November 01, 2011
ISS Seeks Investor Input for Revised Proxy Voting Policies
by Robert Kropp
Institutional Shareholder Services says the comment period for the 2012 update of its proxy voting
policies will run through November 7th.
The contribution of proxy advisory services is credited as a factor in the marked increases in
shareowner support for environmental, social, and corporate governance (ESG) proposals over the
past two proxy seasons. For years, proxy advisors automatically advised against voting in favor of
ESG-related proposals, particularly those addressing environmental and social issues; however, in
2011, Institutional Shareholder Services
(ISS) supported 70% of them.
Each year, ISS revises its proxy voting policies,
in advance of which it seeks input from institutional investors, corporate issuers, and governance
market participants. This year's comment period will run through November 7th. ISS plans to release
its policy updates during the week of November 14th.
One area in which ISS plans to hone
its voting policy is hydraulic fracturing, or fracking. Shareowner resolutions addressing the
controversial practice of natural gas extraction gained more than 40% of votes in 2011. Coordinated
by Green Century Capital Management and
the Investor Environmental Health Network
(IEHN), the proposals requested greater disclosure from companies on issues of water resources
and toxic chemicals used in the practice.
Also, the Securities and Exchange Commission
(SEC) has asked companies to provide it with information regarding toxic chemicals and other
environmental impacts, while the Environmental Protection Agency (EPA) is continuing its study of
the potential impacts of the practice on drinking water and groundwater.
At present, ISS
does not have a voting policy specifically addressing hydraulic fracturing, but instead uses its
General Environmental Proposals and Community Impact Assessments policy to guide its evaluations.
For 2012, however, ISS proposes a policy according to which it will generally vote in favor of
proposals calling for greater disclosure.
Another area in which ISS is considering a
change in its voting policy is corporate political contributions. Especially with national
elections scheduled for next year, the impact of the Supreme Court's Citizens United decision has
raised concerns among investors that companies could incur considerable risk associated with
An investor-driven initiative led by the Center for Political Accountability (CPA) has
engaged with 200 companies on the issue since 2003. Currently, 88 companies have responded with
disclosure of policies relating to political contributions, including 57 listed in the S&P 100.
The ISS voting policy on resolutions addressing greater disclosure of a company's
political contributions and trade association spending policies and activities considers each
proposal on a case-by-case basis. However, ISS now proposes to generally vote for such proposals.
"More than half of the investor respondents consider the various types of contributions of
corporate funds for political purposes including direct contributions, contributions to trade
associations, or payments made for grassroots lobbying as either 'critical' or 'important' to their
organization," ISS stated. "Furthermore, more than half of investor respondents also indicated that
political spending-related disclosure, policies, and practices are either 'critical' or
On the issue of proxy access, ISS proposes to continue its policy of
evaluating proposals on a case-by-case basis, but to consider additional information while doing
so. ISS has also proposed changes to its evaluation of proposals on executive compensation.