On 19 November 2018, International Shareholder Services (ISS) issued updates to its current U.K. proxy voting guidelines. The revised guidelines introduce changes to, among others:

  • Appointment of external auditors — ISS recommends approving external auditors' appointment unless there are serious concerns about the effectiveness of the auditors, or current auditors are being replaced without explanation or the lead audit partner(s) has been linked with a significant auditing controversy
  • Director elections — voting against individual directors for 'egregious actions' related to the director(s)' service on other boards. It also recommends voting against director re-elections where there have been repeated absences (defined as less than 75 percent attendance) at meetings that have not been suitably explained.
  • Remuneration policy — target bonuses should typically be no more than 50 percent of the maximum bonus potential, with any payout exceeding this limit to be supported by a robust explanation.
  • Remuneration report — where there is a material decline in a company's share price, remuneration committees should consider reducing the size of long-term incentive plans (LTIP) awards at the time of grant and fees payable to non-executive directors (NEDs) should not be excessive relative to similarly-sized companies in the same sector.
  • Approval of a new or amended LTIP — shareholders are advised to pay particular attention to dilution limits and, in particular, should ensure that any such limits are in line with the guidelines established by the Investment Association (IA).
  • Social and environmental issues — consider whether there are significant controversies, fines, penalties or litigation associated with the company's environmental or social practices.
  • Stock (scrip) dividend alternative — ISS recommends voting on a case-by-case basis on stock (scrip) dividend proposals, taking into account whether the proposal allows for a cash option and if the proposal is in line with market standards.

The proxy voting guidelines can be accessed here.

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