ISS Likely to Favor Annual Say-On-Pay Vote
ISS announced the opening of its annual comment period for its 2011 proxy voting policies. The comment period, part of ISS’ policy development process, offers institutional investors, corporate issuers, and industry constituents the opportunity to provide feedback on ISS draft policy updates.
Under the SEC’s proposed say-on-pay rules under the Dodd-Frank Act, public companies will be required to include a non-binding advisory vote on whether a company should include an advisory say-on-pay proposal every one, two or three years. The ISS draft policy update states “ISS expects to recommend for the annual vote.” ISS’ rational is as follows: “ISS supports an annual [management say-on-pay proposal, or MSOP] for many of the same reasons it supports annual director elections rather than a classified board structure: because it provides the highest level of accountability and direct communication by enabling the MSOP vote to correspond to the information presented in the accompanying proxy statement for the annual shareholders’ meeting. Having MSOP votes only every two or three years, potentially covering all actions occurring between the votes, would make it difficult to create meaningful and coherent communication that the votes are intended to provide. Under triennial elections companies, for example, a company would not know whether the shareholder vote references the compensation year being reported or a previous year, making it more difficult to understand the implications of the vote.”
ISS will accept comments on the proposal through November 11, 2010. ISS plans to release its final 2011 U.S. and international policy updates late-November and its Global Policy Summary and Concise Guidelines in late-December.
Check dodd-frank.com frequently for updates on the Dodd-Frank Act and other important securities law matters.
Contact Steve Quinlivan for more information.