ISS Releases FAQs: New Defensive Bylaw May Lead to Negative Vote Recommendations in Director Elections
Public companies that have recently adopted or are considering adopting bylaws that disqualify director nominees who receive compensation from anyone other than the company should be aware of new FAQs released yesterday by Institutional Shareholder Services (ISS) and the potential impact the FAQs may have on forthcoming director elections. Such bylaws typically operate in conjunction with advance notice bylaws that require proponents to disclose compensation arrangements with their nominees. Compensation payable by a third party for director candidacy and/or board service – for example, by an insurgent in a contested director election – may call into question a director’s undivided loyalty to the company and all of its shareholders.
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