ISS Announces Data Policy Review and 2022 Benchmark Policy Changes

ISS announced that it will now allow companies to review the data used in its proxy voting reports across a variety of proposals including election of directors, say-on-pay, and equity plans. According to the press release, the portal will launch on January 10, 2022. Companies will be able to verify various data points, including:

• Individual director details such as name, gender, and ethnicity;
  
  
• Board and committee characteristics such as committee names and memberships; and
  
  
• Individual executive pay figures including salary and bonus from the Summary Compensation Table and grant details, equity plan details, gross-ups, etc.

Participating companies will not be required to pay for access but will need to sign up through Governance Analytics run by ISS Corporate Solutions (ICS - ISS’s corporate consulting business). Company representatives (the corporate secretary in most cases) will receive e-mail notification when a company’s 48-hour data verification window opens between the proxy statement filing and publication of ISS’ proxy research report. It is likely that signing up will also require consent to be contacted by ICS sales reps. Companies will still be able to receive a copy of the full report post-publication through the same portal.

We do not expect ISS to provide any verification or review of their qualitative analysis, the quantitative pay-for-performance screens, or the ISS-selected peer group. This new policy does give companies a chance to see over time how often ISS makes a material data mistake and track ISS’s willingness to address errors. The Center is interested in Subscriber experiences with the data verification process.

ISS also released its 2022 global benchmark voting policies. The updates do not contain changes to US compensation policies but there are changes in international markets which may preview US policies under consideration. 

• In Canada, increased requirements for compensation committee responsiveness will go into effect if say-on-pay receives less than 80% support (current required support level is 70%).
  
  
• In the UK and Continental Europe, financial and non-financial conditions for incentives, including ESG criteria, are relevant as long as they reward effective performance in line with company purpose, strategy, and objectives. Specifically for the UK, ESG metrics will also need to be quantifiable. 

For the US, all changes were related to corporate governance, including:

• The climate accountability policy will recommend votes against directors at high emitting companies that are not sufficiently responsive to climate risks.
  
  
• Board gender diversity policies will expand to a wider universe of companies in the US, while large companies will also be expected to have at least one racially/ethnically diverse director.