ISS Governance Study Reveals Some Differences Between Investor Group and Board Priorities

Institutional Shareholder Services (ISS) is an organization that both advises on governance standards and offers related services. As such, occasionally it draws criticism. Because of its influence, those involved in corporate governance would be advised to become familiar with them.

Earlier this year, ISS published the results of their 2011-2012 Policy Survey. It was reviewed this week in Directorship and I recommend a review of that post.

The primary issues reported are the same as in other studies: executive compensation and whether the CEO should also chair the board. However, it is notable that:

  • Executive compensation was reported as only being a major issue in North America. However, I recently returned from a trip to Australia and I can tell you that this is definitely an issue there (see this earlier post).
  • Disclosure of executive compensation is important (more for investors than companies) in Europe.
  • Oversight of risk management is one of the top issues for boards in North America and Europe, but not elsewhere.

The ISS study identified a couple of differences between the views of investor groups and boards (or at least those answering on behalf of companies):

  • While investors continue to advocate separate of the CEO and board chairman roles, companies continue to resist the pressure. IMHO, changes are likely to happen only when a new CEO is appointed by a company.
  • When it comes to “say on pay” votes (which occur not only in the U.S. but also in Australia), investor groups believe that action should be taken if the opposition to the company’s compensation plan is 20%, while companies thought the level should be 50%.

I recommend reading the complete report, which has sections on major issues in each region.

Posted on Nov 5, 2011 by Norman Marks

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