ISS Weighs in on Proxy Access Debate

March 6, 2015

Recently, ISS weighed in on the proxy access debate with its voting policy for proposals that allow shareholders to nominate directors on the company’s ballot. Overall, ISS will recommend in favor of proposals that permit shareholders or a group of shareholders holding three percent of the voting power for three continuous years to nominate 25 percent of the board. ISS views with disfavor proposals that either limit the number of shareholders comprising a group or set ownership and duration thresholds higher than the three percent for three years standard. ISS notes that it will review competing shareholder and management proposals under the same policy. However, it will generally recommend voting against some or all directors if a company omits a shareholder proposal that hasn’t been voluntarily withdrawn, unless the company has obtained either an SEC no-action letter or a U.S. District Court ruling that it can exclude the proposal from its ballot. Given the SEC’s decision not to consider no-action requests under 14a-8(i)(9) for competing management and shareholder proposals and the cost and delay involved in obtaining a court ruling, companies may opt to negotiate a deal with a proponent to modify or withdraw a proxy access proposal in light of management’s agreement to support a similar alternative proposal. Read ISS FAQs on its proxy access voting policy.

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