently when they have adopted and continue to hold a poison pill without shareholder approval? … 12 16. What if a company adopts a poison pill before it is public? …
Political Spending Disclosure
▰ 1
The voluntary or shareholder-requested reporting by a company of its political contributions — including direct donations to candidates and parties, payments to political action committees (PACs), and contributions to 501(c)(4) organizations engaged in political activity. Like lobbying disclosure, political spending transparency proposals are among the most frequently filed shareholder proposals, and ISS evaluates them based on current disclosure practices, materiality, and governance oversight.
Note
political spending disclosure proposals ask companies to tell shareholders where their political money goes. ISS often supports these proposals when a company provides less transparency than peers, viewing political spending oversight as a governance and risk management matter.
ISS QualityScore Pillar: Not directly scored, but intersects with Shareholder Rights (proposal support)
Related Terms
Source excerpts (1)
Group Presses on Political Spending Disclosures The Corporate Reform Coalition, whose members include investors, academics, and public interest groups, is urging the U.S.
Proxy Access
▰▰▰▰▰ 482
Quote
“Proxy access gives long-term shareholders a seat at the table without forcing them to wage a full-scale proxy fight. It is democracy at the board level.”
— Scott Stringer, former New York City Comptroller, on the Boardroom Accountability Project
A governance mechanism that allows qualifying shareholders (typically those owning 3% or more of outstanding shares for at least three years) to nominate a limited number of director candidates directly on the company’s proxy card, without the cost and complexity of running a full proxy contest. Proxy access enables shareholders to propose alternative director nominees while using the company’s ballot infrastructure.
Note
proxy access lets long-term shareholders put their own director candidates on the company’s official ballot. Without proxy access, nominating an alternative director requires an expensive independent proxy solicitation. ISS generally supports proxy access proposals and may recommend against boards that reject widely supported proxy access requests.
ISS QualityScore Pillar: Shareholder Rights
Related Terms
Source excerpts (5)
. As of August 31, 39 percent of S&P 500 companies provide a proxy access right, and 264 U.S. companies in the Russell 3000 have adopted some form of proxy access; only 16 of these companies had adopted proxy access before 2015. By summer 2017, the majority of the companies in the S&P 500 may provide proxy acce
— The Finer Points of Proxy Access Bylaws Come Under the Microscope | ISS
The Proxy Access Era kicked off in a big way in 2015. From a near-standing start this season, proxy access has bolted to the lead of the 2015 shareholder proposal rac
— The Latest in Governance Reform - Proxy Access | ISS
Brief Few U.S. corporate governance topics generate as much debate or controversy as proxy access. The unsuccessful search for a mechanism under the Federal securities laws to allow shareholders to place their board nominees on company proxy ballo
— Proxy Access in the United States: What to Expect for the 2015 Proxy Season |…
Voting Guidelines Updates Rationale for Update: This policy revision provides an analytical framework for evaluating candidates nominated pursuant to proxy access. Public Fund Advisory Services has a policy for evaluating director nominees in contested elections, which currently applies to proxy contests as wel
— 2016 Public Fund Us Policy Updates (PDF), p. 6
4 and Sept. 4, covered a range of issues, including: the provision of multiple voting rights in Europe; proxy access in the U.S.; overboarding for directors and CEOs, globally; and factors for addressing the qualifications of outside directors in Japan. “The level o
— ISS Releases Results of Annual Global Voting Policy Survey | ISS
Proxy Contest
▰▰▰▰▰ 397
Quote
“A proxy contest is corporate democracy in its rawest form: shareholders choose between two visions for the company’s future.”
— Wachtell, Lipton, Rosen & Katz, on the mechanics of proxy fights
A situation in which a dissident shareholder or activist investor solicits proxy votes from other shareholders in opposition to the company’s board or management recommendations, typically seeking to elect alternative director nominees, block a transaction, or force a governance change. Also known as a proxy fight.
Note
a proxy contest is a shareholder battle for control. An activist investor who disagrees with how the company is being run asks other shareholders to vote for the activist’s candidates or proposals instead of the board’s. ISS evaluates each side’s arguments and issues a recommendation.
Related Terms
Source excerpts (5)
Past shareholder activism, board activity, and votes on related proposals. Proxy Contests Sustainability Policy Recommendation: Vote case-by-case on proxy contests, considering the following factors: › Past performance relative to its peers; › Market in which fund invests; › Measures taken by the board to addre
— 2017 Sustainability Us Voting Guidelines (PDF), p. 67
Notably, during the annual meeting season, in-person meetings are typically limited to contentious issues, including contested mergers, proxy contests, or other special situations, while engagement on other topics is handled telephonically. All participants should understand and must agree to the f
— FAQs regarding ISS Proxy Research | ISS
New York City Retirement Systems - Accountability and the Activist Investor A board’s accountability to shareholders is the central question of every proxy contest. Recently, boards facing a proxy contest have attempted to redirect the question toward the activist’s credibility, particularly by pointing out that
— ISS 2015 Annual Conference, North America | ISS
The purpose of advance notice requirements, as generally stated in the market, is: › To prevent stealth proxy contests; › To provide a reasonable framework for shareholders to nominate directors by allowing shareholders to submit director nominations within a reasona
— 2015Canadaventurevotingguidelines (PDF), p. 15
How would ISS evaluate director nominees with third-party compensatory arrangements in a proxy contest? Compensation arrangements with director nominees are among the factors ISS considers in our case-by- case analysis of proxy contests.
Proxy Voting
▰▰▰▰▰▰ 4,813
Quote
“The proxy vote is the shareholder’s voice. When institutional investors fail to vote thoughtfully, they abdicate the most powerful governance tool they possess.”
— Robert Monks, corporate governance pioneer, Corpocracy
The process by which shareholders who are unable or choose not to attend a shareholder meeting in person authorize another party (a proxy) to cast votes on their behalf on matters presented for approval. For institutional investors, proxy voting is a fiduciary duty and a core component of investment stewardship.
Note
most shareholders do not attend company meetings. Instead, they fill out a proxy card (or use electronic systems) to tell someone else how to vote their shares. ISS is the world’s largest provider of proxy voting recommendations and infrastructure.
ISS QualityScore Pillar: Foundational to all pillars
Related Terms
Source excerpts (5)
ISS was founded in 1985 with the goal of supporting sound investment stewardship to help inform proxy voting among institutional investors. First-to-market with proxy voting services in 1992, today ISS is a global leader in providing high-quality research, o
— ISS Governance Research and Proxy Voting Solutions
- On this webinar replay, Lorenzo Saà, Head of Reporting and Assessment at PRI presents an overview which specifically highlights the framework’s proxy voting related reporting obligations. Lorenzo is joined by ISS’ European Head of Business, Jean-Nicolas Caprasse, who outlines the key ways in which ISS can
— Fulfill Your PRI Proxy Voting Reporting Requirements
Department of Labor in 1988 with regard to the fiduciary responsibilities governing the voting of shares of stock owned by the plan. These proxy voting guidelines are designed to help ensure that public funds fulfill all statutory and common law obligations governing proxy voting, with the intent of
— 2016 Public Fund International Proxy Voting Guidelines (PDF), p. 4
(ISS), a leading provider of corporate governance solutions to the global financial community, today released 2014 updates to its benchmark proxy voting policies for the Americas, EMEA, and Asia-Pacific region. These global updates are the culmination of a consultation process that included institutio
— ISS Releases 2014 Proxy Voting Policies
losure Solution ISS provides a turnkey, outsourced reporting preparation solution to help investors comply with SEC rules for Form N-PX disclosure of proxy voting records. - - ASCII or HTML reporting format plus NEW XML framework to meet SEC requirements - Report on proxy voting matters and agenda items mandate
ProxyExchange
▰▰▰▰ 68
The branded ISS end-to-end proxy voting platform that combines research delivery, vote recommendation display, ballot management, custom policy application, vote execution, recordkeeping, and regulatory reporting into a single integrated system. ProxyExchange is distinct from the generic concept of proxy exchange infrastructure.
Note
ProxyExchange (one word, branded) is ISS’s flagship product for institutional investors who need to research proxy proposals, apply their voting policies, execute votes, and generate reports — all in one place. It is the interface through which the majority of ISS clients interact with proxy season.
Related Terms
Source excerpts (5)
With an easy-to-use library of over 30 report templates from vote history to accounts to board statistics and many more, ProxyExchange Reporting Module allows you to tell your stewardship story. Templates can be customized and then saved, scheduled, and shared. The videos below focus
— ProxyExchange Reporting Module | ISS
ocess, and flawlessly execute your mandates, season after proxy season. With rich content, intuitive yet tailored workflows, and secure technologies, ProxyExchange is the preferred platform for the world’s leading institutional investors. DESIGN REIMAGINED ProxyExchange provides unmatched control, visibility, an
ProxyExchange 2.0. An industry standard redefined. The exercise of governance, now even more efficient & transparent.
“We look forward to rolling out additional enhancements over the course of 2018 to ensure ProxyExchange remains the industry’s leading voting platform for institutional investors, globally.” New features within the Project Mercury release include: - Wel
— ISS Announces Transformational Enhancements to ProxyExchange Voting Platform …
MENT LETTER WRITING Advance your stewardship programs through a targeted and efficient process Powering engagement year-round Fully integrated within ProxyExchange, ISS Engagement Letter Writing is a flexible, dynamic solution to support investors’ stewardship engagement strategies. PRE-MEETING Communicate votin
Q
Quorum
▰▰▰▰▰ 411
The minimum number or percentage of shares that must be represented (in person or by proxy) at a shareholder meeting for the meeting to be validly convened and for votes to be binding. Quorum thresholds are set in a company’s bylaws or charter and vary by jurisdiction; a typical U.S. quorum is a majority of outstanding shares. If a quorum is not met, the meeting must be adjourned and reconvened.
Note
a quorum is the minimum attendance needed for a shareholder meeting to count. If not enough shareholders show up or submit proxy votes, the meeting cannot proceed. ISS monitors quorum provisions as part of its shareholder rights assessment, particularly where companies set unusually low quorum thresholds that allow binding decisions with minimal shareholder participation.
ISS QualityScore Pillar: Shareholder Rights
Related Terms
Source excerpts (5)
- TSX and TSXV Current Recommendation: Case-by-case based on analytical framework. Key Changes: Addition of a policy on Enhanced Shareholder Meeting Quorum. New Recommendation: Generally vote against new By-Laws or amended By-Laws that would establish two different quorum levels which would result in imp
— 2014Canadianpolicyupdates (PDF), p. 13
Given this foundational role, these documents should reflect best practices within the Canadian market wherever possible. › Quorum Requirements: The quorum requirement for meetings of shareholders should encourage wide- ranging participation from all shareholders.
— 2015Canadaventurevotingguidelines (PDF), p. 17
ch means that it should apply as of 2017 proxy season. In addition, the law notably provides for (i) an exceptional provision allowing for simplified quorums (i.e., the majority of the capital share attending the shareholders’ meeting) for the resolution (to be adopted by Jan.
— Analysis: Differentiated Voting Rights in Europe | ISS
NST resolutions to lower the stock ownership disclosure threshold below 5 percent unless specific reasons exist to implement a lower threshold. Amend Quorum Requirements Vote proposals to amend quorum requirements for shareholder meetings on a CASE-BY-CASE basis. Transact Other Business Vote AGAINST other
— 2013Isscatholicinternationalpolicy (PDF), p. 5
be inconsistent with the view that shareholder votes on any voting item should carry equal importance and should therefore be approved under the same quorum requirement for all items. Companies have indicated in examples to date that Enhanced Quorum is not designed to block the potential consequence of a
R
Related-Party Transaction
▰▰▰▰▰ 417
A business transaction between a company and an entity with which it has a pre-existing relationship — such as a director, officer, major shareholder, or their family members and affiliated entities. Related-party transactions create conflicts of interest and governance risk because the parties may not negotiate at arm’s length, potentially disadvantaging minority shareholders.
Note
a related-party transaction is a deal between the company and an insider. For example, the company leasing office space from a building owned by the CEO’s family. ISS scrutinizes these transactions for fairness and adequate independent oversight, and may recommend against directors who approve conflicted transactions without proper safeguards.
ISS QualityScore Pillar: Audit & Risk Oversight, Board Structure
Related Terms
Source excerpts (5)
Inclusiveness. Global Expertise. Related-Party Transactions ISS assesses related-party transactions on a case-by-case basis. However, all analyses are conducted from the point of view of long-term shareholder value for the company’s existing shareh
— 2014Isshongkongguidelines (PDF), p. 12
Services may recommend against the shareholder vote, Catholic Advisory Services may recommend against the election of the director(s) involved in the related-party transaction or against the election of the director(s) involved in the related-party transaction or against the full board.
— Catholic Faith Based International Policy Updates (PDF), p. 22
China Proxy Voting Summary Guidelines - 13 - ISS www.issgovernance.com Related-Party Transactions As with many Asian markets, two types of related-party transactions are commonly seen in China – the non-recurring transaction and the recurring service provision agreement.
— 2013Isschinaguidelines (PDF), p. 14
16-2017 Israel Proxy Voting Guidelines Related-Party Transactions General Recommendation: In evaluating resolutions that seek shareholder approval on related-party transactions (RPTs), vote on a case-by-case basis, considering factors including, but not limited to, the following: › The parties on either side of the transact
— 2016 2017 Israel Proxy Voting Guidelines (PDF), p. 15
- Provide shareholders with clear, comprehensive compensation disclosures; At each AGM when a related-party transaction on a post-mandate remuneration (or 2. Maintain appropriate pay-for-performance equivalent) is separately proposed to alignment with emphasis on long-
S
Say-on-Pay
▰▰▰▰▰ 847
Quote
“Say-on-pay is the single most important governance reform since Sarbanes-Oxley. It gives shareholders a direct channel to push back on excessive executive compensation.”
— Rosanna Landis Weaver, As You Sow, on the impact of Dodd-Frank say-on-pay provisions
A mandatory (in the U.S. under Dodd-Frank) advisory shareholder vote on the compensation paid to a company’s named executive officers, as disclosed in the proxy statement. Companies must hold say-on-pay votes at least once every three years, though most hold them annually. ISS recommends against say-on-pay when it identifies problematic pay practices or a significant pay-performance disconnect.
Note
say-on-pay is the annual moment when shareholders give a thumbs up or thumbs down on executive pay. A low vote (below 70% support) is a governance alarm bell and often triggers ISS to recommend against compensation committee members the following year.
ISS QualityScore Pillar: Compensation
Related Terms
Source excerpts (5)
closed at 2015 meetings, as well as goal-setting by companies where financial metrics constituted a majority of annual incentive objectives. Finally, say-on-pay vote results at 2015 shareholder meetings are reviewed as a potential gauge for what to expect in 2016, given the continuing downturn.
— Goal Setting, Attainment, and Say-on-Pay Vote Results at U.S. Energy Companie…
It is the outcome of this qualitative analysis that determines the vote recommendation for the say-on-pay proposal (or, in some cases, for the election of directors when there is no say-on-pay proposal on the ballot). Exceptional circumstances of the COVI
— Pay For Performance Mechanics (PDF), p. 12
This is a codification of existing practice. › Lack of Say-on-Pay Frequency ballot item: In 2017, the large companies who held their initial say-on-pay frequency votes in 2011 were once again required to include it on their ballot in 2017, as the frequency issue needs to be put to a shareholder vote
— Catholic Faith Based Us Policy Updates (PDF), p. 11
What are the implications if a board does not present shareholders with a say-on-pay (or frequency) vote where one would otherwise be expected? If there is no say-on-pay or say-on-pay frequency vote on the ballot where one would other
— Us Compensation Policies Faq (PDF), p. 25
At the market level, it may incorporate a variety of generally accepted best practices. Voting Alternatives In general, the management say-on-pay (MSOP) ballot item is the primary focus of voting on executive pay practices— dissatisfaction with compensation practices can be expressed by voting
Share Buyback
▰▰▰▰ 148
A program under which a company repurchases its own outstanding shares from the open market or through tender offers, reducing the total share count and typically increasing earnings per share and ownership concentration for remaining shareholders. Share buybacks are a capital return mechanism alongside dividends and are subject to shareholder approval in many non-U.S. jurisdictions.
Note
a share buyback is when a company buys back its own stock, effectively returning cash to shareholders by making each remaining share more valuable. ISS evaluates buyback authorizations for reasonableness and may scrutinize them when companies repurchase shares while simultaneously granting large equity awards (offsetting the benefit of the buyback).
ISS QualityScore Pillar: Shareholder Rights (when subject to approval), Compensation (when linked to equity dilution)
Related Terms
Source excerpts (5)
Change in control is defined as a change in the company ownership structure. Share Buyback Impact on Incentive Program Metrics General Recommendation: Vote case-by-case on proposals requesting the company exclude the impact of share buyback
— Us Voting Guidelines (PDF), p. 56
Unadjusted annual burn rate is determined using weighted average common shares outstanding to smooth out the impact of share buybacks and share issuances. Within a given single year, unadjusted burn rate is calculated as: Number of equity awards granted Weighted average common shar
— Canadian Equity Plan Scorecard Faq (PDF), p. 15
Vote for the proposal when there is a pattern of abuse by executives exercising options or selling shares during periods of share buybacks. Stock Distributions: Splits and Dividends General Recommendation: Generally vote for management proposals to increase the common share authorizatio
— Global Board Aligned Us Voting Guidelines (PDF), p. 37
The issue of shares pursuant to a specific transaction will be considered on a case-by-case basis, depending on the merits of the underlying deal. 6. SHARE BUYBACK AUTHORITIES Local requirements Companies are allowed to acquire their own shares (CA s48).
— 2015Southafricavotingguidelines (PDF), p. 7
The JSE specifies that a general authority to issue shares for cash requires 75 percent support. Share Buyback Authorities General Recommendation: Vote for a general share buyback authority, unless: ▪ The company wishes to repurchase more than 20 percent of it
Shareholder Proposal
▰▰▰▰▰▰▰ 6,025
Quote
“The shareholder proposal is the great equalizer of corporate governance. A single investor with a small stake can force an entire board to confront issues it would rather ignore.”
— John Chevedden, prolific shareholder proposal filer
A resolution submitted by an eligible shareholder (meeting SEC ownership and procedural thresholds) for inclusion in a company’s proxy statement and consideration at the annual meeting. Common shareholder proposal topics include governance reforms, environmental disclosures, political spending transparency, and social policies. Shareholder proposals are typically precatory (advisory) rather than binding.
Note
shareholder proposals are items on the ballot that come from investors, not from the company’s board. They are how shareholders formally request changes. ISS evaluates each proposal on its merits and publishes a vote recommendation.
ISS QualityScore Pillar: Shareholder Rights
Related Terms
Source excerpts (5)
These access proposals and calls for independent board chairs were number one and number two, respectively, on the shareholder proposal leaderboard. While the number of shareholder proposals addressing shareholders’ right to call special meetings and act by written consent increased f
— A Look At Governance Shareholder Proposals in 2015 | ISS
In Focus: U.S. Shareholder Proposals at Halftime May 19, 2025 At the halfway mark of the U.S. 2025 proxy season, the total number of shareholder proposals filed has fallen to the lowest
— In Focus: U.S. Shareholder Proposals at Halftime | ISS
A Look at AI-Related Shareholder Proposals at U.S. Companies, 2022-2025 December 1, 2025 The long-projected systemic and business transformations that can be brought about by Artificial Intel
— A Look at AI-Related Shareholder Proposals at U.S. Companies, 2022-2025 | ISS
Rare U.K. Shareholder Proposal Receives Rarer Company Support Shareholder resolutions are rare in the U.K.
— Rare U.K. Shareholder Proposal Receives Rarer Company Support | ISS
An Overview of U.S. Shareholder Proposal Filings FEBRUARY 26, 2018 The 2018 U.S. proxy season is around the corner, and an early overview of shareholder proposal filings may give us a first
Shareholder Rights
▰▰▰▰▰ 830
Quote
“Corporate governance is, at its core, about the protection of shareholder rights. Every other mechanism — boards, auditors, regulators — exists to safeguard those rights.”
— OECD, Principles of Corporate Governance (2004)
The bundle of legal, contractual, and governance rights held by owners of a company’s common shares, including the right to vote, the right to receive dividends, the right to call special meetings, the right to act by written consent, preemptive rights, and the right to amend bylaws. ISS dedicates an entire QualityScore pillar to evaluating how robustly a company protects these rights.
Note
shareholder rights are the powers investors have as part-owners of a company. ISS checks whether companies have erected barriers (supermajority requirements, no special meeting rights, poison pills) that weaken these rights, and scores them accordingly.
ISS QualityScore Pillar: Shareholder Rights
Related Terms
Source excerpts (5)
VOTING CHAIN - Companies should have access to the identity of shareholders without delay. - Transmission of information that enables the exercise of shareholder rights should be made in electronic and machine-readable formats. - Intermediaries are required to facilitate the exercise of shareholder rights including c
— Shareholder Rights Directive II | ISS
European Shareholder Rights Directive II: An Overview JUNE 30, 2018 In response to the global financial crisis, the European Commission proposed, in April 2014, a revision of th
— European Shareholder Rights Directive II: An Overview | ISS
Details will be included in the forthcoming “FAQ” document. Unilateral Governance Changes Which Adversely Affect Shareholder Rights (U.S.) When a unilateral board amendment of the articles or bylaws adversely affects shareholder rights, current ISS policy provides for adverse vote
— Executive Summary Of Key 2016 Updates And Policy (PDF), p. 6
SERIES Identify well-governed and responsible companies that excel in managing governance risks across four key areas: Board Structure, Compensation, Shareholder Rights and Audit & Risk Oversight. US DIVERSITY INDEX Good corporate governance is a foundation for the responsible management of business risks and opportu
ernance is being introduced as a result of the transaction, the company must demonstrate that the economic benefits clearly outweigh any reduction in shareholder rights. • Independent evaluation: ISS prefers to see a fairness opinion prepared by a recognized investment banking firm.
Special Meeting Right
▰ 2
The right of shareholders (individually or as a group meeting a specified ownership threshold) to call a special meeting of shareholders outside the regular annual meeting cycle. ISS supports the right of shareholders owning 10-25% of outstanding shares to call a special meeting and may recommend against governance proposals that eliminate or restrict this right.
Note
a special meeting right lets shareholders convene an emergency meeting when something cannot wait until the next annual meeting — for example, to remove a director or vote on an urgent matter. ISS views restricted or absent special meeting rights as a governance deficiency.
ISS QualityScore Pillar: Shareholder Rights
Related Terms
Source excerpts (2)
On the shareholder proposals front, individual investors seemed determined to make headway on issues such as special meeting rights, independent board chair, and the ability to act by written consent. Meanwhile, environmental and social issues continue to gain momentum, with high
— A Preliminary Review of the 2018 US Proxy Season | ISS
ty to call a special meeting to act on business that was addressed at the previous shareholder meeting. ISS believes that such provisions inhibit the special meeting right, and may recommend that shareholders vote against proposals that have such restrictive language in the company’s bylaws. In this case, the proposed a
Stewardship
▰▰▰▰▰ 616
Quote
“Stewardship is the missing link between asset ownership and corporate accountability. Without it, institutional shareholders are absentee landlords.”
— Paul Myners, Baron Myners, UK government review of institutional investment (2001)
The responsible management and oversight of invested assets by institutional investors, encompassing proxy voting, corporate engagement, monitoring of portfolio companies’ governance and ESG practices, and public disclosure of stewardship activities. Stewardship codes (e.g., UK Stewardship Code, Japan Stewardship Code) formalize expectations for how asset managers and asset owners should exercise their ownership rights.
Note
stewardship is the idea that investors have a responsibility to actively oversee the companies they own — not just buy and sell shares passively. This means voting proxies thoughtfully, engaging with boards on governance concerns, and being transparent about how they exercise ownership. ISS’s entire suite of proxy voting and engagement tools supports institutional stewardship.
ISS QualityScore Pillar: Foundational to all pillars
Related Terms
Source excerpts (5)
ISS’ Head of Japanese Research, Takeyuki Ishida, participated in the Working Group that drafted the Stewardship Code. We are pleased to support the FSA in their efforts to enhance investor stewardship through the creation of this code. Institutional Shareholder
— Statement on Intent to Sign Japan Stewardship Code | ISS
bal financial community, today announced the launch of its ISS Engagement Letter Writing Solution, a flexible, dynamic tool to support investors’ own stewardship engagement strategies in compliance with global regulations and best practice frameworks such as SRD II, PRI and local market stewardship codes. Powe
— ISS Launches Engagement Letter Writing Solution to Support Investors’ Own Ste…
ISS STOXX Stewardship Engagement Solutions At ISS STOXX, we provide a comprehensive suite of solutions designed to support effective investor engagement.
— Stewardship Engagement Solutions | ISS
As we enter peak proxy season, this report sets out to summarize the top governance and stewardship issues likely to be facing investors throughout 2023, and particularly this year’s main proxy seasons.
— Top Governance and Stewardship Issues in 2023 | ISS
Stewardship Excellence: Engagement in 2021 JUNE 24, 2021 KEY TAKEAWAYS: - Over the past decade and more, various soft and hard law initiatives have combined with
Supermajority Vote Requirement
▰▰▰▰▰ 332
A charter or bylaw provision that requires more than a simple majority (typically 66.7% or 80%) of outstanding shares to approve certain corporate actions, such as mergers, charter amendments, or bylaw changes. ISS generally recommends eliminating supermajority requirements because they can entrench management and prevent shareholders from effecting governance changes.
Note
a supermajority requirement raises the bar for passing important votes so high that a small minority of shareholders (or insiders) can effectively block changes. ISS views these provisions as anti-shareholder.
ISS QualityScore Pillar: Shareholder Rights
Related Terms
Source excerpts (5)
In the U.S., poison pills do not require shareholder approval. However, shareholders must approve charter amendments, such as classified boards or supermajority vote requirements. In brief, the very existence of defensive measures can foreclose the possibility of tenders and hence, opportunities to premium prices for sharehol
— Sri Us Voting Guidelines (PDF), p. 26
Disclosure on which provisions were not reduced, and why, is a key consideration. 45. Reducing supermajority vote requirements: reducing threshold to a majority of shares outstanding instead of the called-for majority of votes cast: In general, reducing to the majority of ca
— Us Procedures And Policies Faq (PDF), p. 23
. . When, prior to or in connection with an initial public offering (IPO), the board classifies and implements supermajority vote requirements to amend the bylaws or charter, do you consider it appropriate to hold the directors accountable through continuing adverse vote recommendations at
— Andrew A Schwartz (PDF), p. 1
: Vote against proposals to require a supermajority shareholder vote at a level above that required by statute. Generally vote for proposals to lower supermajority vote requirements. ISSGOVERNANCE.COM 25 of 39 CANADA VENTURE-LISTED COMPANIES PROXY VOTING GUIDELINES 4.
— Canada Venture Voting Guidelines (PDF), p. 25
What companies are not impacted by this policy? … 14 21. Will substitution of supermajority vote requirements on binding shareholder bylaw amendments in lieu of a prohibition be viewed as sufficient? …
T
Tender Offer
▰▰▰▰▰ 224
A public, time-limited offer made by an acquirer (or the company itself, in the case of a self-tender) to purchase shares directly from shareholders at a specified price, typically at a premium to the current market price. Tender offers are a mechanism for gaining control of a company and may be friendly (with board endorsement) or hostile (over board objection). ISS evaluates tender offer proposals for fairness, premium adequacy, and alignment with shareholder interests.
Note
a tender offer is when someone offers to buy your shares at an above-market price within a deadline. It is often used as a takeover technique. ISS assesses whether the offered price is fair and whether the board’s response (recommending acceptance or rejection) serves shareholders’ best interests.
ISS QualityScore Pillar: Shareholder Rights
Related Terms
Source excerpts (5)
- 41 43 430 72 72, E-Mail: customersupport@stoxx.com Methodology Changes Extraordinary Free In case of an ongoing tender offer, the target 5.1.4 Extraordinary In case of an ongoing tender offer, the target 8.3.1.
— Overview Of Methodology Changes Valid From 18 Of March 2024 (PDF), p. 3
GE 47] UNITED STATES 2026 SUSTAINABILITY PROXY VOTING GUIDELINES ▪ Voting agreements—Are the sponsors entering into enter into any voting agreements/ tender offers with shareholders who are likely to vote against the proposed merger or exercise conversion rights? ▪ Governance—What is the impact of having the SP
— Sustainability Us Voting Guidelines (PDF), p. 47
Fair price provisions were originally designed to specifically defend against the most coercive of takeover devises, the two-tiered, front-end loaded tender offer. In such a hostile takeover, the bidder offers cash for enough shares to gain control of the target.
— Sri Us Voting Guidelines (PDF), p. 30
Clarification of the wording of section 5.1.6 regarding the assumptions to be used when establishing whether the basic criteria have been met during tender offers Published Version 11.2.6 Feb. 3, 2022 − Clarification of rule 5.1.4 on extraordinary free float adjustments: addition of the Effective cancellation
— Dax Equity Index Methodology Guide 5526498614 (PDF), p. 107
For example, the existence of several anti-takeover provisions* has the cumulative effect of deterring legitimate tender offers, mergers, and corporate transactions that may have ultimately proved beneficial to shareholders. When a company maintains entrenchment devices, shar
— 2013Isstafthartleyadvisoryservicesusguidelines (PDF), p. 12
U
Unequal Voting Rights
▰▰▰▰ 190
Quote
“One share, one vote is the cornerstone of shareholder democracy. Unequal voting rights violate this principle by letting insiders overrule the majority.”
— CFA Institute, position statement on unequal voting structures
A governance structure in which different classes of shares carry different numbers of votes per share, resulting in a disconnect between economic ownership and voting power. Unequal voting rights — typically implemented through dual-class or multi-class share structures — allow founders, insiders, or controlling shareholders to maintain voting control with a minority economic stake. ISS and major index providers increasingly view unequal voting rights as a significant governance concern.
Note
unequal voting rights mean some shareholders get more votes per share than others. This lets insiders control company decisions even when public investors own most of the company economically. ISS generally opposes unequal voting structures and supports shareholder proposals seeking to eliminate or sunset them.
ISS QualityScore Pillar: Shareholder Rights
Related Terms
Source excerpts (5)
one vote;” pay ratio disclosures; the use of virtual meetings; and board gender diversity. Key findings from this year’s high-level survey include: - Unequal Voting Rights. ISS solicited respondents’ views on multi-class capital structures that carry unequal voting rights.
— ISS Announces Results of 2018 Benchmark Voting Policy Survey | ISS
Proxy Voting Guidelines establishes two classes of common stock with unequal voting rights, but initially involves an equal distribution of preferential and inferior voting shares to current shareholders. Social Advisory Services Recommenda
— 2016 Sri Us Voting Guidelines (PDF), p. 39
In other words, a remarkable 88 percent of all proxy access adoptions to date took place during 2015. Common Wisdom: Unequal voting rights structures are gaining popularity. Reality: The prevalence of unequal voting rights fell in 2015 both in the large-cap (S&P 500) index and the broade
— What’s (Really) Hot: A QuickScore Analysis of 2015’s Real Governance Trends |…
Moreover, in each of the past four years, at least 10 percent of newly-public companies had dual class capital structures with unequal voting rights in place when they went public. Overall, approximately seven percent of Russell 3000 companies currently have a multi-class capital structure in plac
— Proposed Benchmark Policy Changes 2020 (PDF), p. 6
We have no concerns with the policies on multiclass capital structures with unequal voting rights. 2. Shareholder proposals to establish an independent board chair This update largely codifies existing ISS policy application.
V
Vote Disclosure
▰▰ 6
The public reporting by institutional investors of how they voted on proxy proposals, either through regulatory filings (e.g., Form N-PX in the U.S.) or voluntary disclosure on the investor’s website. Stewardship codes in many jurisdictions now require or encourage vote disclosure as a component of responsible ownership.
Note
vote disclosure is when a fund manager reveals their voting record — which proposals they supported, opposed, or abstained on. Transparency in voting is increasingly expected and, in many markets, legally required.
Related Terms
Source excerpts (3)
13 and Standard No. 20 in Australia - Stronger Super Reforms (RG 252) in Australia Form N-PX Vote Disclosure Solution ISS provides a turnkey, outsourced reporting preparation solution to help investors comply with SEC rules for Form N-PX disclosure of proxy
— ISS Proxy Voting - Vote Disclosure Services
Use ISS STOXX data, internal data, or third-party data. - Easy Integration: Upload via SFTP, API or through ProxyExchange. It also connects with our Vote Disclosure Solution to provide a unified view of your stewardship activities. In summary, we provide a stand-alone, scalable solution that enhances transparency
— Stewardship Engagement Solutions | ISS
(Principle 6) - Ensure you are up to date on the latest additional ways ISS can support your PRI implementation needs including custom reporting and vote disclosure websites.
— PRI: How ISS Solutions Support Investment Integration, Active Ownership and R…
Vote Preference
▰ 1
The specific voting instruction (for, against, abstain, withhold, one year/two years/three years) that an investor or proxy advisor assigns to a given ballot item, reflecting the application of a voting policy to the facts and circumstances of the proposal.
Note
vote preference is the actual vote — “for” or “against” — that an investor decides to cast on each agenda item. ISS provides vote preferences as recommendations to its clients, who can accept, modify, or override them according to their own policies.
Related Terms
Source excerpts (1)
Designed to provide choice, ISS Vote Preference is a flexible way for asset managers to create and manage their own offering leveraging innovative technology.
Voting Analytics
▰▰ 15
An ISS data product that aggregates and analyzes proxy voting records from institutional investors worldwide, sourced from regulatory filings (Form N-PX), voluntary disclosures, and ISS’s own voting platform. Voting Analytics enables research into investor voting behavior, support levels for specific proposal types, and stewardship trends across asset managers.
Note
Voting Analytics is the ISS tool that lets you see how the investment industry as a whole voted on governance topics. You can look up how specific funds voted, compare voting patterns across managers, or track whether support for a shareholder proposal type is growing or shrinking over time.
Related Terms
Source excerpts (5)
All figures are approximate. COMPARE INSTITUTIONAL VOTING PATTERNS BY MUTUAL FUND FAMILY Voting Analytics includes mutual funds’ voting records, from SEC filings since 2003, and more recently from other publicly-disclosed sources. - Leverage meaningful in
g records against those of your peers - Examine current shareholder proposals and their proponents Built on a comprehensive database of vote records, Voting Analytics provides the industry’s complete solution for monitoring and analyzing voting policies, meeting results and institutional voting patterns. ISS Provid
However, certain issues gained increased shareholder attention this year, including climate change and income inequality. So far this year, Voting Analytics shows 395 resolutions have been filed, compared to 448 submitted this time last year (479 at year end). A record-breaking 89 climate change resolutio
— Proxy Season Preview: U.S. Environmental & Social Issues | ISS
Average support was highest at TSX Composite companies, at 92 percent according to Voting Analytics. While several companies did receive less than 90 percent support, for the first time in Canadian history, a majority of shareholders expressed dissa
— Canada Sees Shifts in Governance Landscape | ISS
That trend should continue for the upcoming proxy season, due to increased engagement and activism from minority shareholders. ISS Voting Analytics data shows that at least 134 board and fiscal council minority shareholder representatives were elected during the 2015 proxy season, with at least 4
Quick Reference — ISS QualityScore Pillars
| Pillar | Key Terms in This Glossary |
|---|---|
| Board Structure | Board Classification, Board Diversity, Board Independence, Board Refreshment, Board Structure, Board Tenure, CEO Duality, Director Data, Director Election, ESG Committee, Independent Director, Lead Independent Director, Overboarded Director |
| Compensation | Advisory Vote, Burn Rate, Clawback Policy, Compensation Committee, Equity Plan, Executive Compensation, Golden Parachute, Long-Term Incentive Plan (LTIP), Pay-for-Performance Alignment, Say-on-Pay |
| Shareholder Rights | Anti-Takeover Provision, Contested Election, Cumulative Voting, Dual-Class Shares, Extraordinary General Meeting (EGM), Majority Voting, Majority Voting Standard, Poison Pill, Proxy Access, Quorum, Share Buyback, Shareholder Proposal, Shareholder Rights, Special Meeting Right, Supermajority Vote Requirement, Tender Offer, Unequal Voting Rights |
| Audit & Risk Oversight | Audit & Risk Oversight, ESG Committee, Related-Party Transaction |
Disclaimer
This glossary is compiled for educational and reference purposes. Definitions are informed by publicly available ISS and STOXX documentation but are not verbatim reproductions. For authoritative definitions and current policy details, consult the primary sources linked above.