As Liz noted on the Proxy Season Blog, last week ISS announced updates to its benchmark voting policies that will be effective for the 2023 proxy season. Here are the highlights:
– Climate Disclosure & Targets – Globally, there’s a new “climate board accountability” policy for companies in the Climate Action 100+ Focus Group. If the company isn’t adequately disclosing climate risk and doesn’t have either medium-term GHG emission reduction targets or Net Zero-by-2050 for at least Scope 1 & Scope 2, ISS will generally recommend voting against the appropriate directors and/or other voting items available. There will also be additional info in research reports on this, for all Climate Action 100+ companies.
– Board Gender Diversity – Now in effect for all Russell 3000 and S&P 1500 companies, generally vote against or withhold from the nominating committee chair where there are no women on the board (exception if there was a woman at the preceding annual meeting and there’s a “firm commitment” to return to gender-diverse status within one year)
– Officer Exculpation – In light of DGCL changes, ISS is adopting a policy to recommend case-by-case on proposals providing for exculpation provisions in a company’s charter.
– Unequal Voting Rights – The previous grandfathering of older companies with unequal voting rights will be removed in 2023. As part of this update, a de minimis exception has been defined as no more than 5 percent of total voting power.
– Problematic Governance Structures – For the U.S. policy on companies that go public with other problematic governance structures (including classified boards and supermajority vote requirements), a “reasonable sunset period” to fully eliminate the provision is being defined as no more than 7 years from the date of going public.
– Political Expenditures Alignment Transparency Shareholder Proposals – A new specific policy is being introduced for shareholder proposals requesting company transparency on the congruency of its political contributions and lobbying with its public commitments and policies, including climate lobbying congruency to its climate goals. The new policy will provide more transparency to the market about how such shareholder proposals are assessed and codify the case-by-case approach used in the 2022 proxy season. (Emily blogged about these proposals emerging last year, and it sounds like they are going to continue to proliferate.)
– Share Issue Mandates – For U.S. domestic issuers incorporated outside the U.S. and listed solely on a U.S. exchange, a policy is being introduced to generally vote for resolutions to authorize the issuance of common shares up to 20 percent of currently issued common share capital, where not tied to a specific transaction or financing proposal.
Mark your calendars now for our upcoming webcast scheduled for Tuesday, January 10th at 2 p.m. Eastern, “ISS Forecast for 2023 Proxy Season.” We’ll have ISS’s Head of U.S. Research, Marc Goldstein, to offer tips on how to prepare for 2023 issues. Marc will be joined by Davis Polk’s Ning Chiu and Gunster’s Bob Lamm.
— Dave Lynn, TheCorporateCounsel.net, December 5, 2022