Taking stock of directors’ vulnerabilities to receiving a negative voting recommendation from ISS is important when putting the last touches on this year’s annual meeting proxy statement and planning for shareholder engagement about the annual meeting.
The 2016 proxy season saw a small uptick in the number of directors failing to receive majority shareholder support (46 directors at 26 companies, compared to 39 directors at 23 companies in 2015 ). All told, ISS recommended voting against or withhold from individual directors over 3000 times at Russell 3000 companies.
Lack of board responsiveness to shareholder proposals or other governance issues, poor meeting attendance, non-independent members on key committees, “overboarded” directors, audit controversies and unilateral board actions impacting shareholder rights were the predominant reasons for a negative ISS recommendation.
While a negative recommendation from ISS may not result in a failure to receive sufficient votes to be elected, negative attention, investor criticism and reputational issues are sufficient reasons for companies and their directors to understand the circumstances in which ISS may recommend voting against a director.
For a summary of the broad range of circumstances (including ISS’s 2017 updates) in which ISS may issue a negative voting recommendation against individual directors, committee members, or the entire board, see our Alert, available here.