Will generally vote against directors who failed to effectively monitor, and ensure management of material risks and business practices including environmental and social risks. Expects disclosure of a companys EEO-1 statement and/or diversity policy. Under the current policy, ISS only looked at such use of capital for the last three years and did not account for longer term non-shareholder approved pills (such as 5- or 10-year pills). Dan Leon Value-Adjusted Burn Rate benchmarks will be calculated as the greater of: (1) an industry-specific threshold based on three-year burn rates within the company's GICS group segmented by S&P 500, Russell 3000 index (less the S&P 500) and non-Russell 3000 index; and (2) a de minimis threshold established separately for each of the S&P 500, the Russell 3000 index less the S&P 500, and the non-Russell 3000 index. However, ISSs expectations about what constitutes minimum steps to mitigate risks related to climate change will increase over time. Stock retention requirements are also expected to broaden as more companies gravitate toward guideline-dependent and stand-alone retention policies. ISS has a current policy to recommend vote against the entire board (except new nominees, who are considered on a case-by-case basis) at newly public companies that adopted unequal voting rights without a reasonable sunset period not to exceed seven years. Encourages disclosure of how diversity is considered in board composition, including demographic factors such as gender, race, ethnicity, and age; as well as professional characteristics, such as a directors industry experience, specialist areas of expertise, and geographic location. In the absence of racially or ethnically diverse board members, ISS will generally vote against or withhold from the chair of the nominating committee (or other directors on a case-by-case basis). Generally supports shareholder proposals seeking disclosure of workforce diversity demographic data, and release of EEO-1 or comparable data. This post is based on their Pay Governance memoradum. December 13, 2021. As a result, companies should ensure their stock ownership guidelines and administration practices best align to their objectives, culture, officer demographics, and other factors they deem important. ISS added a new policy that codifies its current approach to analyze shareholders proposals on racial equity and/or civil rights audit that first appeared on the ballot this past proxy season. Will vote against the compensation committee chairs at S&P 500 companies that do not disclose their EEO-1 survey responses. The Value-Adjusted Burn Rate will be calculated as follows: Value-Adjusted Burn Rate = ((# of options * options dollar value using a Black Scholes model) + (# of full-value awards * stock price)) / (Weighted average common shares * stock price). By However, most companies now grant at least 50% of their target long-term incentive (LTI) opportunities as performance-contingent awards (e.g., performance shares) based on achieving financial and/or total shareholder return goals, often over a three-year period. Will vote against nominating committee members if there is not at least one woman director and one other diverse director on the board.4. ISS is removing such grandfathering and after a notice period of one year, beginning with meetings on or after Feb. 1, 2023, will start holding directors individually, committee members, or the entire board (except new nominees, who will be considered on a case-by-case basis) accountable at all companies with unequal voting rights. Will vote against the full board if there is not at least one woman director on the board. 4 From March 2022, GSAM will require all companies to have at least two women on the board, unless the board has 10 or fewer members; also, will require S&P 500 companies to have at least one diverse director from an underrepresented ethnic minority group on their board. A comparison of ISSs diversity-related policies to those of Glass Lewis and other large institutional investors is included as an Appendix hereto. Will generally vote against the nominating committee chair where a company does not disclose the gender or racial and ethnic composition of the board. May vote against the Chair of the boards nominating committee at Russell 3000 companies that do not have at least one female board member; may vote against all incumbent nominating committee members where a company has had no gender diversity for three consecutive years. Copyright 2022 WTW. Stock ownership guidelines are a near universal practice at larger publicly traded companies and are considered a governance best practice. Unless specified otherwise, the new policies are applicable to all U.S. company meetings held on or after February 1, 2022. Going forward, companies who have not addressed these issues recently may need to gauge how their policy designs match up against current trends and expectations from shareholders. ISSs policy to require at least one ethnically/racially diverse director for U.S. companies in the Russell 3000 and S&P 1500 indices that was announced last year will go into effect beginning with meetings on or after Feb. 1, 2022. In the case of performance shares, the award opportunity is leveraged to both achieve specified goals and stock price movement. Ownership guidelines require executives and directors to maintain meaningful stock ownership during their tenure. LaToya Scott This change aligns ISSs capital authorization policy with its recommendations on directors for non-shareholder approved poison pills. Key findings from this study include: As companies seek ways to better align leadership with stakeholders, stock ownership guidelines and retention policies will serve to amplify the long-term focus of executive teams. For the companies that are significant greenhouse gas (GHG) emitters, ISS is adopting a new policy to generally vote against or withhold from the incumbent chair of the responsible committee (or other directors on a case-by-case basis) in cases where the company is not taking the minimum steps needed to address the climate change risks to the company and the economy. 1 The policy currently applies to companies in the Russell 3000 or S&P 1500 indices. All rights reserved. Will vote against boards that do not have at least 30% female representation. Under exceptional circumstances, will recommend against directors individually, committee members, or the entire board for poor risk oversight of environmental and social issues. Will vote against nominating committee chairs at companies where women constitute less than two board members or 25% of the board, whichever is lower, for two or more consecutive years, absent incremental improvement. Generally recommends against the nominating committee chair of a board with fewer than two gender diverse directors, or the entire nominating committee of a board with no gender diverse directors, at companies within the Russell 3000 index. Companies may want to examine the structure and administrative practices associated with their guidelines to ensure they align with the spirit and intent behind them. All rights reserved. Generally recommends vote against or withhold from the chair of the nominating committee (or other directors on a case-by-case basis) at Russell 3000 or S&P 1500 companies where the board has no apparent racially or ethnically diverse members. ISS will generally recommend against the responsible committee chair at these identified companies that have not made appropriate climate-related disclosures, such as according to the four pillars of the TCFD framework, and that have not set quantitative GHG reduction targets covering at least a significant portion of the companys direct emissions (Scope 1 and 2) targets. If you have questions or comments, please email info@georgeson.com or call 212 440 9800. In its case-by-case analysis, ISS will consider the companys existing process for addressing racial inequity and discrimination internally; any recent public statement by the company relating to its racial justice efforts; any engagement by the company with impacted communities, stakeholders, and civil rights experts; companys track record on racial justice measures and outreach; any company controversy on this issue; and alignment of companys actions with market practices. A common structure requires executives to achieve a specified ownership level within a five-year period. This Viewpoint focuses on those elements of ownership guidelines often subject to greater volatility in company stock price and performance. At significant greenhouse gas (GHG) emitter companies, will recommend against the responsible committee chair at companies that have not made appropriate climate-related disclosures and that have not set quantitative GHG reduction targets covering at least a significant portion of the companys direct emissions (Scope 1 and 2) targets. Will generally recommend in favor of shareholder resolutions requesting that companies provide enhanced disclosure on climate-related issues, such as requesting that the company undertake a scenario analysis or report against the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). More than ever, making the most of your capital means solving a complex risk-and-return equation. May vote against the directors it consider responsible for climate risk oversight, where corporate disclosures are insufficient to make a thorough assessment, or a company has not provided a credible plan to transition its business model to a low carbon economy, including short medium and long-term targets. With the current crisis potentially eliminating the opportunity to earn shares from one, two, or all three outstanding performance cycles, meeting the guidelines within a five-year timeline could be difficult. End of main navigation menu. LTI awards continue to make up the lions share of CEO pay programs (61% for S&P 1500 CEOs in 2020); consequently, CEO ownership targets are likely to keep ballooning above six times salary. Case-by-case approach to other workforce diversity-related proposals. The policy has also been rearranged to better differentiate between general and specific use authorizations of capital, and to clarify the hierarchy of factors considered. How executive compensation can drive climate objectives, ISS launches comment period for draft 2022 policy changes, Benefits Administration and Outsourcing Solutions, Financial, Executive and Professional Risks (FINEX). Against the backdrop of investors increased diversity expectations and NASDAQs board diversity rules, ISS is expanding its current policy requiring at least one female director to all companies, not just those in the S&P 1500 or Russell 3000 indicies, starting with meetings on or after Feb. 1, 2023. ISS is codifying its current case-by-case approach relating to Say on Climate proposals. In the end, stock ownership guidelines are just that: guidelines. Executive stock ownership guidelines at S&P 100 companies: 2015 2021. eS0r`+yc!2"1'di0%`.=Gpz:= f7d=B#. On December 7, 2021, Institutional Shareholder Services (ISS) published updates to its U.S. benchmark proxy voting policies. The following table represents a high-level summary of proxy advisors and select significant investors policies with respect to board and workforce diversity for the U.S. companies. The targets for Scope 3 emissions will not be required for 2022. Ownership guideline designs and administrative provisions can and should vary by company, recognizing there is no universal approach mandated by the Securities and Exchange Commission or the stock exchanges.

Some companies already have guideline provisions that mitigate stock price volatility (e.g., using an average stock price to assess ownership compliance) and recognize the highest long-term incentive weighting is typically on performance shares (e.g., not fixed time for compliance). and Expects companies to make public EEO-1 data or other equivalent information for US employees, and where feasible, to disclose similar information for other segments of the workforce. Read about ISS key updates in the UK and Europe. 2 Glass Lewis assesses the quality of such disclosure based on how a companys proxy statement presents: (i) the boards current percentage of racial/ethnic diversity; (ii) whether the boards definition of diversity explicitly includes gender and/or race/ethnicity; (iii) whether the board has adopted a policy requiring women and minorities to be included in the initial pool of candidates when selecting new director nominees (aka Rooney Rule); and (iv) board skills disclosure. Stock retention requirements have also seen significant growth since 2015. Will consider voting against the election of accountable directors where there are serious concerns relating to racial or ethnic underrepresentation on the board, or the number is inadequate, based on factors including the board size, industry, and market. John R. Sinkular and Don Kokoskie are partners at Pay Governance LLC. Generally recommends against or withhold from the chair of the nominating committee (or other directors on a case-by-case basis) at companies1 where there are no women on the company's board. Will vote against nominating committee chairs where multiple concerns exist with respect to board diversity broadly speaking, including ethnic diversity among other factors. Generally recommends for proposals requesting disclosure of diversity policies, initiatives, or comprehensive workforce diversity data, including EEO-1 data. Generally votes against a companys nominating and/or governance committee chair (or any other director if needed) if the companys board has made insufficient progress on board diversity or board diversity-related disclosure. instructions how to enable JavaScript in your web browser, Gain strategic advice for a merger or acquisition, Distribute communications to shareholders, Help your owners update and reactivate their accounts, Locate owners of uncashed checks and other dormant accounts, Manage your unclaimed property reporting needs, Clean up your register after a corporate transaction, Reduce shareholder and proxy-related costs. Increased stock price volatility brought about by the pandemic may exacerbate the situation, resulting in individuals shifting between compliance and non-compliance solely due to swings in stock price. Will generally recommend voting against the governance committee chair of a company in the S&P 500 index that fails to provide explicit disclosure concerning the boards role in overseeing environmental and/or social issues. Since stock prices decrease and increase, it is important to have policies that are durable in both down and up markets. Compliance with those guidelines can be problematic in times when there is considerable volatility in financial results and stock prices as most companies are currently experiencing. Believes boards should aspire to 30% diversity3 of membership and encourage companies to have at least two directors on their board who identify as female and at least one who identifies as a member of an underrepresented group. Likely to support shareholder proposals that request disclosure on how climate change risks are incorporated into strategy and capital allocation decisions, ask for an assessment of climate impact (including scenario analysis) and/or request feasibility analysis. The 2022 Americas Policy Updates, redlining the changes being made as well as the rationale therefor, are available now on the ISS Policy Gateway. Among other information, ISS will consider the extent of disclosures in line with TCFD or other market standards; disclosure of GHG emissions (Scope 1, 2 and 3); completeness and rigor of short-, medium- and long-term emission reduction targets in line with Paris Agreement goals; commitment to be net zero emitter by 2050; whether targets are science-based; external verification; alignment of companys lobbying activities and its capital expenditures with company strategy. ISS will allow for exemptions in cases of companies having a sunset period for unequal voting rights of no more than seven years from the date of going public; limited partnerships or operating partnership unit structure of REITs; unequal voting rights being de-minimis; and company providing protection to minority shareholders by allowing them a regular binding vote on whether the capital structure should be maintained. Expects disclosure of workforce demographics, such as gender, race and ethnicity, in line with the EEO-1 Survey, alongside steps being taken to advance diversity, equity and inclusion. Effective Feb. 1, 2023, it will apply to all companies. Related research from the Program on Corporate Governance includes Paying for Long-Term Performance by Lucian Bebchuk and Jesse Fried (discussed on the Forum here). Instead of using volatility-based multiplier for full-value awards to group companies into six "buckets", the new methodology will more accurately capture the value of equity awards by using Black Scholes model for measuring the value of option grants.

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