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ISS Updates Frequently Asked Questions for US Proxy Voting Policies and Procedures for 2017

Proxy advisory firm Institutional Shareholder Services (ISS) recently updated its frequently asked questions (FAQs) for US proxy voting policies and procedures (excluding compensation-related policies and procedures). The following is a brief summary of the new/updated FAQs.

Restricting Binding Shareholder Proposals

ISS has introduced new FAQs related to the restricting of binding shareholder proposals:

A small minority of presumably non-Delaware incorporated public companies prohibit shareholders from submitting binding shareholder proposals. ISS expressed its position that shareholders’ ability to amend bylaws is a fundamental right, and shareholders should be permitted to submit binding bylaw amendment proposals. Substituting a supermajority vote requirement on binding shareholder bylaw amendments in lieu of the prohibition will be viewed by ISS as an insufficient restoration of a fundamental right. Further, ISS will generally view commitments to remove the restriction within a given period of time as insufficient to mitigate concerns. However, ISS will evaluate each company on a case-by-case basis based on such factors as shareholder outreach, complete disclosure, board views and planned actions.

Director(s) Receiving Less Than 50 Percent of Shares Cast

ISS has updated its FAQs to clarify that:

If a director receives less than majority support due to attendance issues, and that director attends 75 percent of the aggregate of his/her board and committee meetings the following year, ISS will view that as a sufficient response.

Attendance

ISS also clarified its position that:

Director absence is acceptable when only one meeting is missed and the total of all meetings was three or fewer, even though attendance is below the 75 percent reporting threshold. Because companies generally schedule their board and committee meetings more than a year in advance, for new directors who do not have this advanced notification, ISS will consider it an acceptable reason, if new directors miss meetings due to scheduling conflicts. If the proxy disclosure is unclear and insufficient to determine whether a director attended at least 75 percent of the aggregate of his/her board and committee meetings during his/her period of service, ISS will recommend a vote against or withhold from the director(s) in question.

Overboarded Directors

ISS has updated its FAQs to clarify its position that:

The boards of public companies and mutual fund families are counted when determining if a director is “overboarded.” ISS does not include the boards of non-profit organizations, universities, advisory boards and private companies in determining whether a director is overboarded.

A summary of ISS’ new/updated FAQs for 2017 US proxy voting policies and procedures is available here.

©2019 Katten Muchin Rosenman LLP

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About this Author

Farzad F. Damania, Capital markets and securities lawyer, Katten Law Firm
Partner

Farzad F. Damania focuses his practice on capital markets and securities law, mergers and acquisitions, and general corporate law. He is regularly engaged on capital markets transactions, including initial public offerings, follow-on offerings, tender offers, and high yield debt transactions as well as direct investments by private equity acquirers, sellers and co-investors. He also represents public companies on corporate governance issues, securities law compliance and stock exchange regulations.

Farzad counsels US public companies and foreign...

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