On October 29, 2014, Institutional Shareholder Services Inc. (ISS) introduced an updated version of its global corporate governance scoring solution for institutional investors, designed to help investors identify and measure corporate governance risk across companies.
Like previous versions, QuickScore 3.0 provides a score for each company in its coverage universe that measures the company’s level of corporate governance risk, both overall and based on four broad pillars: (i) board structure; (ii) shareholder rights and takeover defenses; (iii) compensation/remuneration; and (iv) audit and risk oversight. Once implemented, QuickScore 3.0 will support ISS’ voting policy and recommendations.
Public companies should review their data and submit updates and corrections to ISS during the verification period. Companies have from November 3, 2014 (9:00 a.m. EST), to November 14, 2014 (8 p.m. EST), to verify the underlying raw data to be included in their respective QuickScore 3.0 scores and to submit updates and corrections through the ISS data review and verification site. On November 24, 2014, the new scores are expected to be released and will begin appearing in ISS research reports. The free ISS data verification website can be accessed here.
Quickscore 3.0 includes several new scored factors for U.S. companies, including (i) whether the company discloses a policy requiring an annual performance evaluation of the board, (ii) whether the board failed to address the issue underlying majority director withhold votes, (iii) whether ISS’ review found that the board recently took action that materially reduces shareholder rights, (iv) whether there is a sunset provision on the company’s unequal voting structure, (v) whether there is at least one member of the audit committee with sufficient financial skills in audit and accounting (i.e., a financial expert), and (vi) the number or proportion of women serving on the board. The last two factors were previously provided for informational purposes only. In addition, Quickscore 3.0 now includes a new unscored factor for informational purposes, i.e., whether the company has a controlling shareholder.
Quickscore 3.0 also includes revisions to other factors, including (i) whether a regulator has initiated an enforcement action against the company or against a director or officer of the company in the past two years (which factor previously only referred to securities regulators and the taking, rather than the initiation, of an enforcement action), (ii) the percentage of a company’s directors that have received shareholder approval rates below 80 percent (which factor previously only referred to shareholder approval rates below the “industry-index level”), (iii) whether the company’s three-year equity grant rate exceeds the greater of 2 percent and the average of its industry/index peers (which factor previously referred to the grant of awards at “an excessive rate”) and (iv) whether the most recent say-on-pay proposal received shareholders’ support below 70 percent (which factor previously referred to shareholders’ support “below the industry-index level”). Finally, QuickScore 3.0 also incorporates technical updates, including (i) the ability to access and analyze the underlying data from which the scores are generated, (ii) coverage expansion to 4,500 companies in 30 markets, and (iii) company report enhancements to reflect the inclusion of historical scores, a log of data changes and trending analyses, as reflected by directional icons showing improvements, degradation or static governance practices.