2018 ISS Policy Survey Queries Use of Pay Ratio, Gender Diversity, Share Buybacks Proposals

Corporate Governance, Executive Pay Plan Design, Proxy Advisory Firms

This week, ISS released its 2018 policy survey, seeking company and investor input as part of the annual policy development process and including questions about the use and value of the pay ratio in anticipation of the first disclosures, which will be required in 2018 proxies.  This year's survey is being conducted in two parts: the first, a "Governance Principles Survey" dealing with changes in underlying governance principles for 2018, and the second, its "Policy Application Survey" addressing how ISS interprets its existing principles.  The main survey is available here. Questions of particular interest are:

• Pay Ratio Between Senior Executives and Employees:  ISS asks two questions about how the U.S. pay ratio will be used.  The first question asks how the data will be analyzed and whether it will be used to compare companies, to assess year-on-year changes at an individual company, or not used at all.  The second question asks how shareholders should use the pay ratio—as a data point for evaluating compensation related votes, for evaluating director votes, to assist in engaging with companies, as a "risk factor" in making investment, or not at all because it will not be meaningful to investors.
  
  
• Gender Diversity:  Citing the growing attention on board diversity and citing some jurisdictions that have implemented quotas or best practices to drive female participation, ISS asks questions about the level of concern over the lack of gender parity in public company board participation.  The Policy Application Survey also asks whether companies should disclose their gender pay gaps more generally and whether disclosure depends on certain factors (e.g., disclosure is legally required or the company has experienced controversies over gender pay).
  
  
• Share Issuance and Buyback Proposals:  Comparing requirements under which EU and UK domiciled companies that are also listed on stock exchanges in those countries must obtain shareholder approval for share issuances and buybacks, ISS seeks input on whether, as a matter of principle, a shareholder vote should be required or whether these matters should be the purview of the board.  Secondly, for companies incorporated in a different country but listed on a U.S. exchange, the survey asks whether ISS should assess the company under the rules of the exchange rather than the rules of where the company is incorporated.

The Governance Principles Survey deadline is August 31 and the Policy Application Survey deadline is not until October 6.  The Association's Center On Executive Compensation will survey its Subscribers and will file detailed comments incorporating their feedback.