US proxy voting adviser clarifies approach to over-boarding

Institutional Shareholder Services (ISS), the US proxy voting adviser, has announced updates to its Proxy Voting Guidelines for the UK and Ireland. The changes are intended to address ongoing concerns about directors' remuneration and clarify the ISS approach to the number of directorships held by individuals. There are also some changes specifically for smaller companies.


As before, the policy states that ISS may recommend a vote against directors who appear to hold an excessive number of board roles at publicly-listed companies. New wording has been provided and is intended to remove any confusion about what is acceptable. An excessive number of board roles is now defined as follows:

  • Directors who hold more than five non-chair non-executive director positions.
  • A non-executive chairman who, in addition to this role, holds (i) more than three non-chair non-executive director positions, (ii) more than one other non-executive chair position and one non-chair non-executive director position, or (iii) any executive position.
  • Executive directors holding (i) more than two non-chair non-executive director positions, (ii) any other executive positions, or (iii) any non-executive chair position.

New language also expands on what the consequences of over-boarding are for chairs. As before, the policy provides that an adverse vote recommendation will not be applied to a director within a company where he/she serves as CEO; instead, any adverse vote recommendations will be applied to his/her additional seats on other company boards. The policy now also goes on to say that the same is also valid for chairs, except (i) where they exclusively hold other chair and/or executive positions or (ii) where they are elected as chair for the first time. According to ISS the revised policy works on the broad basis that a chair role is equivalent to two non-executive director roles.


The sections on remuneration have been updated to reflect the focus on UK remuneration in 2016. ISS explains that it has taken into account:

  • the number of high-profile defeats for remuneration report (and, in one case, remuneration policy) resolutions during the last AGM season,
  • the publication of the report by the Executive Remuneration Working Group set up by the Investment Association on proposals for changes to the current pay model, and 
  • the call by the new Prime Minister for corporate governance reform, including, binding votes on remuneration report resolutions and higher levels of pay disclosure.

Investors are also looking ahead to the 2017 AGM season when many UK companies will be seeking shareholder approval for new binding remuneration policies. As a result, changes to the policy are intended to reflect some of the main issues expected to be relevant for 2017.

Changes include:

  • New introductory wording to directly address the recommendation of the Executive Remuneration Working Group for companies to consider pay models which do not fully align with the typical structure found in the UK market and related changes to the specific sections on the remuneration policy and remuneration report resolutions.
  • The extension of the policy to potentially recommend against the chair of the remuneration committee in the event of a serious breach of good practice to reflect the position of some investors that the committee chair should be held directly accountable where major remuneration issues have been identified. This approach is consistent with the PLSA (Pensions and Lifetime Savings Association) voting guidelines which historically formed the basis for the ISS voting guidelines.
  • The introduction of methodology developed by ISS for European companies for the assessment of remuneration resolutions.

Smaller companies

For smaller companies, changes have been introduced to clarify that the ISS policy on AIM companies also applies to other companies.

Further changes also aim to introduce a more rigorous standard and bring the policy into line with the Quoted Companies Alliance Code by specifying that audit and remuneration committees should be fully independent. ISS considers that this change is significant and, therefore, it will be phased in over two years. This means that for AGMs in 2017, ISS will recommend a vote in favour of non-independent members of audit and remuneration committees, with the new policy formally taking effect from February 2018.


The updates were published on 21 November 2016 and the revised policy applies to company meetings from 1 February 2017.

Click here for a copy of the ISS EMEA policy updates, which include the UK and Ireland. A press release and executive summary are also available.