Proxy adviser releases annual survey results

Proxy adviser Institutional Shareholder Services (ISS) has released the results of its annual global voting policy survey. ISS uses the responses to update its voting policies. Many of the issues covered in the survey are particular to the United States (such as proxy access) or other jurisdictions, but other issues apply more globally, such as director overboarding and equity remuneration for non-executive directors.

On director overboarding, the survey results showed that companies have a different view from investors of how many board seats is an appropriate limit. Among company respondents, 41 per cent did not favour a general limit, while 34 per cent of investors indicated that four total board seats is an appropriate limit (for directors who are not active CEOs); 18 per cent indicated that a total of five board seats is the right limit; and 20 per cent indicated that a total of six board seats is appropriate. Only 12 per cent of investors thought that there need not be a general limit.

In Australia, the Australian Shareholders’ Association 2015 voting guidelines on the workloads of professional directors limits their support to one director sitting on five separate and un-related listed company boards and notes that additional government or not-for-profit positions will also be considered when assessing workloads.

Interestingly, the survey also canvasses incentives for long-term shareholders, such as multiple voting rights, loyalty dividends and special tax incentives.

On the question of incentives for long-term shareholders, only one-quarter of investor respondents supported differential loyalty dividends, and fewer (13 per cent) supported tax incentives. Only 15 per cent of investor respondents supported enhanced multiple voting rights. The vast majority (more than 90 per cent) see the equal treatment of all shareholders as enhancing long-term shareholder value, expressing concern that loyalty rewards can be discriminatory across different types of shareholders.

With large institutional investors writing to the chairs of large listed companies around the globe recently, confirming they are long-term investors interested in the sustainability of their investee companies, the focus appears to be on shareholder engagement rather than loyalty benefits..

The report can be found here http://www.issgovernance.com/file/publications/ISS2015-2016PolicySurveyResultsReport.pdf.

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