In its announcement, ISS said its analysts will begin applying the new policies for all US and Canadian companies with shareholder meeting dates on or after February 1, 2006.
Major policy additions for the 2006 proxy season address disclosures under Section 404 of the Sarbanes-Oxley Act, performance tests for directors, and tally sheets for CEO pay, according to the announcement. ISS will also recommend withhold votes on compensation committee members at companies with poor pay practices.
ISS is also fine-tuning previous policies related to majority voting for director elections, stock option burn rates, and overboarding on the part of CEO directors. ISS said it will continue to support well-crafted and binding shareholder proposals calling for a majority voting standard. However, for companies with demonstrated good governance practices, ISS, as well as ISS Canada, will consider policies representing meaningful alternatives or near-equivalent structures to majority voting.
The 2006 burn rate policy includes updated information on average industry burn rates that will be used as the standard for comparison in applying ISS’ burn rate policy. To encourage more companies to adopt reasonable burn rate levels, ISS is changing its commitment threshold. “We are pleased that the burn rate policy, which was adopted last year and enhanced this year, is encouraging many companies to focus on prudent use of their equity compensation,” said Dr. Martha Carter, ISS’ director of US research, in the announcement.
The 2006 policy updates can be viewed at http://www.issproxy.com/2006policy .