Jones Day – “ISS Formally Opposes Director Compensation Bylaws”

Institutional Shareholder Services Inc. (ISS) has now formalized its position on director compensation bylaws. In short, ISS has adopted the position that a board that adopts a bylaw provision prohibiting directors from accepting third-party compensation for board service has infringed on the right of shareholders to elect directors of their choosing, which ISS considers to be a material failure of governance that may result in an against or withhold vote recommendation in respect of the reelection of the company's director nominees.

While we recognize that ISS has recently taken steps in the right direction on other topics, particularly by revamping the quantitative component of its approach to executive compensation, we think that this voting policy is misguided and misses the serious governance issues raised by compensation schemes offered by some dissident shareholders to their nominees—depending, of course, on the structure, these compensation schemes can be divisive at best and contrary to basic tenets of fiduciary duties at worst….

Read the full memo:

The Board Director Training Institute (BDTI) is a "public interest" nonprofit in Japan dedicated to training about directorship, corporate governance, and related management techniques. It is certified by the Japanese government to conduct these activities as a regulated nonprofit. Read a summary about BDTI here, and see a menu of its services for both corporations and investors here.

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