The ISS is currently conducting its 2015 benchmark voting policy consultation:
To ensure its voting policies take into consideration the perspectives of the corporate governance community and the views of its institutional clients, ISS gathers broad input each year from institutional investors, issuers, and other market constituents through a variety of channels and mediums. Following the release earlier this month of its 2015 policy survey results, ISS is now making available for public comment draft 2015 voting policies.
Specifically, ISS is requesting feedback from interested market constituents on new or potential changes to nine discrete voting policies, including: independent chair shareholder proposals (U.S.); former CEO cooling-off period (Canada); board independence (Portugal); board independence (Japan); factoring capital efficiency into director elections (Japan); equity plan scorecard (U.S.); share issuance limit (Singapore); advance notice provisions (Canada); and impact of Florange Act (France). Download the draft policies here.
Today, I submitted the following comments to the ISS with respect to the proposed changes to their policy on Independent Chair Shareholder Proposals:
As John Coates summarizes the field, the evidence is mixed, at best:
At least 34 separate studies of the differences in the performance of companies with split vs. unified chair/CEO positions have been conducted over the last 20 years, including two “meta-studies.” … The only clear lesson from these studies is that there has been no long-term trend or convergence on a split chair/CEO structure, and that variation in board leadership structure has persisted for decades, even in the UK, where a split chair/CEO structure is the norm.
To be sure, in many corporations, the Chairman of the Board is given unique powers to call special meetings, set the board agenda, and the like. In such companies, a dual CEO-Chairman does wield powers that may impede board oversight of his or her performance. Yet, in such companies, the problem is not that one person holds both posts; the problem is that the independent members of the board of directors have delegated too much power to the Chairman. The solution is to adopt bylaws that allow the independent board members to call special meetings, require them to meet periodically outside the presence of managers, and the like.
Indeed, the influence of an executive chairman may not even be a problem. Brickley, Coles, and Jarrell concluded that the separation and combination of titles is part of the natural succession process. A successful CEO receives a variety of rewards from the company, one of which may be a fancier title. If the power that comes with the combined title came as a reward for sustained high performance, that power may actually redound to the company’s benefit.
Turning from the benefit side to the cost side of the equation, even if splitting the posts makes it easier for the board to monitor the CEO, the board now has the new problem of monitoring a powerful non-executive Chairman. The board now must expend effort to ensure that such a Chairman does not use the position to extract rents from the company and, moreover, that the Chairman expends the effort necessary to carry out the post’s duties effectively. The board also must ensure that a dysfunctional rivalry does not arise between the Chairman and the CEO, both of whom presumably will be ambitious and highly capable individuals. In other words, if the problem is “who watches the watchers?,” splitting the two posts simply creates a second watcher who also must be watched.
In addition, a non-executive Chairman inevitably will be less well informed than a CEO. Such a Chairman therefore will be less able to lead the board in performing its advisory and networking roles. Likewise, such a Chairman will be less effective in leading the board’s in monitoring top managers below the CEO, because the Chairman will not know those managers as intimately as the CEO.
 Olubunmi Faleye, Does One Hat fit All? The Case of Corporate Leadership Structure (January 2003).
 James A. Brickey et al., Leadership Structure: Separating the CEO and Chairman of the Board, 3 J. Corp. Fin. 189 (1997).
 James A. Brickley et al., Corporate Leadership Structure: On the Separation of the Positions of CEO and Chairman of the Board, Simon School of Business Working Paper FR 95-02 (Aug. 29, 2000), http://ssrn.com/abstract=6124.
 John Coates, Protecting Shareholders and Enhancing Public Confidence through Corporate Governance (July 30, 2009), http://blogs.law.harvard.edu/corpgov/2009/07/30/ protecting-shareholders-and-enhancing-public-confidence-through-corporate-governance/.
 Michael C. Jensen, Presidential Address: The Modern Industrial Revolution, Exit and the Failure of Internal Control Systems, 48 J. of Fin. 831, 866 (1993).
 James Verdonik and Kirby Happer, Role of the Chairman of the Board 2 (explaining that “one of the duties of the Chairman is to call meetings of the Board of Directors and the shareholders. … Chairmen often set the agenda for Board meetings”), www.directorsforum.com /role-of-the-chairman-verdonik-happer.pdf.