Share pledging is the practice in which an executive secures a loan by using equity compensation as collateral to secure the loan or agrees to donate shares to a charitable cause during a period during which trading of stocks by insiders is prohibited (i.e. a blackout period). Pledging can allow executives who have a high concentration of wealth in company stock to purchase other assets and achieve financial diversification. The title of the pledged shares remains with the executive and because pledging is used to obtain a collateralized loan, pledging by its nature requires the executive to continue to hold company stock. Therefore, unlike hedging, pledging of nonmaterial amounts does not disconnect the interests of the executive with those of the shareholders when used reasonably and appropriately. Furthermore, as noted above, there are circumstances where pledging is appropriate and beneficial to the company and the executive (such as supporting charitable and philanthropic giving). The Center believes pledging of shares can be a reasonable part of a company’s compensation and governance program particularly if responsibly managed so that pledging is not allowed to take an executive below the company’s stock ownership guidelines. However, in its 2013 voting policies, proxy advisory firm ISS expects companies to adopt a policy prohibiting pledging going forward.