Council of Institutional Investors Weighs In on Benchmark Voting Recommendations for U.S. Companies
Tuesday, November 23, 2021

In response to an Institutional Shareholder Services ("ISS") request for comment on proposed changes to its benchmark voting policies, the Council of Institutional Investors ("CII") expressed support for proposals on equal voting rights as to all equity shares, greater board diversity, and climate-related board accountability policies. The ISS is a proxy advisory firm providing corporate governance and investment advice to the financial community. The "CII is a nonprofit, nonpartisan association of public, corporate and union employee benefit funds, and other employee benefit plans, foundations and endowments with combined assets under management exceeding $4 trillion."

CII supported ISS's recommendation to withhold support from, or to vote against, incumbent directors sitting on boards of companies with unequal voting rights. However, CII also noted that many of these directors had no involvement in the original assignment of voting rights at the time of the companies' IPOs. In these cases, CII suggested granting a one-year grace period to the incumbent director if the company has, in an SEC filing, committed to undertake efforts to achieve equal voting rights in the near term. As to directors that did not support one-share, one-vote policies, CII stated that it maintained a "Dual-Class Enablers" list that would allow investors to "bring accountability" to those directors as they move on to other boards.

CII supported ISS's recommendation that certain U.S. companies include at least one female director by 2023 and at least one racially or ethnically diverse director by 2022. CII stated that companies can achieve diverse boards without the imposition of quotas, and expressed concern that smaller companies might have trouble finding directors with the right skill sets if they were forced to meet "check-the-box" diversity criteria. As a result, CII recommended that diversity must be broadly defined in terms of the "distribution of skillsets, backgrounds and tenure on the board."

CII also supported ISS's "proposed climate-related board accountability policy, in particular the recommendation against the re-election relevant directors at companies that decline to make appropriate climate-related disclosures." CII stated it supports "clear, comparable and reliable disclosure on sustainability-related performance," but related that there was "broad skepticism among investor members as to whether an advisory vote on climate can deliver its intended salutary effect," and that "Say on Climate" shareholder proposals "present[] considerable new hazards for investors."


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