ISS, Glass Lewis 2016 Final Policies to Include Stricter Limits on Board Participation

Corporate Governance, Proxy Advisory Firms

Proxy advisory firms ISS and Glass Lewis both recently released final 2016 policy updates, with relatively few changes to compensation policies as both firms focus on "overboarding" of directors for public companies.  Updates included the following:

• ISS - Overboarding.  Starting in 2017, ISS will recommend against directors who sit on more than five total public company boards, but will not tighten existing restrictions on sitting CEOs, where the current guideline is no more than three total boards including the home company.  ISS backed off of its initial suggestion that it would seek to limit sitting CEOs to two boards total, possibly due to negative investor feedback from investors such as Invesco and T. Rowe Price, whose public comments on the proposed policy warned against placing undue focus on overboarding.  The Association's Center On Executive Compensation raised similar concerns in its comments on ISS's proposed policies.
  
  
• ISS - Shareholder Proposals on Equity Retention/Holding Periods.  ISS has restated its policy on shareholder proposals seeking companies to adopt equity retention policies for senior executives, focusing on a case-by-case analysis of the percentage/ratio of shares to be retained and the time period over which they must be retained.
  
  
• ISS - Updated Equity Plan FAQ.  ISS made minor changes to its equity plan scorecard methodology for assessing the cost and attributes of omnibus compensation plans, including increasing the holding period required after awards vest from 12 to 36 months in order to receive full points under the methodology and expanding the definition of accelerated vesting in the event of a change-in-control.  Under the new policy, a company will receive no points for automatic accelerated vesting of time-based awards or payout of performance awards above target in a change-in-control.
  
  
• Glass Lewis - Overboarding.  Also starting in 2017, Glass Lewis will recommend against directors who sit on more than five total public boards and against sitting CEOs who sit on more than two total public boards (a stricter policy than ISS).

ISS plans to issue its comprehensive revised policies and frequently asked questions on its U.S. policies later this month.