ISS Announces Results of 2018 Benchmark Voting Policy Survey

ROCKVILLE, M.D. (25 September 2017) – Institutional Shareholder Services Inc. (ISS), a leading provider of corporate governance and responsible investment solutions to financial market participants, today released the results of its annual global benchmark voting policy survey.

ISS received 602 total responses to this year’s survey, of which 129 were from institutional investors and their organizations, representing an increase of 37 and 8 percent, respectively, compared with last year. ISS also received responses from 469 members of the corporate community (including companies, consultants/advisors to companies, corporate directors, and other trade organizations representing companies, with the remainder comprised of academics, non-profit organizations, and other governance stakeholders).

This year, survey topics were split into two parts, with an initial, high-level survey covering a small number of fundamental and high-profile topics, including: “one-share, one vote;” pay ratio disclosures; the use of virtual meetings; and board gender diversity. Key findings from this year’s high-level survey include:

• Unequal Voting Rights. ISS solicited respondents’ views on multi-class capital structures that carry unequal voting rights. Among investors, a large minority (43 percent) indicated that unequal voting rights are never appropriate for a public company in any circumstances. An equal proportion of investors (43 percent) said unequal voting rights structures may be appropriate for newly public companies if they are subject to automatic sunset requirements or at firms more broadly if the capital structure is put up for periodic re-approval by the holders of the low-vote shares. Among non-investors, 50 percent responded that companies should be allowed to choose whatever capital structure they see fit, while 27 percent responded that a multi-class structure may be appropriate at a newly public company if subject to an automatic sunset provision or more broadly if reapproved on a periodic basis by the low-vote shareholders.
• Board Gender Diversity. ISS asked respondents if they would consider it problematic if there are zero female directors on a public company board. More than two-thirds (69 percent) of investor respondents said “yes.” The lion’s share of these respondents (43 percent) said that the absence of women directors could indicate problems in the board recruitment process, while 26 percent of investor respondents said that although a lack of female directors would be problematic, their concerns may be mitigated if there is a disclosed policy/approach that describes the considerations taken into account by the board or the nominating committee to increase gender diversity on the board. A majority (54 percent) of the non-investor respondents answered “yes” when asked if the absence of a single woman director on a board is problematic although more than half of these respondents said their concerns might be mitigated by a company’s disclosed policy or approach.
• Virtual Meetings. Survey respondents were asked to provide their views on the use of online mechanisms to facilitate shareholder participation at general meetings, i.e., “hybrid” or “virtual-only” shareholder meetings. About one out of every five (19 percent) of the investors said that they would generally consider the practice of holding either “virtual-only” or “hybrid” shareholder meetings to be acceptable, without reservation. At the opposite extreme, 8 percent of the investors did not support either “hybrid” or “virtual-only” meetings. More than one-third (36 percent) of the investor respondents indicated that they generally consider the practice of holding “hybrid” shareholder meetings to be acceptable, but not “virtual-only” shareholder meetings. Another 32 percent of the investor respondents indicated that the practice of holding “hybrid” shareholder meetings is acceptable, and that they would also be comfortable with “virtual-only” shareholder meetings if they provided the same shareholder rights as a physical meeting.
• Pay Ratio Disclosures. ISS asked respondents how they intend to analyze data on pay ratios. Somewhat surprisingly, only 16 percent indicated that they are not planning to make use of this new information. Nearly three-quarters of the investor respondents indicated that they intend to either compare the ratios across companies/industry sectors, or assess year-on-year changes in the ratio at an individual company or use both of these methodologies. Of the 12 percent of investors who selected “other” as their response, some of them indicated a wait-and-see approach while other comments indicated uncertainty or concerns regarding the usefulness of the pay ratio data. Among non-investor respondents, a plurality (44 percent) expressed doubt about the usefulness of such pay ratio data.

Download a copy of this year’s survey results here.

ISS’ survey is part of its annual policy development process.  During the second half of October, ISS will release draft policies that will be subject to a public comment period before they are finalized.  The process will culminate in mid-November with the release of final policies applicable to global shareholder meetings occurring on or after Feb. 1 of 2018.