As Canadian public companies begin preparing for the upcoming 2018 proxy season, directors and management should be aware that ISS has proposed eliminating the “less than 75% attendance trigger” for determining whether a director is “overboarded”. A decision on this policy, and its effective date, should be available later this month.
Currently, ISS will generally recommend a negative vote for an individual director if:
- he/she sits on more than four public company boards in total; AND
- has attended less than 75 percent of his/her respective board and committee meetings held within the past year without a valid reason for these absences.
If the individual director is also the CEO of a public company, ISS will recommend voting against that director if:
- he or she sits on more than one outside public company board in addition to the company of which he/she is CEO; AND
- has attended less than 75 percent of his/her respective board and committee meetings held within the past year without a valid reason for these absences. However, a negative vote will only be recommended in the election of directors for outside boards the CEO sits on.
However, ISS is proposing to change its policy to a single-trigger by eliminating consideration of attendance at meetings as a factor in determining its voting recommendations. Serving as a director of more than four public company boards (one outside board in the case of a CEO of a public company) presumptively would result in a nominee being “overboarded” and incapable of effectively discharging his or her duties as a director.
If adopted, the ISS policy will be more similar to the Glass Lewis policy. Glass Lewis will provide a negative vote recommendation for any director that serves on more than five public company boards. For CEOs, they will provide a negative vote recommendation if the CEO serves on more than two public company boards. Note that Glass Lewis bases its recommendation solely on the number of Boards and does not include an attendance trigger like ISS.
Invitation for Discussion:
If you would like to discuss this blog in greater detail, or any other business law matter, please do not hesitate to contact one of the lawyers in the Business Law group at Linmac LLP.
Disclaimer:
Note that the foregoing is for general discussion purposes only and should not be construed as legal advice to any one person or company. If the issues discussed herein affect you or your company, you are encouraged to seek proper legal advice.