Insights Blog

Institutional Shareholder Services (ISS) has published its proposed voting policy changes for 2023 for comment.

Share Issuance Mandates on US Domestic Issuers Incorporated Outside the US (impacts Irish incorporated companies listed in the US)

ISS is seeking views on a proposed policy change which would authorise issuances up to 20% of a company’s issued share capital, where not tied to a specific transaction or financing proposal, for solely US listed issuers incorporated outside the US, with renewal on an annual basis. This proposed change is intended to better reflect the expectations and concerns of investors in the US market. ISS currently evaluates share issuance mandate proposals under the policy of the market of incorporation (e.g. Ireland). However, such policies generally follow local listing rules and best practice recommendations, which presume a local market listing and companies with a primary or sole listing in the US believe that being forced to offer pre-emptive rights, to an investor base largely unfamiliar with the concept, will delay the process of fundraising and put the company at a disadvantage relative to US incorporated peers that do not offer such rights. The proposed policy would apply to companies with a sole listing in the US, but which are required by the laws of the country of incorporation to seek approval for all share issuances. Dual-listed companies will continue to be evaluated under the policy of their market of incorporation.

Climate Board Accountability (impacts all markets)

In 2022, ISS instituted a new policy in several markets to recommend against the appropriate director or other relevant voting items in cases where a company in the Climate Action 100+ Focus Group was not considered to be adequately disclosing climate risks and did not have quantitative GHG emission reduction targets covering at least a significant portion of the company’s direct emissions. For 2023, for the limited universe of high emitting companies (those in the Climate Action 100+ Focus Group) ISS proposes to extend globally the policy on climate board accountability and to update the factors considered under the policy. Under the proposed change, the same analysis framework will be used for all Climate Action 100+ Focus Group companies globally, but with differentiated implementation of any negative vote recommendations depending on relevant market and company factors (for example, voting item availability). ISS is seeking views on what criteria would be important if it were to develop its own target group of high emitting companies for this policy in the future and whether certain sectors should be prioritised.

Remuneration Report (impacts UK & Ireland) 

ISS note that there is a concern that part of the current wording of the ISS UK and Ireland policy on remuneration may be misunderstood as encouraging companies to increase directors’ base salaries proportionally in line with increases made to the wider company workforce. The proposed change modifies the policy language to clarify that keeping directors’ annual salary increases low and ideally lower proportionally than general increases across the broader workforce is considered to be good market practice.

The comment period for the proposed voting policy changes is open until 5.00 p.m. ET on 16 November 2022. ISS expect to announce the final policy changes in or around the first week of December 2022 and the revised policies will be applied for shareholder meetings taking place on or after 1 February 2023.

“Investors, Companies and Other Stakeholders are Invited to Comment on 2023 Proposed Changes to ISS’ Global Benchmark Policy”