ISS Proposes 2016 Policy Updates: No Proposal on Proxy Access or Responsiveness; U.S. Policy Changes Would Lower the Acceptable Number of Board Positions Held by a Director, Provide for Ongoing Negative Director Recommendations After Certain Unilateral Governance Changes, and Heighten Compensation Disclosure Requirements for Externally-Managed Issuers

Sullivan & Cromwell LLP - October 26, 2015

Today, Institutional Shareholder Services, the proxy advisory firm, published proposed draft policy changes for the 2016 proxy season. The proposals applicable to U.S. companies include a reduction in the acceptable number of total board seats held by directors (with a one-year grace period for implementation), an updated policy regarding negative director recommendations following unilateral action to classify the board or introduce supermajority voting provisions (or following an IPO of a company with such provisions), and a recommendation against say-on-pay proposals for externally-managed issuers (EMIs) who fail to provide the disclosure necessary to allow a comprehensive assessment of pay-for-performance. There were no published proposals relating to proxy access or board responsiveness.

As U.S. issuers plan for the 2016 proxy season, they should take into account these proposed changes. Comments on the proposed changes are due by November 9, 2015, with the final policy changes expected to be released on November 18.