I previously commented on the 2015 ISS Benchmark Policy Consultation re Independent Chair Shareholder Proposals and praised Randi Val Morrison's argument for "tolerance of multiple views and alternative structures based on what the board believes to be optimal under the circumstances."
Now Randi has kindly referred me to Davis Polk's very detailed and thoughtful comment letter on the issue. In addition to making some excellent points about the substance of the policy proposals, Davis Polk makes some very telling comments about the seriously flawed process the ISS has followed in this case:
First, as the 2015 policy survey did not have any questions about independent chair shareholder proposals, market constituents were unprepared for the potential revision of that policy, and it took some time to review, understand and evaluate the possible impact of the policy for a broad range of constituents.
The proposals subject to comment were released on October 15, with a deadline for comments two weeks later. While the draft policy is fairly succinct, there is little specific information provided. There are only general references to a “holistic review” of new factors, citing several examples, without indicating whether the existing factors remain unchanged (other than the performance period), or would be adjusted as well. The draft mentions that any single factor could be mitigated by positive or negative aspects, but then there is no explanation of what factors would be considered positive or negative. The lack of detail makes it difficult to target comments meaningfully.
ISS indicates that the final policy will be issued on or around November 7, only seven business days after comments are due. This seems to be a fairly limited window to thoroughly review comments received and to properly take them into account in formulating final policies, which may discourage additional persons from commenting.
Davis Polk has a point. The institutional investors ISS serves would be screaming bloody murder if the SEC or the exchanges adopted such a flawed comment process.
