On October 15, Institutional Shareholder Services (ISS), a leading proxy advisory firm, released for comment draft voting policy changes for 2015. The two significant proposals that would impact US companies are as follows: 

  • Equity Plan Scorecard: In place of the existing approach (using a series of “pass/fail” tests), ISS is proposing a “scorecard” model for evaluating equity plan proposals, which will involve consideration of various factors within three main categories: (1) plan cost (relative to its peers); (2) plan features and (3) grant practices. Consideration of these factors, in their entirety, will result in a total equity plan scorecard score. ISS has indicated that the scorecard factors and their relative weights would be keyed to company size and status, with different weights, and therefore scorecards, applicable to companies in the S&P 500, Russell 3000 (excluding S&P 500), Non-Russell 3000 and “Recent IPOs” or “Bankruptcy Emergent companies.”   
  • Independent Chair Shareholder Proposals: Under the current policy, ISS generally recommends in favor of independent chair shareholder proposals unless the company satisfies all of six criteria, including at least two-thirds of the board being comprised of independent directors and the absence of problematic governance issues. ISS is proposing additional criteria not currently considered (including absence/presence of an executive chair, recent board and executive leadership transitions, director/CEO tenure and a longer (five-year) total shareholder return performance period), and a “more holistic review of each company’s board leadership structure, governance practices, and financial performance” in their totality, rather than the rigid framework under the current policy where any single factor could have resulted in a “For” or “Against” recommendation. 

The comment period for those proposed policy changes is open until 6:00 p.m. ET on October 29. ISS expects to release final 2015 policies on or around November 7, and, if adopted, the final policies will take effect for shareholder meetings held on or after February 1, 2015.