Don't Miss Chance to Shape ISS Policy

Many press reports attribute 20% of voting power at some companies to recommendations made by ISS. That makes them sound like one of the most powerful entities in the world. However, much of their “power” is based on their annual survey, which helps ISS shape its recommendations to meet the voting preferences of its customers. Are they a leader or a follower?

I doubt many investors follow ISS recommendations blindly. However, their positions are certainly used as a guide in helping shareowners identify voting decisions that are consistent with the existing preferences of ISS subscribers.

As part of its policy formulation process, ISS undertakes significant outreach to a broad range of corporate governance constituencies, including investors, issuers and industry organizations.

Throughout this process, ISS places a strong emphasis on proactive outreach, broad-based input, effective communication, thoughtful policy application and sound decision-making. The survey closes on August 26, so I would advise taking it now. ISS 2011-2012 Policy Survey.

Taking the survey is another opportunity to make a real difference. For example, in response to a 2010 proposal to allow shareowners to act by written consent, Home Depot added their own barriers, requiring 25% of shareowners to first request a record date and then that all shareowners be solicited. Nonsense! Investors should be telling ISS that such restrictions are unacceptable.

The ability to act by written consent will only be used in emergency situations. Why should shareowers have to solicit all shareowners, if 50+% agree on a specific action? Setting a fixed record date in advance would also be problematic, since those advocating change may need to gradually accumulate to reach majority.  If the record date is set in advance as August 24, but they don’t get the votes until August 25, the results could be tragic.

Take the survey and let ISS know that shareowners want companies to be more accountable.

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  1. » The Mind of an Institutional Investor - 08/29/2011

    […] a follower as a leader because of their annual survey, which they use to set their proxy policies. Don’t Miss Chance to Shape ISS Policy. Jon also discusses the failure of ISS to strongly influence say-on-pay […]

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