On July 30, 2018, Institutional Shareholder Services Inc. (ISS), launched its 2018 Annual Policy Survey, part of ISS’s annual proxy voting policy development process. ISS states that the results from this survey of institutional investors, issuers, directors, and other market participants will inform its proxy voting policy changes for 2019. As was true in 2017, the 2018 ISS Annual Policy survey is being conducted in two parts:
| ▪ | Part I of the 2018 ISS Annual Policy Survey covers “a small number of global high-profile governance topics,” including auditors and audit committees, director accountability, board gender diversity and the “one-share, one-vote” principle. Part I of the 2018 ISS Governance Principles Survey will close on Aug. 24, 2018, at 5 p.m. ET. |
| ▪ | Part II of the 2018 ISS Annual Policy Survey includes more granular questions, several specific to regions, e.g., Americas, EMEA, and Asia-Pacific. Part II of the 2018 ISS Governance Principles Survey will remain open for responses until Sept. 21, 2018, at 5 p.m. ET. |
Part II of the 2018 ISS Annual Policy Survey includes some topics of significance to U.S. public REITs. Your company should strongly consider responding to Part II of the 2018 ISS Survey. Important topics include:
| ▪ | Survey Questions Regarding Minimum Stock Ownership Requirements for Bylaw Amendments (U.S.). Question 6 of Part II asks respondents whether their “organization support[s] companies setting a minimum stock ownership requirement (in excess of that specified in SEC Rule 14a-8) for shareholders who want to propose binding amendments to corporate bylaws.” Question 7 asks respondents supporting this position whether the proper ownership threshold is 1 percent or 3 percent of outstanding shares, or some other threshold; and Question 8 further asks whether issuers should permit multiple shareholders to aggregate their stock to meet the ownership requirement. |
| ▪ | Survey Question Regarding Quantitative Pay-for-Performance Screens (U.S. and Canada). In the preamble to Question 9, ISS states that “[m]any investors have expressed a preference for additional financial metrics to be included in the P4P screens,” and announces that it is “considering supplementing or replacing existing GAAP-based accounting metrics in the Financial Performance Assessment with Economic Value Added (EVA) based metrics to measure corporate economic performance.” Question 9 asks respondents whether ISS should: i) use adjusted and standardized financial measures related to EVA or Economic Profit supplementing or replacing reported GAAP-based measures; ii) continue to use reported GAAP-based measures; (iii) no longer use performance measures other than TSR; or, (iv) “other.” |
If your company wants to comment on the survey’s question about compensation metrics, please see Nareit’s Oct. 11, 2017 letter to ISS , in which we urged ISS to evaluate REIT reported compensation with reference to Nareit-defined Funds From Operations (FFO) rather than GAAP net earnings