Proxy Advisory Firm Policy Developments
In November 2015, Institutional Shareholder Services ("ISS") adopted a "vote against"/"withhold" policy for the directors of companies that prior to or in connection with their initial public offering adopt charter provisions or by-laws which it considers to be anti-takeover defenses, such as: a classified board, supermajority voting requirements or other limitations on the amending of the charter or by-laws, or dual-class share structures.
Despite this opposition, companies making their initial public offering continue to adopt anti-takeover charter provisions without any notable impact on valuation or marketing, according to a recent survey. The impact of ISS opposition was most apparent in companies with institutional shareholder bases, where directors received 10-20% votes against their re-election. Those companies with major venture capital or private equity shareholders saw minimal impact in terms of votes against directors.
This trend may strengthen over time if ISS maintains its negative recommendation against board members. Companies can avoid a continuing negative recommendation by putting their anti-takeover policies to a vote within three years of their initial public offering, in accordance with ISS policy.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
