2014 Proxy Season Developments: SEC Staff Issues Guidance on Unbundling Proposals; ISS Addresses Third-Party Director Compensation, Publishes Updated QuickScore Metrics, Opens Data Verification Period, Requests Comments for Longer-Term Policy Changes, and Issues Other New Policies

Sullivan & Cromwell LLP - January 30, 2014

As U.S. public companies plan for the 2014 proxy season, they should be aware of a number of recent developments, including the following:

  • The staff of the Securities and Exchange Commission has issued new guidance regarding the requirement to “unbundle” distinct proposals into separate votes, including confirmation that companies proposing to make a material change to their governance documents are permitted to include immaterial technical changes as part of the same proposal.
  • Institutional Shareholder Services, the influential proxy advisory firm, has introduced a new policy on bylaws that limit director or nominee compensation by third parties.
  • ISS has published updates to its QuickScore corporate governance rating system, including several new factors and introducing “zero-weight” factors that are for informational purposes only. Corporate issuers have until February 7 to verify the data ISS is using to calculate their QuickScore rating.
  • This year, for the first time, ISS has broadly sought feedback from all market participants on its longer-term policy approaches to the following topics: director tenure, director independence, independent chair shareholder proposals, auditor ratification and equity-based compensation plans. The comment period ends on February 14.
  • ISS has published its updated policy summaries for 2014 and related FAQs, which incorporate and give additional detail on the previously disclosed 2014 policy updates.