ISS has revised its QuickScore methodology applicable to U.S. companies to include one new “zero-weight” factor relating to whether the company has adopted proxy access. ISS has stated that it will track, for information purposes only:
- The minimum ownership threshold and holding period;
- The maximum number of shareholders that can comprise a nominating group; and
- The maximum percentage or number of board seats open to proxy access nominees.1
The QuickScore factors applicable to U.S. companies have also been revised to clarify that:
- A “small number” of “long-tenured” directors (i.e., those with tenure of more than nine years) “does not negatively impact the governance risk rating.” ISS has not specified what constitutes a “small number."
- ISS considers the cash portion of the directors’ base retainer in determining whether director stock ownership guidelines are “robust” (five times retainer or more), “standard” (three or four times retainer) or “substandard” (two times or below retainer).
- In analyzing whether a regulatory investigation was resolved with a material penalty, ISS generally considers “any penalty against an individual to be material.”
- In categorizing investigations as “routine” or “non-routine,” ISS generally considers FCPA-related investigations and Wells notices to be non-routine, “unless the company states that it does not expect the outcome to have a material adverse effect on the company.” Moreover, accounting investigations that do not involve major fraud or risk are generally considered routine by ISS unless “tied to a restatement.” In addition, investigations involving tax practices have been deleted from the list of investigations that ISS generally considers routine.
- Companies should ensure that they take steps to verify data prior to Friday, November 13 at 8:00 p.m. EST, and reference public filings where appropriate. The data verification tool is free for issuers and is accessible from the “Data Verification” tab at the following link: http://www.issgovernance.com/governance-solutions/investment-tools-data/quickscore/. ISS has specified that only issuers can conduct verification – not law firms, compensation consultants, proxy solicitors or others.
- Companies that anticipate filing a proxy statement in the near future should be aware that data verification is not available during the period between the filing of a proxy statement and the publication of ISS’ proxy analysis for that meeting.
- Data can also be verified after updated QuickScore reports become available on November 23, 2015.
1 Institutional Shareholder Services, ISS Governance QuickScore 3.0 (last updated Oct. 30, 2015), available here.
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|Holly J. Gregory
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|John P. Kelsh
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+1 212 839 8541
|Claire H. Holland
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