Corporate Governance Updates—Launch of 2019 ISS Comment Period and Release of Commonsense Principles 2.0

Comment Period for the ISS Benchmark Policy Opens, With No Proposed Action on Some of the Most Controversial Topics Covered by the 2019 Survey

“Commonsense Principles 2.0” Aim to Combat Unhealthy Short-Termism
Sullivan & Cromwell LLP - October 22, 2018

On October 18, Institutional Shareholder Services Inc. (“ISS”) announced that the comment period for its 2019 benchmark voting policy is open until 5:00 PM ET on November 1, 2018. For U.S. companies, ISS is soliciting comments on proposed changes relating to board gender diversity and say-on-pay secondary screens. However, the proposed policy change relating to board gender diversity is not proposed to be in effect for 2019. ISS is not soliciting comments for tracking director controversies on other company boards or providing adjusted voting results for dual-class companies, both of which were included in ISS’s annual policy survey earlier this year.

Also, on October 18, a group of 21 executives from some of the largest U.S. public companies and asset managers, as well as public pension funds and mutual fund companies, released an updated statement of corporate governance principles for public companies, their boards of directors, and their shareholders. Referred to as “Commonsense Principles 2.0,” the new Principles are intended to update the principles published in 2016 and recognize the efforts of the Investor Stewardship Group, the Business Roundtable, the World Economic Forum, and others in the continuing dialogue regarding effective governance. In addition to recommending that asset managers and institutional asset owners take a more active role in encouraging long-term value creation by public companies and their boards, the revised Principles address the importance of director independence, early board engagement on important shareholder proposals, and shareholder proxy access. The group also committed to applying the Commonsense Principles 2.0 in their respective businesses and urged their peers to similarly use the Principles as a guide for their own companies. The principles also state that poison pills and other anti-takeover defenses should be put to a shareholder vote.