"ISS’ transparent, market-based approach to evolving the policies that are the basis of our informed, independent research and benchmark voting recommendations, continues to develop to help support our institutional investor clients' voting and other investment stewardship-related decisions."

December 1, 2022

ISS Announces 2023 Benchmark Policy Updates

ROCKVILLE, Md. (December 1, 2022) – Institutional Shareholder Services Inc. (“ISS”), a leading provider of corporate governance and responsible investment solutions to the global financial community, today released updates to its 2023 ISS benchmark proxy voting policies. The updated policies will generally be applied for shareholder meetings taking place on or after Feb. 1, 2023, except for those, as noted, that are being announced now with a one-year transition period and which will become effective in 2024, or those relating to a small number of markets that have off-cycle main proxy seasons.

By way of background, each year ISS conducts a robust, inclusive, and transparent global policy development process to update its benchmark voting policies for the upcoming year, led by ISS’ Global Policy Board. After an assessment of emerging issues, relevant regulatory changes, and notable trends seen across global, regional, and individual markets, plus relevant academic research and empirical studies, to ensure its benchmark voting policies take into consideration the changing views and needs of its institutional investor clients, and to gain further insights from a broad range of market participants, ISS then gathers input from institutional investors, companies, and others worldwide through a variety of channels and over a number of months. For further details on this year’s policy development process, please see here. The updates announced today have been informed by the careful consideration of the many inputs received.

“Institutional investors, companies and other interested market constituents globally have provided thoughtful feedback on a wide range of issues through the ISS benchmark policy survey, multiple policy roundtables and discussions, and through our public open comment period on proposed changes,” said Georgina Marshall, Global Head of Research and Chair of the ISS Global Policy Board. “ISS’ transparent, market-based approach to evolving the policies that are the basis of our informed, independent research and voting recommendations continues to help support our institutional investor clients in making informed voting decisions according to their own investment and governance philosophies with regard to their investment stewardship responsibilities and fiduciary duties.”

For full details of all ISS benchmark policy updates announced, please visit the ISS Policy Gateway.

ISS will be hosting an informational webcast on the 2023 policy updates as well as other developments in the governance landscape, on January 19, 2023 at 5:00p.m. CET | 4:00p.m. GMT | 11:00a.m. EST | 8:00a.m. PST. To register, please click here.

The ISS benchmark policy updates announced include:

For 2023, for high emitting companies – identified as those in the Climate Action 100+ Focus Group – ISS is extending to all applicable markets globally the climate board accountability policy first introduced in 2022 under which negative vote recommendations may be made in cases where the company is not considered to have adequate disclosure or does not have quantitative GHG emission reduction targets covering at least a significant portion of the company’s direct emissions. In addition, ISS is updating the factors considered under the policy for 2023, with differentiated implementation of any negative vote recommendations depending on relevant market and company factors, for example, voting item availability. Additional relevant data and information will be included in the company information section of the ISS research reports for all Climate Action 100+ Focus Group companies globally.

Among the changes for the U.S., a policy is being introduced specifically for U.S. Domestic Issuers incorporated outside the U.S. and listed solely on a U.S. exchange to generally recommend “For” resolutions to authorize the issuance of common shares up to 20 percent of currently issued common share capital, where not tied to a specific transaction or financing proposal. This is intended to better reflect the expectations and concerns of investors in the U.S. market. A further specific new policy for the U.S. is being introduced for shareholder proposals that request company transparency on the congruency of its political contributions and lobbying with its public commitments and policies, codifying the case-by-case approach used by ISS in the 2022 proxy season. Other U.S. policy updates include a new policy to recommend a case-by-case review of proposals providing for officer exculpation provisions in a company’s charter, removing the grandfathering of older companies with unequal voting rights and also defining a de minimis exception threshold of 5% and defining the “reasonable sunset period” for other problematic governance structures (including classified boards and supermajority vote requirements) to be no more than 7 years from the date of a company going public. The board gender diversity policy being extended to all U.S. companies covered under the U.S. policy, announced in 2021 with a one-year grace period, will become fully effective in 2023 and its application to Foreign Private Issuers (FPIs) will be expanded for 2023 from Russell 3000 and S&P 1500 FPIs only to all FPIs.

For Canada, after a one-year grace period, in 2024 Canadian S&P/TSX Composite Index constituents will be expected under the updated policy to have at least one racially/ethnically diverse director. This reflects broadened Canadian disclosure requirements in this area and increasing investor expectations of board diversity.

For the U.K. and Ireland policy on remuneration, due to a concern that the wording of the existing policy could be misunderstood as encouraging companies to increase directors’ base salaries proportionally in line with increases made to the wider company workforce, the language is being modified to clarify that keeping directors’ annual salary increases low and ideally lower proportionally than general increases across the broader workforce is considered to be good market practice.

In Continental Europe, against the backdrop of several markets approving legislation that allows for virtual-only general meetings, investor feedback from ISS’ policy survey and roundtables indicated that there remain concerns about the use of virtual-only meetings, and that there is far from universal agreement that virtual-only meetings will not be problematic for shareholder rights. The updated policy for assessing proposals that would allow companies to hold virtual-only shareholder meetings will be to review on a case-by-case basis, taking into consideration the company rationale provided, and any disclosed safeguards, such as a commitment that virtual meetings will not preclude in-person or hybrid meetings, ensuring that shareholders would have the same participation rights as they have at an in-person meeting, and any possible time restriction for the authorization. Also for Continental Europe, a new policy on unequal voting rights structures is being introduced. After a one-year grace period, in 2024, and for widely held companies, ISS will generally recommend voting “Against” directors individually or “Against” the discharge of non-executive directors for maintaining a corporate structure with unequal voting rights. A de minimis exception will be applied where distortion between voting and economic power does not exceed 10 percent.


About ISS
Founded in 1985, Institutional Shareholder Services group of companies (ISS) empowers investors and companies to build for long-term and sustainable growth by providing high-quality data, analytics and insight. ISS, which is majority owned by Deutsche Börse Group, along with Genstar Capital and ISS management, is a leading provider of corporate governance and responsible investment solutions, market intelligence, fund services, and events and editorial content for institutional investors and corporations, globally. ISS operates on an arm’s-length basis and Deutsche Börse has adopted Principles protecting the independence and integrity of ISS’ research offerings. ISS’ 2,000 employees operate worldwide across more than 30 global offices in 15 countries. Its more than 4,000 clients include many of the world’s leading institutional investors who rely on ISS’ objective and impartial ESG and governance research, market intelligence and fund services and data and analytics, as well as public companies focused on ESG and governance risk mitigation as a shareholder value enhancing measure. Clients rely on ISS’ expertise to help them make informed investment decisions.

Media Contact:
Sarah Ball, Executive Director, Communications

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