Forum Selection: ISS Policy Proposal Backs Exclusive Forum Bylaws
Last week, Liz blogged about ISS’s benchmark policy document. In addition to the ESG and diversity policy changes that she mentioned, page 34 of the document sets forth a proposed policy under which ISS would generally endorse Delaware exclusive forum bylaws for Delaware corporations. Here’s an excerpt from Wachtell Lipton’s memo on the proposed policy:
Institutional Shareholder Services (ISS) has released its proposed 2021 voting policy updates and, for the first time, proposes expressly recognizing the benefits of Delaware choice of forum provisions for Delaware corporations and generally recommending in favor of management-sponsored proposals seeking shareholder approval of such charter or bylaw provisions. Under the new ISS policy, ISS would:
(1) generally vote for charter or bylaw provisions that specify Delaware, or the Delaware Court of Chancery, as the exclusive forum for corporate law matters for Delaware corporations, “in the absence of serious concerns about corporate governance or board responsiveness to shareholders” (and continue to decline to vote against the directors of Delaware companies who adopt such bylaw provisions “unilaterally”);
(2) continue to take a case-by-case approach with respect to votes regarding exclusive forum provisions specifying states other than Delaware; and
(3) generally vote against provisions that specify a state other than the state of incorporation as the exclusive forum for corporate law matters or a specific local court within the state (and apply withhold vote recommendations to a board’s “unilateral” adoption of such a provision).
When it comes to federal forum bylaws, ISS’s proposed policy would generally support charter or bylaw provisions that specify “the district courts of the United States” as the exclusive forum for federal securities law matters. However, the memo notes that ISS would recommend against provisions that limit the forum to a particular federal district court. As with ISS’s other proposed policy changes, the time period to submit comments on this proposal ends on October 26th.
-John Jenkins, TheCorporateCounsel.net October 20, 2020
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