November 6, 2023
ISS Policy Survey Results: Investors Say Political Risk Doesn’t Justify Greenhushing
Last week, ISS announced the results of its 2023 benchmark policy survey. ISS received responses from 239 investors and 216 non-investors, including public companies, board members and their advisors.
The results summary details a number of key findings on E&S matters. One question sought to address whether investors would give companies a pass for reducing their transparency on E&S topics in light of recent ESG backlash. Investors overwhelmingly (85%) responded that the risk of reduced transparency is greater than the risk of political backlash and that they would not tolerate reduced disclosure, even on politically sensitive topics. 49% of non-investor respondents agreed!
On the governance side, ISS sought feedback from respondents on its strict test for professional services relationships:
Under ISS’ current classification of directors, a director who provides professional services to the company or an affiliate in excess of a certain amount (currently $10,000 per year in the U.S.), or who is a partner, employee, or controlling shareholder of an organization that provides such services, is considered to be nonindependent. A director is also classified as non-independent if his or her immediate family member meets any of those criteria. However, a company’s audit firm or law firm may employ thousands of people in numerous offices, many of whom may not have any influence over the services provided to the company.
When asked if it was appropriate to treat a director as non-independent due to a family member’s employment by such a firm, just over half of investor respondents said that it was appropriate. About one-quarter of investor respondents said that the policy was appropriate but that the threshold for considering payments for professional services to be “de minimis” should be increased. In contrast, nearly 40 percent of Investor respondents said that a director’s or his or her family member’s employment by a professional services firm does not raise concerns as long as the director or family member is not involved in the provision of services to the company and does not supervise employees who are involved.
The results will be used to formulate the proxy advisor’s voting policies, which will be released in draft form in November — followed by a public open comment period for all interested market participants — and then finalized in late November or early December. The final policies will apply to shareholder meetings on or after February 1, 2024.
– Meredith Ervine
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