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Updated 2020 ISS Proxy Voting Guidelines


ISS has released updated proxy voting guidelines that are due to take effect for general meetings held on or after 1 February 2020. There are a few changes to the guidelines on remuneration, which are detailed below:


Remuneration Policy

The most notable change to the Proxy Voting Guidelines for 2020 is clarification of the ISS stance on pensions in light of evolving governance thinking and market practice. The ISS Guidelines have been updated to state:


“ISS' position is that the pension arrangements for new joiners should be aligned with those of the wider workforce, and companies should actively disclose whether or not this is the case. For incumbent directors, companies should seek to align the contribution rates with the workforce over time, recognising that many investors in the UK will expect this to be achieved in the near-term.”


Mercer | Kepler commentary: as indicated to us earlier this year, ISS has opted for a more flexible approach on pensions, particularly in relation to the timing of harmonisation. The primary focus remains on aligning pension contributions for new Executive Directors, while ISS’ expectation for pensions contributions for incumbent directors is that they be brought into line over time (rather than be harmonised within a set timeframe for compliance such as by the end of 2022).


Remuneration Report

ISS has clarified (and strengthened) its voting guidelines in relation to disclosure of annual bonus targets, stating that ISS “… will normally recommend a vote against a remuneration report where bonus targets are not disclosed. Targets for both financial and non-financial objectives should be presented at an appropriate level of detail, preferably with a full target range.”


In addition, ISS has introduced wording to its guidelines that sets an expectation for immediate retrospective disclosure of targets (unless they remain commercially sensitive and justified as such in the remuneration report):


“Any company choosing to disclose one or more years in arrears would be out of step with wider market practice and may attract a negative vote recommendation.”


Mercer | Kepler commentary: immediate retrospective disclosure of annual bonus targets following the end of the relevant financial year is now common practice across the FTSE. In view of this, the strengthening of the ISS guidelines on this will impact only a small handful of companies. Importantly, the guideline continues to give companies the flexibility to delay the publication of targets if the targets remain commercially sensitive at the time they would normally be reported, but this would then need to be justified in the report.


The 2020 edition of the ISS Proxy Voting Guidelines also include new wording around Committee discretion, stating that:


“The remuneration committee should disclose how it has taken into account any relevant environmental, social, and governance (ESG) matters when determining remuneration outcomes. Such factors may include (but are not limited to): workplace fatalities and injuries, significant environmental incidents, large or serial fines or sanctions from regulatory bodies and/or significant adverse legal judgments or settlements.”


Mercer | Kepler commentary: the growing investor focus on ESG matters in recent years has now been reflected in the latest ISS guidelines. We anticipate that remuneration committees will increasingly wish to consider ESG matters in their deliberations around incentive outcomes, and that the level of disclosure on these matters (and any impact on the exercise of discretion in relation to remuneration) will grow over time.



This briefing is for general guidance and does not necessarily cover all areas of the topics included in this briefing. It is not designed to give legal or other professional advice.

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