November 20, 2006

ISS Releases its 2007 Proxy Voting Policies

On Friday, ISS released its US, Canadian and international 2007 proxy voting policy updates. ISS analysts will begin applying the new policies for all companies with shareholder meeting dates on – or after – February 1, 2007. As apart of its comprehensive policy formulation process, ISS collected more feedback this year compared to the past.

Here are some of the more noteworthy changes:

– ISS will generally support precatory proposals and binding by-law amendments related to majority voting for directors (provided it doesn’t conflict with state law in the state where a company is incorporated and there is a carve-out for plurality voting in contested elections).

– ISS recommends that shareholders withhold their vote from the CEO, or even the entire board, of companies with “poor compensation practices”; last year, ISS recommended withheld votes in such circumstances only for directors sitting on the compensation committee. A non-exhaustive list of sample poor compensation practices is on pages 17-18 of the revised guidelines, which includes internal pay disparity, overly generous hire packages and excessive severance arrangements.

– ISS has tightened its guidelines on corporate performance, recommending withheld votes for directors of companies that significantly underperform their sector in both financial and share price terms for two years in a row.

The SEC’s New Online Search Tool

Last week, the SEC launched a new full-text search tool that enables searches of the contents of any disclosure documents filed electronically on EDGAR, including same day filings and any others made sometime during the past four years. Here is the SEC’s related press release.

Here are some reactions from David Copenhafer of Bowne:

– The SEC’s new tool seems to work pretty well.

– Rather amazing that filings are indexed for text search on the same day as they are filed.

– The “hit list” doesn’t always show you the “hit.”

– Hits are not highlighted when you go to the filing; you have to use the browser to find the location of the hit(s).

– If you have several hits in one document, they seem to be “together” – in that they each line up under the previous hit. Good services collect all the hits from one filing and allow you to see more easily the context of each.

– Not sure about accuracy or completeness. For example, “exxon capital exchange” shows up with 2 hits in filings made this year using the SEC’s tool, but 5 hits on a commercial service – the commercial service found hits in SEC comment letters, so the SEC’s search may not be vetting those.

– No apparent “help” screen, although it looks like standard Internet techniques work (e.g., quotes around several words performs search on that string). The Boolean operator “AND” seems to work. I didn’t try “NOT” or “OR.”

UK Regulator Rejects Adoption of XBRL Due to Cost

According to this article, the United Kingdom’s securities regulator, the Financial Services Authority, has decided against using extensible business reporting language (XBRL) for companies to file their regulatory returns on the grounds of cost. The FSA’s decision to abandon XBRL means that UK regulators do not have to commit to backing XBRL for the foreseeable future.

Personal note – As a Michigan alumni, I am among those that demand a rematch at a neutral site! Go Blue!