This week, ISS released its Global Board-Aligned U.S. Voting Guidelines and Global Board-Aligned International Voting Guidelines. ISS describes these new guidelines as follows:
The new policy is designed to provide subscribing investors with analyses and recommendations that enable them to vote in a manner that upholds foundational corporate governance principles as a means of protecting and maximizing their investments, while generally aligning with the recommendations of company boards on proposals with an environmental or social focus.
Released to coincide with the start of the 2023 annual shareholder meeting season in most major global markets, the Global Board-Aligned Policy will enable subscribing institutions to focus their voting on widely accepted standards of good corporate governance and the protection of shareholder rights.
On matters of corporate governance, executive compensation, and corporate structure, the Global Board-Aligned Policy guidelines are also focused on the creation and preservation of economic value. On environmental or social matters, the Global Board-Aligned Policy will generally result in recommendations that are in line with those of a company’s board, with recommendations in support of shareholder proposals limited to circumstances where it is considered that greater disclosure will directly enhance or protect shareholder value and is reflective of a clearly established reporting standard in the market.
The new voting guidelines differ from the standard benchmark voting guidelines in that specific policies for voting on environmental and social issues are replaced with the following approach:
Environmental and social proposals will be reviewed with a focus on how, and to what extent, the issues dealt with in such proposals will directly affect shareholder value, and with a presumption on environmental and social topics that the board’s recommendations should generally prevail. In those circumstances where it is widely considered that greater disclosure will directly enhance or protect shareholder value and is reflective of a clearly established reporting standard in the market, the Global Board-Aligned Policy will generally recommend in support of such proposals (e.g. proposals requesting greater disclosure of a company’s political contributions and/or trade association spending policies and activities). In the absence of a clear determination that environmental and social proposals will have a positive effect on shareholder value or there are proposals that seek information that exceeds a widely endorsed standard in the market or place any burden upon the company beyond a reasonable and clearly established reporting standard in the market, the Global Board-Aligned policy will generally recommend voting against such proposals, or in line with the board’s recommendations if different.
Specific policies are retained for say-on-climate proposals, noting that ISS will generally recommend a vote for the board’s recommendation on management say-on-climate proposals and will generally recommend a vote against say-on-climate shareholder proposals, in each case rather than evaluating them on a case-by-case basis.
As this Reuters article notes, this new policy resulted from discussions that ISS had with pension funds in Republican-leaning states that invest internationally and could not use an existing U.S.-focused version of the voting policy guidelines. As Liz noted in the Proxy Season Blog last month, earlier this year ISS and Glass Lewis received letters from 21 State Attorney Generals claiming that their climate & DEI proxy voting policies and recommendations violate contractual obligations and legal duties under federal and state laws.
– Dave Lynn