Institutional Shareholder Services Launches Governance QualityScore

Institutional Shareholder Services (ISS) is rebranding its corporate governance rating system on November 21, 2016. The “new” rating system, Governance QualityScore (QualityScore), was previously known as Governance QuickScore. Companies can verify and update the data used to determine their score by visiting ISS’s website. Data verification for covered companies began on October 31, 2016 and continues until November 11, 2016. From November 11, 2016 until November 21, 2016 companies will not be able to verify or update their data. However, following November 21, 2016, companies will be able to verify and update their data subject to certain blackout periods.

In addition, ISS announced new factors that will contribute to a company’s QualityScore in the U.S.

Board Structure

• Proportion of women on the board of directors;
• Non-executive directors on the board of directors for less than six years and other mechanisms designed to encourage director refreshment;
• Formal CEO and key executive officer succession plan;
• Material corporate governance failures; and
• Adequate response by the board of directors to low support for management proposals.

Compensation

• Employment of at least one metric that compares the company’s performance to a benchmark or peer group.

Audit & Risk Oversight

• Tenure of the company’s external auditor.

Shareholder Rights

• Exclusive venue / forum provisions in the company’s organizational documents;
• Fee shifting provisions in the company’s organizational documents;
• Representative claim limitations or other signification litigation rights limitations;
• Proxy access bylaw provisions, including ownership thresholds, duration thresholds, caps on shareholder nominees to fill board seats and aggregation limits on shareholders to form a nominating group;
• Ability of the board of directors to implement a classified board without shareholder approval;
• Ability of shareholders to amend the company’s bylaws; and
• Ability of the board of directors to materially modify the company’s capital structure without shareholder approval.

For more information on this or other issues that affect companies, please contact any of the authors of this Legal Alert or visit the DGS website at www.dgslaw.com.