U.S.-based proxy advisory firm Institutional Shareholder Services Inc. (ISS) is placing the practice of Canadian companies using upfront equity grants to lure new directors to their boards under scrutiny as part of its annual global policy survey.
ISS launched the survey on Tuesday, which the firm uses to help develop its basic stance on various corporate governance issues for the upcoming proxy voting season. The survey covers several key issues for which it may revise its benchmark policy guidelines for the 2017 proxy season.
The survey — which seeks feedback from institutional investors, companies, directors and other market players — covers a variety of policy issues. This includes how to define “overboarding” for executive board chairs; gauging the preferred frequency of say-on-pay votes in the U.S.; the use of time-based vesting shares in the U.K.; and the use of so-called “sign-on awards” for directors in Canada.
“Upon joining Canadian company boards, some non-executive directors are provided with initial equity grants (often referred to as inducement grants),” the survey says, noting that these awards “are made outside of customary director compensation programs as a board recruitment tool.”
The other major issue for Canadian markets is whether ISS should incorporate additional metrics in seeking to identify potential misalignments between CEO pay and company performance.
“We encourage and welcome market participants’ feedback on potentially new or amended benchmark policy areas that will, if adopted, inform the vote recommendations and research we deliver to institutional investor clients” says Georgina Marshall, global head of research with ISS, in a statement. “ISS’s annual survey process is unique among proxy advisors and part of our long-standing commitment to both inclusivity and transparency in developing ISS’s benchmark policy.”
In addition to the survey, the firm also uses roundtables and conference calls with market participants to feed into its policy development process. The proposed guidelines for 2017 will be published for public comment before they are finalized. The survey is open until Aug. 30.