The majority of investors (84%) and issuers (71%) voted to have ISS continue to display GAAP financial metrics below the new EVA screen for 2020, according to ISS's recently released 2019-2020 policy survey. The annual policy survey, which as usual was answered by many more issuers and non-investors (268) than investors (128), included the following highlights:
- Both investors (84%) and non-investors (71%) prefer that ISS continue to display the previously used GAAP-based metrics along with EVA. While it is generally assumed that ISS will push ahead with EVA, this response seems to indicate that, by and large, the market as a whole remains skeptical about EVA and its wide-scale applicability.
- It is unclear whether respondents fully understood that ISS does not plan to use GAAP metrics in the Financial Performance Analysis; rather, ISS will simply display them under the EVA analysis for investor review. Given that comparatively few investors submitted specific comments (and only one investor made a negative comment), investors could be expressing that they don’t oppose the use of EVA in the report, but they also want to see the GAAP-based metrics in order to ignore EVA or use whichever they feel is most appropriate in a given situation in determining their voting strategy.
- 88% of investors and 66% of non-investors stated that globally, board gender diversity is either an essential attribute of effective board governance or that it is an issue that should be examined on a market-by-market basis.
- Specific to the US, ISS will begin issuing negative vote recommendations against the chair of the Nominating Committee (and other members as needed) at Russell 3000 and S&P 1500 companies that do not have any female directors. However, if the company expressly states in the proxy the intention to add a female director in the short term, or there was a female director at the last annual meeting, the concern will be mitigated.
- Investors were split (41% yes vs. 46% no) on whether other mitigating factors (such as a Rooney-Rule style candidate search process) should be considered while non-investors support such an approach by a more significant margin (62% yes vs. 28% no).
- Investors (95 out of 111) ranked poor responsiveness to shareholder concerns as the biggest reason for needing an independent board chair, while non-investors cited a weak or poorly-defined lead director role.