‘Tis the season… of proxy voting policies updates

Institutional Shareholder Services Inc. (ISS), a leading provider of end-to-end governance and responsible investment solutions to the global financial community, just released updates to its 2018 benchmark proxy voting policies.

Two policy updates affect all Canada companies: 

  • Pay-for-performance methodology: ISS will modify its quantitative pay-for-performance screening for 2018 to add an examination of a company’s alignment of pay and financial performance over three years relative to a peer group.
  • Director independence: The Canada policy now includes guidance on the nature of professional services relationships. Closely aligned with European Standards, the three classifications will be Executive Director, Non-Independent Non-Executive Director, and Independent Director. 

There are two primary additional changes for TSX listed companies:

  • Overboarded directors: Directors that are considered overboarded are going to experience increased pressure from Institutional voting. Starting in 2019, ISS will no longer examine attendance and will recommend against any directors who serve on an excessive number of boards. However, also in 2019, ISS will raise the number of boards that is considered excessive. For non-CEO directors, the number of allowable public boards will increase from four to five; for CEO directors, the number of allowable outside public boards will increase from one to two.
  • Having a Gender diversity policies has become increasing important:

-The update for TSX Composite companies: Starting in 2018, ISS will recommend against nominating committee chairs at TSX Composite companies where there are no female directors and the company has not disclosed a formal gender diversity policy.

-The update for other TSX companies: After a one-year grace period, starting in 2019, ISS will apply the above policy to smaller TSX companies. 

ISS also announced other Canada policy updates:

  • Advance notice provisions calling for a nominating shareholder’s presence at the meeting regardless of the number of votes obtained by his or her nominee, or that give the board discretion to request excessive additional disclosure, will be deemed problematic. (TSX and TSX-V companies)
  • Majority-owned companies need not adopt a director resignation policy in order for their directors to receive recommendations from ISS. ISS also made changes to reflect applicable exchange rules. (TSX companies only)

We’ll keep you posted on Glass Lewis’s policy 2018 when available. Policy changes can also be found on Shorecrest Group’s LinkedIn page and our website once they are available!