Generally Not Materially Adverse
- advance-notice bylaws that set customary and reasonable deadlines
- director-qualification bylaws that require disclosure of third-party compensation arrangements
- exclusive forum provisions (when the venue is the company’s state of incorporation).
Materially Adverse
- authorized capital increases that do not meet ISS’ Capital Structure Framework
- board classification to establish staggered director elections
- director-qualification bylaws that disqualify shareholders’ nominees or directors who could receive third-party compensation
- fee-shifting bylaws that require a suing shareholder to bear all costs of a legal action that is not 100 percent successful
- increased vote requirement for shareholders to amend the company’s bylaws or charter
- removal of a majority vote standard and substitution of plurality voting
- removal or restriction of the right of shareholders to call a special meeting (including raising thresholds or restricting agenda items)
- removal or material restriction of shareholder right to act in lieu of a meeting via written consent.
In assessing the boards of pre-IPO (initial public offering) companies, ISS will consider the timing of the adoption of the provisions that diminish post-IPO shareholders’ rights, the clarity of disclosures of such changes (including in the company’s prospectus or other documents connected to the public offering) and the continuity of board membership.