November 13, 2015
The Association's Center On Executive Compensation filed comments with ISS this week in response to the proxy advisor's 2016 draft policy updates, focusing on ISS's proposal to decrease the acceptable number of boards on which directors may serve. The draft policy suggests that for sitting CEOs, ISS will decrease the acceptable number of outside boards (i.e., in addition to their own company's board) from two to one, while for directors who are not sitting CEOs, ISS will decrease the total acceptable number of boards from six to either four or five. The policy change is notable because ISS anticipates that if it is adopted, significantly more directors would be considered "overboarded" and suffer "against" or "withhold" votes from ISS. The Center's comments raised concerns that once again, ISS is unnecessarily imposing artificial and unnecessary standards on companies despite the fact that the proxy advisor already maintains strict policies regarding overboarding and monitors director attendance closely. In addition, most large companies already have strict limits on outside directorships for both independent directors and sitting CEOs, and to the extent investors are unhappy with company policies or individual directors, they may make this known through engagement and/or by withholding director votes. Final policy updates are expected around November 18, and may cover more topics than were included in the draft proposals. Once finalized, the policies will apply to companies whose annual meetings occur on or after February 1, 2016.