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ISS Releases 2018-2019 Policy Survey Results

Institutional Shareholder Services received 669 responses (from 638 different organizations, predominantly North American) to their annual Governance Principles Survey – which seeks input to guide future policy on both high-level topical corporate governance areas and more granular international policy applications from investors, issuers, boards and other relevant parties.

Among the key-findings this year from the high-level governance aspect:

Auditors and Audit Committees:  When evaluating the auditor, investor and non-investor respondents agreed that past regulatory fines stemming from weak practices or accounting errors, and the independence of the audit partner with company management are top of list.

Director Accountability and Track Records: Investors and non-investors agreed the premier director oversight issue was risk oversight – more specifically fraud and other types of corporate malfeasance.

Gender Diversity on Boards: Investors and non-investors concurred that the absence of women on the board could be symptomatic of poor recruiting practices and could potentially lead to increased management or board engagement, support for shareholder resolutions to increasing diversity and opposition to chair of the Nom. & Gov. committee.

In a recent Rivel study, North American and, especially, European investors drove home the point that exhibiting sufficient board diversity aids board effectiveness and helps shape strategic flexibility – especially at companies with a diverse range of global stakeholders and markets.

One-Share, One-Vote Principle: Investors overwhelmingly reacted positively (92% – Yes) when ISS proposed a hypothetical adjusted vote result at uneven voting dual class companies – leveling the votes as if they were all one vote per share. A major consideration for the use of this analysis is the sunset provision. When asked about the appropriate sunset horizon on the voting right provision, 41% of investors answered “It depends”, 25% responded one to three years and 21% responded four to six years.