Insights Blog

Institutional Shareholder Services (ISS) published its 2024 Proxy Voting Guidelines for the UK and Ireland and the US effective for meetings held on or after 1 February 2024.  Updates made to these Guidelines did not form part of its Benchmark Policy Consultation held at the end of last year.

Updates to the UK and Ireland Guidelines include the following:

Board Gender and Ethnic Diversity: The policy language has been simplified and updated to reflect changes to the diversity reporting requirements in the FCA Listing Rules which apply to LSE standard and premium listed companies and which took effect for financial years commencing on or after 1 April 2022 i.e. whether, as at a chosen reference date within its accounting period:

  • at least 40% of the board are women;
  • at least one of the senior board positions (Chair, CEO, Senior Independent Director or CFO) is held by a woman; and
  • at least one member of the board is from a minority ethnic background.

ISS may consider recommending against the chair of the nomination committee (or other directors on a case-by-case basis) if the company has not met the FCA’s reporting requirements.

For ISEQ 20 constituents and AIM-listed companies with a market capitalisation of over GBP 500 million, ISS will generally recommend against the chair of the nomination committee (or other directors on a case-by-case basis) if there is not at least one woman on the board and if they have not appointed at least one individual from an ethnic minority background to the board by 2024.

Certain mitigating factors will apply e.g. (a) compliance with the relevant board diversity standard at the preceding AGM and a firm commitment, publicly available, to comply with the relevant standard within a year; and (b) other relevant factors as applicable.

Definition of Significant Shareholder: In the context of determining the non-independence of a non-executive director (which includes where they are a significant shareholder), a note has been added to clarify that significant in this context means a holding of ≥3%.

Capital Structure: The share issuance authority language has been updated to reflect the Investment Association’s Share Capital Management Guidelines (updated in February 2023).  The change notes that ISS will generally support an authority to allot up to two-thirds of the existing issued share capital, providing that any amount in excess of one-third of existing issued shares would be applied to fully pre-emptive offers only (previously this referred to fully pre-emptive rights issues).

In relation to the US Guidelines, the only change made relates to Severance Agreements for Executives/Golden Parachutes.