April 17, 2020
ISS is adjusting several corporate governance and executive compensation policies, including some additional flexibility in how it evaluates changes to annual and long-term incentives.
For compensation and capital structure, the policy changes and clarifications for the U.S. markets, which are similar to those published by Glass Lewis on March 26, include:
The document also provides information on several other corporate governance policies. Director attendance will have some flexibility due to the crisis and switching to a virtual-only shareholder meeting will not be viewed in a negative light. A severe stock price decline as a result of the COVID-19 pandemic is likely to be considered valid justification for implementing poison pills lasting less than a year. For longer pills, ISS will review the full rationale and circumstances, including the active threats, on a case-by-case basis.
Why this matters: Overall, COVID-19 impacts will be considered within the framework of existing ISS policy. While that may buy companies moderate flexibility, it is also clear that actions ISS viewed negatively in the past will continue to be viewed negatively. Disclosures on rationale and shareholder engagement efforts will likely mitigate some concerns. It remains to be seen whether the Center-supported proposed SEC rules on proxy advisory firms will encourage ISS to provide meaningful engagement opportunities during the crisis.