Institutional Shareholder Services (ISS) has launched its Annual Benchmark Policy Survey signaling potential changes to ISS’s proxy voting policies for 2021. Below we discuss the Global and North American Survey, which highlight the many key corporate governance issues that are top of mind for boards of directors and management today. The Global Survey covers questions relating to maintaining ISS’s COVID-19 guidance, racial and ethnic diversity on boards, executive compensation adjustments in light of the pandemic, oversight of climate change risk, sustainability frameworks, auditor independence and oversight and audit committees, and the annual meeting format. The North America Survey focuses on independent board chairs.

Institutional investors, companies, corporate directors and other market constituents participate in the survey. The survey will close on August 21, 2020, at 5pm ET. ISS will then review the results along with input obtained from investors, company executives, directors and others through its various regional, topic-specific roundtables and conference calls to advise and assist ISS with updating its policies ahead of 2021 annual shareholder meetings. The survey is available here.

  • Continued Application of ISS’s “Flexible” COVID-19 Guidance (Global). As discussed in our Alert available here, ISS issued guidance in April 2020 addressing certain circumstances where ISS may apply its policies with greater flexibility amid the COVID-19 pandemic. Topics covered in the April guidance included annual meeting postponements and virtual-only meetings, poison pills, shareholder rights, board and executive changes, compensation issues, dividends, share repurchases and capital raising. Recognizing that a return to normal operations appears to be “some way off,” for most public companies globally, ISS asks respondents to weigh in on whether ISS should maintain the COVID-19 related guidance into 2021, in which regions and for how long.
  • Racial and Ethnic Diversity on the Board (Global). Citing the low levels of disclosure about, and representation by, members of racial and ethnic minority groups among directors and executives and the waves of recent protests over racial and ethnic inequalities and public responses, ISS posed three questions about ethnic and racial diversity. ISS asks respondents whether all corporate boards should provide disclosure of the “demographics” of board members including “self-identified” race and/or ethnicity. ISS also asks respondents for views on the importance of ethnic and racial diversity on boards and actions that may be appropriate for shareholders to consider to encourage increased racial and/or ethnic diversity on boards of their portfolio companies, including engaging with management or the board, supporting shareholder proposals, supporting the link between pay and diversity, and voting against directors.
  • Executive Compensation Adjustments (Global). Recognizing that many boards of directors are making decisions regarding short-term and long-term compensation in light of the impact of the COVID-19 pandemic, the survey seeks to obtain views on what respondents believe is a reasonable response to executive compensation programs. ISS asks respondents to identify a response that most closely reflects their view of executive compensation adjustments amid the pandemic, including that (i) boards need flexibility to make adjustments in these extraordinary circumstances that are different from other market downturns, (ii) boards need to thoughtfully incorporate the impact of the pandemic into compensation decisions to adjust pay and performance expectations, which should be disclosed to shareholders, or (iii) the impact of the pandemic is not substantially different than other major market downturns and decisions regarding performance and pay should reflect actions to promote a return to profitability and financial health over a reasonable timeframe without significant adjustment to short-term programs or executive compensation goals. Specifically with respect to short-term incentive programs, ISS asks respondents to identify what their organization believes is a reasonable response to the pandemic (e.g., mid-year changes to incentive metrics, performance target and/or measurement period to reflect changed economic realities, suspending annual incentive programs and instead making one-time awards based on committee discretion, both of the foregoing, or avoid making any changes and make payouts based on original program design).
  • Oversight of Mitigate Climate Change Risk (Global). In a similar question to last year’s U.S. survey, ISS notes the need for companies to assess and mitigate regulatory risks related to climate change, as well as potential direct environmental harms to their businesses. In the survey, ISS asks respondents to weigh in on what actions they believe would be appropriate for shareholders to hold companies accountable that they consider to be not effectively reporting or addressing climate change risk. Such actions may include engaging with management or the board, urging boards to incorporate climate-risk related goals into executive compensation programs, supporting shareholder proposals, voting against company financial statements, statutory reports or sustainability reports (if proposed), or voting against directors deemed responsible for poor climate change risk oversight.
  • Sustainability Frameworks (Global). Referring to the United Nations’ 17 interconnected Sustainable Development Goals (SDGs) that address topics such as education, health, social protection and job opportunities as well as a range of environmental topics, ISS asks respondents whether they consider the SDGs to be an effective way to measure environmental and social risks.  The survey also requests that respondents select which framework, if any, their organization considers to be more effective than the SDGs, such as the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI), the CDP (formerly the Carbon Disclosure Project), or the Taskforce on Climate-related Financial Disclosures (TCFD).
  • Auditors and Audit Committees (Global). Citing continuing concerns over alleged fraud-related controversies at certain companies, ISS is revisiting questions it posed in 2018 in response to the Wells Fargo and Equifax incidents regarding auditors and audit committees (see our prior Blog here). This year’s survey includes two questions relating to the factors that respondents believe to impact auditor independence other than relative level of non-audit services and fees as compared to audit-related services and fees (e.g., lead audit partner tenure, relationship with the audit partner, auditor tenure, significant audit controversies, regulatory fines related to financial disclosure practices or weaknesses, and/or the significance of materials restatements due to errors, omissions or misconduct). ISS also specifically asks whether respondents would take into consideration the lead audit partners’ link to a significant audit controversy at another company. The survey also asks what information shareholders should consider in evaluating the audit committee (e.g., skills, quality of financial reporting, significant controversies, disclosure on auditor independence, meeting frequency and committee refreshment).
  • Virtual-only Shareholder Meeting Format (Global). As a result of the COVID-19 pandemic, virtual-only and/or hybrid annual meetings are now permitted as part of the regulatory framework in many more jurisdictions. In most jurisdictions, ISS does not have a policy to recommend against directors at companies that hold virtual-only meetings. ISS asks respondents to identify the preferred annual meeting format (e.g., in-person with virtual meetings used only when there is a compelling reason, hybrid meetings where shareholders attend in person or through “effective remote communications,” or virtual-only).
  • Independent Chair (North America). Citing the increased level of support for shareholder proposals calling for independent board chairs in 2020 (though only two receiving majority support), ISS asks respondents to provide their preferred approach to independent board chairs. ISS also specifically asks respondents for their view as to what constitutes a significant “material governance failure” or evidence that the board has failed to oversee and address certain risks. Examples of such failures include unilateral board actions diminishing shareholder rights, insufficient board responsiveness to majority shareholder votes, significant audit failures, internal control oversights, misconduct or mismanagement, and significant failures of human capital management. These could factor into ISS’s evaluation of whether to support a shareholder proposal requiring an independent board chair.


ISS typically announces proposed policy changes, including changes resulting from input provided on the survey, and seeks further comment approximately two months after the survey closes and then adopts its final policy changes in mid- to late-November. More information on ISS’s policy development process is available here.