In a stark departure from its previous practices, Institutional Shareholder Services (ISS) has notified S&P 500 companies it will no longer provide the opportunity to review a draft of the company's respective proxy research report. This procedural update is effective for shareholder meetings taking place on or after January 1, 2021. In a brief letter to S&P 500 companies, dated November 2, 2020, ISS explained the change in process, noting the original rationale for the draft reviews was no longer compelling and that increasingly many companies do not use the process as intended.
The draft review period for S&P 500 companies was originally implemented to "help check the factual accuracy" of data in the reports. ISS advises companies in its November 2 letter that, due to the firm's investment of "considerable additional resources in data collection, checks and quality controls," the data included in voting recommendation advisory reports now has "a high degree of factual accuracy." Additionally, ISS notes S&P 500 companies often used the process to comment on the underlying policies upon which ISS recommendations are based, instead of providing "useful feedback." Finally, ISS notes that the change in process will result in issuance of voting recommendation advisory reports in an earlier timeframe, giving its clients "more time to consider the information and their voting decisions, and to engage with companies where they wish to." In describing the background to their decision, ISS also notes feedback from institutional clients indicating a preference that subject companies not be involved in the research, see the research or recommendations before institutional clients, or be in a position to lobby ISS about the reports prior to their release.
This development underscores the importance of issuers making sure that ISS has accurate and updated data upon which to make its analyses, both through clear disclosure and by utilizing ISS' data verification portals where appropriate. If you have questions about how ISS gathers data or what you can do to ensure your company's data is correct, reach out to your Georgeson representative, email us at info@georgeson.com or call 212 440 9800.