August 4, 2017

Voting: “Passive” Institutional Investors Become Even More So?

Over the years, we’ve blogged about the extent to which ISS influences voters at institutional investors (here’s an example). Different studies (or anecdotes) show different things – and the debate continues. This recent article from “Proxy Insight” (pg. 6) indicates that some investors that are considered “passive” may be more on auto-pilot than some would think. Here’s an excerpt from that article:

Looking at Proxy Insight’s ISS Vote Comparator table, for most of these investors this is not a right they often feel compelled to exercise. The majority of them vote 99-100 percent in accordance with ISS. Of course, this correlation makes the investors a reliable source for discerning ISS recommendations.

However, we thought it would be interesting to look at what issues would make auto-voters override the voting recommendations of ISS, providing some insight into the proposals that matter most to these investors. To do this we have taken the ten largest investors by assets under management who vote in accordance with ISS, and analyzed those proposal types where they override most frequently. These include say on pay, the re-/election of directors and auditor ratification.

Say on pay is not only one of the most frequently voted issues for auto-voters, but is also usually near the top (see Table 3) when it comes to the disparity between investor voting and ISS recommendations. This is unsurprising, given that say on pay is one of the most contentious proxy voting topics, which is seemingly never out of the news.

However, as Table 1 illustrates, even on contentious issues auto-voters receive a correlation with ISS that ranges in the high 90s. Moreover, the lower correlation on exclusively ISS against recommendations (Against recs (%)) indicates that the auto-voters are more passive than ISS, overriding the proxy adviser in order to vote with management. Other proposals near the top of the list include the approval of stock option plans and restricted stock plans.

Note that the meaning of “passive” depends on one’s perspective. To some, it’s voting with management. But others could say that breaking with ISS for the say-on-pay vote is the definition of “active” – given the time & effort required for an institutional investor to override a default voting policy.

Conference Hotel Nearly Sold Out: “Pay Ratio Conference”

If you plan to attend in Washington DC (rather than by video webcast), be warned that the Conference Hotel for our “Pay Ratio & Proxy Disclosure Conference” on October 17-18th is nearly sold out. The Conference Hotel is the Washington Hilton, 1919 Connecticut Ave NW, Washington, DC 20009. Reserve your room online or call 202.483.3000 to make your reservations.

Be sure to mention the “Proxy Disclosure Conference” to get a discounted rate. If you have any difficulty securing a room, please contact us at or 925.685.9271.

ISS Policy Survey: Pay Ratio & More

Yesterday, ISS opened up its “Annual Policy Survey,” which is being undertaken in two parts this year:

1. Governance Principles Survey – Initial, high-level survey on high-profile topics including “one-share, one vote,” pay ratio disclosures, the use of virtual meetings, and board gender diversity. In this survey, ISS is asking companies (i) how they plan to analyze pay ratios and (ii) what is their view on how shareholders should use pay ratio disclosures. This survey closes on August 31st.

2. Policy Application Survey – More expansive portion that can be accessed at the end of the initial portion, allowing respondents to drill down into key issues by market and region as well as by topics such as responsible investment, takeover defenses and director compensation. This survey closes October 6th.

After analysis of the survey responses, ISS will open a comment period for all interested market participants on the final proposed changes to their policies as always…

Next Pay Ratio Webcast: Tune in on Tuesday, August 15th for the second of our monthly pre-conference webcasts on pay ratio: “Pay Ratio Workshop: What You (Really) Need to Do Now.” The speakers for the August 15th webcast are:

Mark Borges, Principal, Compensia
Keith Higgins, Partner, Ropes & Gray LLP
Scott Spector, Partner, Fenwick & West LLP

For those registered for our comprehensive “Pay Ratio & Proxy Disclosure Conference“, we have posted the transcript for our July 20th webcast. The third webcast is on September 27th.

Liz Dunshee