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Governance Data, Analytics, and News from Institutional Shareholder Services

August 23, 2019


Meetings to Watch

Upcoming ISS Speaking Events

Interesting Meeting Calendar

News Roundup

ISS Updates & Links


2019 U.S. Director Elections and Governance Shareholder Proposals Proxy Season Review

Editor's Note: In this week's issue, we feature excerpts from our recent publication 2019 U.S. Director Elections and Governance Shareholder Proposals Proxy Season Review. To access the full report, click here (requires login to Governance Analytics; first log in to Governance Analytics, and then click on Governance Exchange to enable the link).

Key Takeaways

  • Investor voting dissent against directors increases.  The number of directors who received majority withhold/against votes and the number of board nominees who failed to clear an 80 percent support threshold increased markedly over the first half of 2019. Ongoing concerns regarding board responsiveness and accountability joined newer issues including director overboarding and inaction toward board gender diversity as significant vote drivers.
  • Board gender diversity reaches milestone, with laggards facing increasing investor pressure. While there is now at least one female director at all S&P 500 companies, hundreds of smaller Russell 3000 companies continue to lack gender diversity. Nominating committee chairs at boards without gender diversity faced the most pronounced levels of investor dissent, but even nominating committee chairs on boards with low diversity were not entirely spared.
  • Investor sentiment shifts on overboarding. Changes in voting policies by some large investors raised negative votes for non-CEO directors who serve on five (or more) boards, and CEOs who serve on three (or more) boards.
  • Shareholder proposals requesting an independent board chair regained prominence. Proponents refocused their efforts on board leadership stucture in 2019, including a novel approach by an activist investor to place such a proposal on ballot at Allergan plc.

According to ISS data, median support for the more than 16,500 nominees at Russell 3000 companies with meetings from Jan. 1 to June 30, 2019 stood at 98.1 percent of votes cast, a slight decrease compared to the two previous years (98.3 percent in 2018 and 98.4 percent in 2017). Among large-cap S&P 500 companies, median support for director nominees stood at 98.5 percent of votes cast for the first half of the year (compared to 98.6 percent in 2018 and 98.7 percent in 2017).

While the average support levels for director elections remained relatively high in the first half of 2019, the number of directors who failed to receive majority support increased over the same period in 2018. At Russell 3000 companies, 47 directors spread across boards at 36 companies failed to receive majority support, compared to 26 directors at 18 firms in the first half of 2018. This year’s number of directors who failed to receive majority support ranks the highest in the past nine years.

For the fourth consecutive year, the percentage of director elections that drew “significant opposition” (generally connotated throughout this report as dissent of more than 20 percent of votes cast) increased. At 5.8 percent, the proportion of nominees with significant opposition was the highest since 2010.

Issues in longstanding areas of investor concern such as board accountability, responsiveness, and poor governance structures continued to drive negative votes, and boards also faced shifting investor voting on director overboarding and lack of board gender diversity.

In the first half of 2019, 204 governance-related shareholder proposals appeared on ballot at Russell 3000 companies, slightly below the 213 proposals in the same period last year. Of the 204 proposals on ballot, 40 proposals received support from a majority of votes cast. A lower proportion of the governance-focused shareholder proposals were targeted at S&P 500 companies compared to the previous year (from 75 percent of proposals in 2018 to 65 percent of proposals in 2019).

Gender Diversity

The percentage of women directors on boards across the entire Russell 3000 Index has grown in each of the past 10 years, and, at 20.6 percent, is now double the level seen in 2008. The rate of change has accelerated since 2017 when several large investors announced their willingness to vote against board members at companies that lacked gender diversity in the boardroom.

The ongoing push for improved board gender diversity reached a symbolic milestone on July 20, 2019, as Diane Morefield was appointed to the board of Copart Inc. With the appointment, for the first time, there is now at least one woman director at every S&P 500 company.

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For some boards, however, gender diversity remains elusive. According to ISS data, there are still close to 300 companies with all-male boards in the Russell 3000. Nominating committee chairs found themselves in the hot seat at companies that lacked gender diversity on their board, with 36 percent of nomination committee chairs of all-male boards receiving support of less than 80 percent of votes cast, compared to 20 percent of nomination committee chairs of all-male boards receiving significant opposition in the prior year.

While boards with no women have drawn most of the attention, boards with only one or two female directors are feeling the heat from some investors as well. Blackrock, for example, publicly calls for at least two women directors on its portfolio companies’ boards. Other institutional investors ascribe to the 30% Club’s target of at least 30 percent female directors. While the rates of voting opposition are not as pronounced as at companies with no board diversity, nominating committee chairs at boards with only one or two women directors do not appear to have been spared from investor concerns regarding gender diversity. Since 2016, the rate of nominating committee chairs receiving less than 80 percent vote support has more than doubled at boards with only one or two women.

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In the past decade, many investors and other market participants have emphasized the importance of directors having sufficient time and resources to properly discharge their responsibilities.  Given the growing time commitment associated with serving on public company boards in recent years, investor views on the number of directorships that constitute “too many” have also evolved. Such views appear to have contributed to a decline in the percentage of Russell 3000 non-CEO directors who serve on five or more boards and the percentage of CEOs who serve on three or more boards in the past decade.

Among Russell 3000 companies that held annual general meetings between July 1, 2018, and June 30, 2019, ISS data shows 137 unique individual non-CEO directors holding five or more directorships each, and 230 unique individual CEOs sitting on more than two boards each.

An increased turn in investor sentiment against director overboarding occurred just prior to the start of this year's proxy season, when a number of investors, including Vanguard and Legal & General, announced new policies regarding director board service limits. Joining Blackrock, each of these investors announced their stricter views toward board service and indicated that they would generally vote against non-CEO directors who serve on more than four public boards, and on CEOs who serve on more than one board in addition to their home company panel.

Rates of opposition for nominees impacted by these new overboarding standards increased significantly. In the first half of 2019, 34 percent of non-CEO directors serving on five boards received less than 80 percent support of votes cast, compared to 17 percent of such directors receiving significant opposition in the previous year. Similarly, 32 percent of CEOs who served on a total of three boards (generally the board at which they are CEO in addition to two outside companies) received less than 80 percent support of votes cast at the companies where they did not serve as CEO, compared to only 14 percent of CEOs with the same number of directorships who received significant opposition at boards where they did not serve as CEO in the prior year.

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Notably, it appears likely that shifting investor concerns on overboarding played a significant role in the failure of three CEOs to receive majority support at certain of their outside boards. At the time of their respective annual meetings, directors Andrew Cogan, Robert Dennis, and Patrick Walsh each served as CEO while sitting on a total of three boards. At Interface Inc., Cogan received the support of only 47 percent of votes cast, while Dennis also received the support of 47 percent of votes cast at CoreCivic Inc., and Walsh received the support of 45 percent of votes cast at BJ's Restaurants Inc. In 2018, Cogan, Dennis, and Walsh had received the support of 79, 86, and 62 percent of votes cast for their reelection at the same board positions, respectively.

Following this low support, each director tendered resignations to their respective boards. At Interface and CoreCivic, the resignations were conditional and on a delayed basis. The resignations will become effective in February 2020 unless Cogan and Dennis voluntarily reduce their board service to one public company in addition to the board at which they serve as CEO. The board of BJ's Restaurants has not yet disclosed whether it will accept Walsh's resignation.

While not resulting in failure to receive majority support, several other CEOs who serve on two outside boards other than their own experienced support rates at those outside boards that were considerably lower to their support rates in 2018. ISS has identified a dozen such CEOs who received less than 60 percent of votes cast in 2019.

Governance Shareholder Proposals

The number of governance-related shareholder proposals on ballot fell slightly in the first half of 2019 with 220 governance-related shareholder proposals on ballot versus 245 for the same period in 2018, while the number of proposal filings dropped from 326 proposals in the first half of 2018 to 305 proposals in the first half of 2019. Overall, 49 governance-related shareholder proposals received support from a majority of votes cast in the first half of 2019, up from 41 majority-supported proposals in the first six months of 2018.

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Shareholder proposals requesting an independent board chair were the most common in this category, with 56 proposals on ballot. This was the largest number of independent board chair proposals since 2015 and an increase from 46 proposals in the first half of 2018. Proposals regarding special meeting rights fell drastically to 23 proposals in the first half of 2019, after an eight-year high of 60 proposals in the first half of 2018. Twenty-three proposals requesting a majority vote for director elections appeared on ballots (the highest level since 2014), as CalPERS submitted 15 such proposals targeted mostly at smaller Russell 3000 companies with no women on their boards.

-- Alec Haskard and Robert Kalb, ISS U.S. Research

To access the full report 2019 U.S. Director Elections and Governance Shareholder Proposals Proxy Season Review, click here (requires login to Governance Analytics; first log in to Governance Analytics, and then click on Governance Exchange to enable the link).

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Special Situations Research

Log into Governance Analytics and click on Special Situations Research to enable these links:

Sothebys (BID) Merger with BidFair | Analysis | Upcoming Meeting on September 6, 2019


2019 US Midyear Activism Review | Note | Published on August 6, 2019


2019 European and Asian Mid Year Activism Review | Note | Published on August 2, 2019


Contentious Pipeline - July 2019 | Pipeline | Published on August 12, 2019


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Upcoming ISS Speaking Events

These are upcoming events where ISS staff will be speaking or in attendance. ISS does not necessarily endorse any of these groups.

August 29, Copenhagen
Danish Initiative for Ethical Trade (DIEH): Ensuring Human Rights and Environment in Climate Investments
(Anna Warberg, ISS ESG)

September 4-5, Washington, DC
Eversheds Sutherland 2019 BDC Roundtable
(Cristiano Guerra, Special Situations Research)

September 5, New York
Columbia University - Center of Global Energy Policy - Women in Energy Panel
(Ariane de Vienne, ISS ESG)

September 6, Paris
French Society of Financial Analysts Seminar
(Catherine Salmon, ISS Research)

September 6, Stockholm
Seminar on Economic Crimes and Money Laundering
(Anna Warberg, ISS ESG)

September 9, Paris
Panel Hosted by AllianzGI at PRI in Person
(Maximilian Horster, ISS ESG)

September 11, Dortmund
Working Group of Church Investors Conference
(Julia Wissmeyer, ISS ESG)

September 12, Stockholm
Klimatkommunerna Event
(Reinhilde Weidacher, ISS ESG)

September 16-18, Minneapolis
CII Fall 2019 Conference
(Nathan Worthington, Brian Walker, Lorraine Kelly, ISS; Cristiano Guerra, Special Situations Research)

September 16-19
27th Annual NASPP Conference
(Eric Schwarte, Roy Saliba, and Leah Dela Cruz, ISS Corporate Solutions; David Kokell, ISS Research)

September 17, Frankfurt
Deutsches Aktieninstitut (DAI), Annual Conference
(Thomas von Oehsen, ISS Research)

September 17, Madrid
Spanish Corporate Directors Association (IC-A)
(Stephen James, ISS Corporate Solutions)

September 19, Nashville, TN
Davis Polk Forum on Executive Compensation
(John Roe, ISS Analytics)

September 23, Austin, TX
2019 REIT finance and tax leadership conference: Panel on ESG
(Nicole Bouquet, ISS ESG)

September 25, San Francisco
NICSA Event: ESG Essentials for Asset Managers and Advisors
(Ariane de Vienne, ISS ESG)

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Interesting Meeting Calendar

This supplemental list highlights upcoming meetings with notable ballot items; these may include companies with interesting or novel shareholder proposals, proxy contests, non-standard management proposals, and more. Appearance on this list does not denote any particular ISS vote recommendation.

Company Ticker Country Meeting Type Date
Petronet Lng Limited 532522 India Annual 27-Aug-19
Galaxy Gaming, Inc. GLXZ USA Proxy Contest 28-Aug-19
Indian Oil Corp. Ltd. 530965 India Annual 28-Aug-19
PT Bank Mandiri (Persero) Tbk BMRI Indonesia Special 28-Aug-19
Sun Pharmaceutical Industries Ltd. 524715 India Annual 28-Aug-19
Yonyou Network Technology Co., Ltd. 600588 China Special 29-Aug-19
Oil & Natural Gas Corp. Ltd. 500312 India Annual 30-Aug-19
Vertical Capital Income Fund VCIF USA Proxy Contest 30-Aug-19
Bharat Petroleum Corporation Limited 500547 India Annual 30-Aug-19
PT Bank Negara Indonesia (Persero) Tbk BBNI Indonesia Special 30-Aug-19
Hindalco Industries Limited 500440 India Annual 30-Aug-19
Gazprom Neft PJSC SIBN Russia Special 2-Sep-19
PT Bank Rakyat Indonesia (Persero) Tbk BBRI Indonesia Special 2-Sep-19
Vitasoy International Holdings Limited 345 Hong Kong Annual 4-Sep-19
Powszechny Zaklad Ubezpieczen SA PZU Poland Special 6-Sep-19

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News Roundup

The US Securities and Exchange Commission is set to impose new regulatory oversight on proxy advisory firms, increasing legal scrutiny on their methods for offering shareholder voting recommendations.

The changes are a victory for corporate lobby groups, who have argued Institutional Shareholder Services and Glass Lewis wield too much power in battles over corporate governance.

Commissioners are voting at a meeting on Wednesday to approve guidance clarifying that proxy advisers are subject to anti-fraud rules concerning materially false or misleading statements. Current SEC guidance was vague on whether proxy advisers must adhere to anti-fraud provisions, the agency said.

Financial Times | August 21, 2019

CEOs Spurn Investor-First Model. Now Critics Ask ‘What's Next?’

It seemed, at least on paper, like a tectonic shift of American capitalism: The deviation from the long-held conviction that shareholder returns must always reign supreme.

In a 300-word statement released Monday, 181 leaders of some of the world’s largest companies endorsed a philosophical redrawing of the purpose of a corporation. The goal, according to JPMorgan Chase & Co.’s Jamie Dimon, chairman of the Business Roundtable, must be to promote an economy that serves all Americans, not just investors.

Critics quickly seized on the unknowns. Would activist investors overlook stock price dips if the cause could be traced to higher wages and better benefits for workers? Can chief executive officers, who last about six years on average and mainly get paid in company stock, reasonably be expected to run businesses with a decades-long mind-set?

The group “should be willing to be held accountable in their efforts to transition this statement into reality,” said Catherine Jackson, a former senior adviser for responsible investments at Dutch pension fund PGGM. “Stakeholders, including investors, need a line of sight into how these commitments are going to be actioned.”

Bloomberg | August 20, 2019

Investors’ New Weapon in Japan: Votes to Embarrass the Boss

Shareholders are growing more vocal in Japan, lodging protest votes against chief executives, presidents and other company directors.

Embarrassing bosses like that was once rare in the consensus-based corporate culture. But the taboo is weakening, as part of a yearslong push to improve Japanese companies’ profitability and corporate governance, and to encourage more involvement from investors.

It hasn’t led directly to the ouster of many leaders. But it has given stockholders a new weapon as they try to nudge companies around to their way of thinking. In some cases, such as with Olympus Corp., investors have managed to get their nominees onto boards.

The Wall Street Journal | August 20, 2019

Double- and even triple-digit growth in the amount of U.S. institutional assets in ESG investments shows no sign of slowing down, and public pension funds are leading the way.

Sustainable, responsible and impact investing assets reached $12 trillion in early 2018, according to the U.S. SIF Foundation's biennial Report on U.S. Sustainable, Responsible and Impact Investing Trends. That 38% jump from 2016 represents a compound annual growth rate of 13.6% since the U.S. SIF Foundation started measuring U.S. assets in 1995.

The lion's share — $8.6 trillion — is managed on behalf of U.S. institutional investors.

Public pension funds and other publicly pooled portfolios accounted for 54% of the $8.6 trillion, followed by insurance companies at 37%, education-related organizations at 6%, and foundations and labor organizations at 1% each.

Pensions & Investments | August 19, 2019

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ISS Updates & Links

Links in these sections are available to subscribers through our on-line platform. 

To access these documents, first log into Governance Analytics and then click on Governance Exchange (or Special Situations Research for those noted items) to enable these links:

2019 ISS Publications

Building a Climate Change Voting Policy (available on ISS website)

Director Overboarding: Global Trends, Definitions, and Impact (available on ISS website)

An Overview of Vote Requirements at U.S. General Meetings (available on ISS website)

Dual-Class Shares: Governance Risk and Company Performance (available on ISS website)

Early Review of 2019 US Proxy Season Vote Results (available on ISS website)

2019 U.S. Board Diversity Trends (available on ISS website)

Seven Venial Sins of Executive Compensation (available on ISS website)

CEO Ownership, Corporate Governance, and Company Performance (available on ISS website)

Snapshot: Update on U.S. Director Pay (available on ISS website)

Realizable Pay: Insights into Performance Alignment (available on ISS website)

2019 U.S. Executive Compensation Trends (available on ICS website)

2019 Compensation Insights: An Interview with the ISS U.S. Compensation Team (available on ICS website)

Insights into Value Creation: Using EVA to Measure Performance (available on ICS website)

Corporate Governance in Emerging Markets (available on ISS website)

The Long View: The Role of Shareholder Proposals in Shaping US Corporate Governance (2000-2018) (available on ISS website)

The Long View: US Proxy Voting Trends on E&S Issues from 2000 to 2018 (available on ISS website)

The Corporate Governance World in 2019 (available on ISS website)

Top 10 Corporate Governance Topics to Watch in 2019 (available on ISS website)

2019 Season Reviews

2019 US Director Elections and Governance Shareholder Proposals Proxy Season Review

2019 US Compensation Proxy Season Review

2019 Latin America Proxy Season Review

2019 South Korea Proxy Season Review

2019 Season Previews

2019 Japan Proxy Season Preview

2019 Taiwan Proxy Season Preview

2019 China Proxy Season Preview

2019 Singapore Proxy Season Preview

2019 Hong Kong Proxy Season Preview

2019 US Environmental and Social Issues Proxy Season Preview

2019 Canada Proxy Season Preview

2019 United Kingdom Proxy Season Preview

2019 Continental Europe Proxy Season Preview

2019 Market IQs

2019 China Market IQ

2019 Taiwan Market IQ

2019 Greece Market IQ

2019 Italy Market IQ

2018 Market IQs

2018 Portugal Market IQ

2018 Israel Market IQ

2018 Singapore Market IQ

2018 Hong Kong Market IQ

2018 China Market IQ

2018 France Market IQ

2018 Japan Market IQ

2018 Netherlands Market IQ

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For questions, comments or suggestions, email contactus@isscorporatesolutions.com.


Drawing on ISS' Data Desk, Governance Insights delivers news and analysis of corporate governance developments, including insights and reporting found in no other media, on a periodic basis. While we exercise due care in compiling this newsletter, we assume no liability with respect to the consequences of relying on this information for investment or other purposes.


Founded in 1985 as Institutional Shareholder Services Inc., ISS is the world’s leading provider of corporate governance and responsible investment (RI) solutions for asset owners, asset managers, hedge funds, and asset service providers. ISS’ solutions include: objective governance research and recommendations; RI data, analytics, advisory and research; end-to-end proxy voting and distribution solutions; turnkey securities class-action claims management (provided by Securities Class Action Services, LLC); and reliable global governance data and modeling tools. Clients rely on ISS' expertise to help them make informed corporate governance and responsible investment decisions. For more information, please visit www.issgovernance.com.

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ICS is a wholly owned subsidiary of Institutional Shareholder Services Inc. (ISS). ICS provides advisory services, analytical tools and publications to companies to enable them to improve shareholder value and reduce risk through the adoption of improved corporate governance practices. The ISS Global Research Department, which is separate from ICS, will not give preferential treatment to, and is under no obligation to support, any proxy proposal of a corporate issuer (whether or not that corporate issuer has purchased products or services from ICS).  Similarly, ISS’ responsible investment research and analytics teams will not provide preferential treatment to, and is under no obligation to provide a favorable rating, assessment and/or any other favorable result to, any corporate issuer (whether or not that corporate issuer has purchased products or services from ICS).  No statement from an employee of ICS should be construed as a guarantee that ISS will (a) recommend that its clients vote in favor of any particular proxy proposal nor (b) provide a favorable rating or other assessment of any corporate issuer.

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