2019 Proxy Season Review Part 2—ISS Negative Recommendations Against Directors

Sullivan & Cromwell LLP - July 25, 2019
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ISS recommendations continue to correlate with lower director support levels:

  • Directors average 97% shareholder support with ISS in favor  and 79% if not (level with 2018), although almost all directors win over 50% shareholder support
  • S&P 500 directors identified for excessive non-audit fees or poor attendance receive the lowest average shareholder support (55% and 63%, respectively)
  • Outside of the S&P 500, Russell 3000 directors receive the lowest average shareholder support for non-responsiveness to shareholder concerns or excessive non-audit fees (58% and 60%, respectively)
ISS focus areas diverge between S&P 500 and broader Russell 3000:
  • No S&P 500 directors identified for non-responsiveness (either to low say-on-pay vote or other shareholder concerns), poison pill or unilateral action, although a meaningful number of Russell 3000 directors was cited for each, as broader Russell 3000 falls behind in adopting some corporate standards
  • Most common negative recommendation among Russell 3000 relates to adverse governance provisions at newly public companies (369 outside S&P 500, compared to three within)
ISS launches 2019 policy survey, including questions regarding overboarding, independent chair, board diversity and climate disclosure

Our annual proxy season review memo summarizes significant developments relating to the 2019 U.S. annual meeting proxy season. This year our review comprises three parts: Rule 14a-8 shareholder proposals submitted and voted, ISS negative recommendations and compensation-related matters. This is Part 2. Part 1, which focuses on Rule 14a-8 shareholder proposals, was published on July 12, 2019, and is available here. Part 3 can be accessed here. Details regarding our annual webinar to discuss 2019 proxy season developments can be found here.