PUBLICATIONS & WHITE PAPERS

Environmental, Social and Governance (ESG) concerns have become some of the top issues for corporate America in recent years. However, discussions surrounding these initiatives have become highly politicized and polarized, with anti-ESG shareholder proposals on the rise, certain companies rolling back their DEI initiatives , and falling shareholder vote support for various environmental and social proposals in recent years. At the same time, some shareholders are pushing companies to take more ambitious actions. The U.S. Supreme Court’s June 2023 ruling to significantly limit the use of race status in college admissions has also emboldened investors challenging Diversity, Equity, and Inclusion (DEI) initiatives at public companies.

Many public companies have been incorporating ESG considerations including DEI into compensation programs to incentivize their executives to achieve sustainability and DEI goals as well as financial objectives. Now, some are re-evaluating their approach given the recent shifts in the political and legal landscape. Against this backdrop, ISS-Corporate examined the incentive pay data for S&P 1500 companies to determine the prevalence, usage and payout levels of DEI metrics as well as changes these metrics measure.

In a follow-up to our whitepaper, “What ‘Perks’ Can Tell Us About Executive Compensation,” ISS-Corporate reviewed the pay structures for Russell 3000 companies that held annual general meetings in the first nine months of 2024 to analyze the usage and magnitude of perquisites in fiscal 2023. In this update, we continue to focus on perquisites that are most common amongst Russell 3000 companies and have excluded those that are rarely adopted.

Equity plans serve as a vital mechanism for attracting executives and employees and retaining current talent. However, equity compensation results in a transfer of wealth from existing shareholders to employees and can dilute shareholders’ stake in a company. Amending or approving an equity plan requires shareholder approval, and investors may push back on poorly designed plans.

Equity plan design and its underlying governance features have evolved over time, reflecting investor preferences as well as the desire of compensation committees to have flexibility in administering these plans. This report delves into equity plan features and examines key trends observed over the past five years.

ISS-Corporate, a leading provider of compensation, governance, cyber risk monitoring, and sustainability offerings to help companies improve shareholder value and reduce risk, last month announced the acquisition of SustainaBase, a provider of carbon accounting and data management software solutions for corporate sustainability reporting. In a new interview, Head of ISS-Corporate Marija Kramer and SustainaBase CEO Gaida Zirkelbach outline how this exciting development advances ISS-Corporate’s position as a holistic provider of sustainability solutions for corporates.

Metric selection in an Annual Incentive Program (AIP) gives company directors the opportunity to tailor compensation plans to the specific circumstances of the company’s named executive officers (NEOs). Often this decision revolves around competing goals as the compensation plan is expected to compensate NEOs for the opportunity cost of their time, reward exceptional performance, retain talented individuals, and incentivize high effort and productivity. While a well-designed Annual Incentive Plan considers all of these factors, shareholders generally prefer AIPs that display a clear relationship between shareholder value creation and executive pay.

Traditionally, Japanese CEO compensation has been modest compared to global standards, with an emphasis on stable fixed compensation, reflecting cultural norms of collective responsibility and lifetime employment. However, recent years have shown a gradual shift, particularly among companies with international board members or significant overseas revenues. This trend is partly driven by the need to attract and retain top talent within the management teams in an increasingly global market as well as desire to encourage greater risk-taking to increase corporate value.

This article examines the evolving dynamics of CEO compensation in Japan, focusing on the Pharmaceutical and Automotive industries due to their highly globalized nature. These industries face intense international competition, requiring top talent and global market strategies, making them ideal for examining CEO compensation trends in Japan’s evolving corporate landscape.

Corporate impacts and dependencies related to nature have garnered considerable attention in recent years, with growing interest also reflected in shareholder proposal campaigns focused on nature-related issues. The landmark 2022 COP 15 summit that established the Kunming-Montreal Global Biodiversity Framework, the launch of the Taskforce on Nature-related Financial Disclosures (TNFD) in 2021, and the inclusion of Biodiversity and Ecosystems as key reporting standard under the European Sustainability Reporting Standards (ESRS) per the EU Corporate Sustainability Reporting Directive (CSRD) are among the key drivers for the reframing of the discussion around nature and renewed interest in environmental impacts and relevant disclosures.

With the 16th Conference of the Parties to the Convention on Biological Diversity (COP 16) currently underway, ISS-Corporate reviewed nature-themed shareholder proposals during the past decade to identify key trends and developments related to nature in corporate shareholder engagements.

Equity awards are the primary compensation vehicle for U.S. executives, comprising 71 percent of total CEO compensation for S&P 500 CEOs and 60 percent for Russell 3000 (excluding S&P 500). As compensation committees seek to maintain alignment of executive and shareholder interest, the use of risk mitigators in equity grants has increased over the past five years. This paper analyzes key equity compensation risk mitigating practices such as clawback policies, stock ownership guidelines, holding period requirements, and anti-hedging and pledging policies, which enhance accountability over pay and ensure that executives bear similar risks as shareholders.

For much of the past two decades, transparency regarding corporate political activities has been a key issue in corporate engagements with investors. Over the past decade, shareholder proposals focused on political activity transparency have consistently ranked the highest in volume among proposals submitted at U.S. companies, outpacing all other environmental and social categories, including those related to climate change and human capital management.

As the U.S. presidential election approaches, ISS-Corporate reviewed shareholder proposals submitted to U.S. companies in the past decade, along with the latest corporate disclosure data, to assess key trends and developments in relation to engagements on this crucial topic for companies and investors.

Shareholder proposals, often seen as a bellwether of investor sentiment and preferences, have gone through a significant shift over the past decade. The number of proposals on environmental and social topics exploded, surpassing the governance and compensation topics that had dominated the discourse in mid-2010s. In recent years, discussions related to environmental, social, and corporate governance (“ESG”) risks have become highly politicized, including attempts to politicize the shareholder proposal process. However, investors show little to no interest in proposals that advocate a political viewpoint without demonstrable economic relevance. ISS-Corporate reviewed the data of shareholder proposals submitted at U.S. companies from July 2014 to June 2024 and examined how shareholder proposals as well as corporate behavior and disclosures on sustainability and corporate governance have changed over the decade.

The third quarter of 2024 registered a total volume of $323 billion in green, social and sustainability (GSS+) bond and loan issuances according to Environmental Finance (EF data), a slight decrease from the second quarter.

In its Q3 Quarterly Report, the International Capital Market Association (ICMA) found that green bonds were again at the top of the market, representing more than half of all sustainable bond issuances year-to-date.  

Climate lobbying – the alignment of a company’s climate commitment with its lobbying expenditures – has emerged as a trend in shareholder proposals in recent years. Often these proposals call for companies to “Review Public Policy Advocacy on Climate Change” or “Report on Corporate Climate Lobbying Aligned with [the] Paris Agreement.” This trend is part of a broader theme of shareholder expectations for companies to integrate climate considerations with other ESG matters (e.g., social justice – the “just transition”), rather than simply reporting on emissions reduction.

Greenhouse gas emissions and corporate efforts to reduce them have become central to the climate change discussion in recent years. As corporate disclosures on climate and emissions gain prominence, including through regulatory mandates, the focus is now shifting towards tangible actions and measurable outcomes in climate mitigation and decarbonization. While climate adaptation remains a critical part of the equation, GHG emissions reduction targets have emerged as a key tool for addressing climate challenges.

ISS-Corporate analyzed global corporate disclosure data on GHG emission and reduction targets, evaluating the current levels of transparency, exposure, and sector-specific commitments toward decarbonization.

Shareholder proposals offer a glimpse into investor and market sentiment on key corporate governance issues, including how companies are managing environmental and social impacts, risks, and opportunities. The topic of climate features prominently in shareholder proposal campaigns, as it remains a key priority for policymakers, investors, and corporate boards. ISS-Corporate analyzed shareholder proposals and voting results data from the past decade to discern key trends in voting patterns among investors as well as the underlying dynamics that may affect voting in relation to climate change-related engagements between companies and their shareholders. The analysis finds that climate-related shareholder proposals continue to rank high on the agenda of shareholder engagements , but these discussions are becoming more nuanced, as corporate disclosures and climate-related practices evolve and continue to improve. At the same time, investors appear to be taking a more targeted approach in dealing with these topics from a stewardship and voting perspective.

Many market observers and investors believe that signs of poor corporate governance may be an effective risk indicator, providing early warning signs of other brewing problems. ISS’ Governance QualityScore (GQS), a decile ranking system based on a holistic assessment of companies’ governance practices, including board structure, compensation, shareholder rights, and audit, helps to quantify this risk. A score of 1 indicates the strongest governance practices (lower risk) while 10 suggests higher risk.

In this report, we examine four different gauges of market sentiment and compare them with GQS ratings. The first two – short interest ratios and credit ratings – are commonly accepted measures of perceived risk, while the other two are indicators of investor discontent as measured by vote support on director election and Say-on-Pay (SOP).

Taxation plays a vital role in achieving the UN Sustainable Development Goals (SDGs), and serves as a key mechanism through which organizations contribute to society, public services, economic development, and social welfare in the countries that they operate in.

Corporates are increasingly under pressure to demonstrate how their tax strategy and practices align with their stated sustainability visions and strategies. Over the years, several large U.S. companies have received shareholder proposals requesting for greater tax transparency, and we continue to see these types of proposals in 2024, signaling that the topic remains of interest to shareholders and other stakeholders.

Total Shareholder Return (TSR) is an increasingly popular metric for determining long-term incentive (LTI) plans at Australian companies. While the measurement is viewed favorably by many institutional investors as an objective measurement of shareholder value creation, some of its flaws are raising questions among shareholders. An increasing number of ASX100 companies are adopting financial measures that are linked to shareholder returns, such as earnings per share (EPS), return on capital employed (ROCE) and return on equity (ROE), and TSR appears to be the most popular choice. However, simply using TSR as a highly weighted performance condition in an LTI program does not guarantee support from the investment community. Factors associated with the TSR condition, such as the vesting schedule, the peer groups selected, the presence of a positive TSR gateway or the length of the performance periods may arouse criticism and prove a challenge to attract shareholder support.

Over the past decade, the business world has made significant strides in establishing standardized and methodical approaches for corporates developing their sustainability strategies and relevant disclosures. Today, a materiality assessment for identifying and prioritizing key issues has become a basic expectation among stakeholders, with certain jurisdictions beginning to require companies to conduct such assessments according to prescribed standards, including assurance requirements.

In recent months, Canada and the European Union have forged ahead in passing new legislation aimed at reducing false or misleading environmental claims, a practice commonly referred to as greenwashing. Anti-greenwashing regulations aim to fundamentally improve increased consumer trust, supporting the green transition, and standardizing claims.

With the update of Australia’s Sustainable Finance Roadmap in June 2024, Australian corporates are facing tough new rules on climate disclosures as the country aligns itself more closely with global standards related to climate and sustainability goals.

In the two years to January 2024, almost 700 cyber incidents were reported among Russell 3000 companies in the U.S., impacting more than 10% of the firms. One-third of those involved the compromise of a supplier or other third party, and the study also identified substantial third-party aggregate risk concentration across Russell 3000 firms.

In this report, ISS-Corporate breaks down the new regulatory standards and reviews how they are applied and the steps that companies must take to comply with them. The report also provides analysis on how companies are currently performing in terms of disclosing their emissions and examining the potential benefits of developing a comprehensive Environmental Justice plan.

Shareholder proposals to eliminate supermajority vote requirements are soaring among the biggest listed U.S. companies, a sign that investors feel more well-represented in businesses that make decisions based on a simple majority. The percentage of S&P 500 companies still employing supermajority rules has declined to just over one third, meaning those retaining the practice increasingly look like outliers and may face more scrutiny and pressure to change.

As new corporate sustainability regulations come into force around the world, companies are grappling to broaden the scope of their environmental and social strategies to comply with the new requirements. This requires them to identify, understand, and report on a variety of risks related to responsible business conduct.

The EU CSRD and the Corporate Sustainability Due Diligence Directive (CSDDD) are perhaps the most comprehensive regulatory efforts currently addressing responsible corporate behavior. As shown in the table below, ISS-Corporate mapped out key themes covered under the NBR methodology and how they connect to the key disclosure areas per the European Sustainability Reporting Standards (ESRS) under the CSRD.

The first half of 2024 registered a total volume of $768bn in green, social, and sustainability (GSS+) bond and loan issuances, with bonds making up almost two thirds of that figure, according to Environmental Finance (EF data).

Within the bond market, green deals still account for the vast majority of issuance (more than 70%), followed by social and sustainability issuances, as highlighted by the Climate Bond Initiative (CBI).

The Canadian Sustainability Standards Board (CSSB) is moving to establish sustainability disclosure standards for Canadian companies. On March 13, 2024, CSSB published two exposure drafts for the Canadian Sustainability Disclosure Standards (CSDS) – CSDS 1 and CSDS 2 – and announced the opening of a public consultation period during which it will collect feedback on the proposed Standards for the Canadian. Following the end of the 90-day consultation period on June 10, 2024, CSSB will aim to finalize the standards by the end of the fourth quarter of 2024, marking another milestone towards the adoption of sustainability disclosure standards in Canada.

•  A Delaware judge’s decision to void $55.8 billion in compensation for Elon Musk was a noteworthy event for shareholders and corporate issuers, not only regarding compensation, but also the complexities around evaluating director independence.
•  Traditional measurements used by major exchanges and proxy advisors seem to show that board independence in the U.S. is robust, but some less obvious non-independent traits may lurk beneath the surface.
• Our research indicates that Delaware courts could more frequently consider non-traditional/non-financial factors in evaluating board independence, process, and fair dealings with shareholders than widely believed.

Mandatory sustainability disclosure has become a reality in South Korea, as the Korea Sustainability Standards Board (KSSB) published the Exposure Draft of the ‘Korean Sustainability Disclosure Standards’ on May 2. While the exact scope and timing of the initiative are yet to be unveiled, starting from 2026, climate-related disclosures will become mandatory.

Japan’s corporate governance is evolving, influenced by increasing shareholder activism and initiatives by regulators and the Tokyo Stock Exchange (TSE) to attract global investment. The upcoming proxy season is expected to see a rise in shareholder proposals, with a focus on board independence, capital allocation and environmental issues.

This report looks at the trends in Japanese corporate governance, where there is a growing emphasis on shareholder proposals and capital efficiency. We examine what this means for the upcoming proxy season and the challenges faced by Japanese companies in meeting investor expectations, offering insights into the ongoing transformation and its implications for issuers.

Governance is back on focus this proxy season, with both the volume and support on proposals aiming to enhance shareholder rights and companies’ governance practices gaining steam. Environmental and social proposals are showing a sign of reversing trend of declining support from the 2021 peak, while anti-ESG proposals are gaining volume but not support.

We reviewed proposals submitted for Russell 3000 company AGMs held between Jan. 1 and May 31 for each year since 2020 to shed light on how investors were bringing up their concerns ahead of the May 23 peak U.S. AGM date, which topics carry the greatest currency, and their level of success.

While responsible business conduct has long been a focus for activists, special interest groups and the socially responsible investment movement, in recent years, more stakeholders are recognizing the importance of global norms for responsible business conduct to prevent and mitigate adverse impact. Governments around the world are demanding more comprehensive disclosures from companies and their investors, creating a feedback loop that increases the focus on these topics.

Monitoring the implementation of responsible business conduct standards across a company’s own operations and along the value chain can prove difficult. For the past several decades, corporate sustainability has been shaped by a variety of global standard-setting initiatives. Many voluntary frameworks are now being incorporated into regulation at the national or regional level. Legal frameworks largely focus on disclosure, yet a growing number of regulatory initiatives also introduce sustainability due diligence obligations.

The inaugural IFRS Sustainability Disclosure Standards were released by the International Sustainability Standards Board (ISSB) in mid-2023, designed to establish a global baseline for corporate disclosures. They are set to be adopted across several jurisdictions in the next few years. The new rules have garnered global support from 64 jurisdictions to date, with 19 national regulators already consulting on adoption of the recommendations under jurisdictional law.

Whilst based on TCFD, IFRS S2 significantly expands the scope and detail of disclosures required. To assess the concrete implications of this progression, ISS-Corporate performed a detailed cross-standard analysis, asking two key questions: What are the additional disclosures required under IFRS S2? And how well do exemplary climate reports align with IFRS S2?

ISS-Corporate reviewed the level of alignment of corporate disclosures in major Asia-Pacific markets with established frameworks – the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board standards, and the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations – to identify which countries and sectors are better prepared to meet the more ambitious requirements of CSRD and the IFRS Sustainability Disclosure Standards.

ISS-Corporate, a leading provider of compensation, governance, cyber risk monitoring, and sustainability offerings to help companies improve shareholder value and reduce risk, earlier this month announced the acquisition of Celsia, an Oslo-based provider of SaaS solutions for corporate sustainability reporting. Marija Kramer and Petter Reistad outline how this strategic development will advance ISS-Corporate’s position as a holistic provider of sustainability offerings to corporates.

The first quarter of 2024 registered a total volume of $285bn in GSS+ bond and loan issuances, showing signals of recovery compared to the last quarter of 2023, according to Environmental Finance (EF data).

With this addition, the market has now surpassed $4 trillion (EF data). This encouraging start of the year has been fueled by a rise in transition issuances, which are expected to become one of the key themes in the sustainable finance world, as highlighted by Nordea among others (Nordea).

Companies in the U.K. and Ireland face heightened expectations from investors for gender diversity in line with the issue’s growing importance for companies. An increasing number of companies have developed their diversity goals in line with their enhanced ESG programs, and some have even linked their executives’ variable pay with meeting their own diversity objectives. While furthering diversity, equity and inclusion used to be optional for companies, it is now a primary requirement that applies to most listed companies.

A decision by Chinese financial regulators to cancel separate meetings for a class of shareholders on the Hong Kong stock exchange has sparked concerns among some large institutional investors that the change may weaken minority investor rights.

In this report, ISS-Corporate examines the background, reaction, and implications of removing the class meeting requirement in Hong Kong’s securities market.

The majority of target goals set for S&P 1500 CEOs were higher in 2022 than a year earlier when the same metrics were used in annual incentive awards. On the surface, that’s an encouraging outcome as we generally expect companies to grow over time, setting increasingly challenging goals for management teams. But do those goals increase every time previous targets were achieved? And what happens the following year – are the higher goals achieved? Part one of our three-part series examined recent payout levels for annual incentive awards while part two focused on goal level achievement for earnings metrics. In this third and final installment, we take a deeper look at the goal setting process in 2022 and explore the connections between goals and actual outcomes over the span of 2021 and 2022.

In recognition of the recently observed Women’s History Month in March and the United Nations-recognized International Women’s Day (March 8), ISS-Corporate reviews the state of pay equity practices based on corporate disclosures, with a focus on gender. The analysis includes an overview of legislation and shareholder initiatives that influence gender pay gap disclosures, while also sharing a review of disclosure data across geographic regions, as well as quantitative gender pay gap figures for publicly held companies.

The adoption of the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) signals broad consensus on the importance of robust controls to prevent adverse impacts of business activities on people and the environment. Notwithstanding significant concessions on the ambitious proposal presented by the European Commission over two years ago, this regulation will drive the harmonization of sustainability due diligence obligations in the EU and beyond.

Artificial intelligence (AI), the use of technology to execute or simulate processes that would otherwise require human intelligence, is quickly evolving. Companies have begun to use the rapidly expanding technology to help achieve efficiency, increase competitive advantages, and enhance engagement with stakeholders. Early adopters are implementing AI in a variety of ways, such as sales/marketing, product development, and legal.

Reflecting the rising importance of AI’s impact on businesses, some companies are recruiting directors with AI expertise and establishing board-level oversight. To assess how boards may evolve to manage and oversee this new area of potential risks and opportunities, ISS-Corporate examined S&P 500 company DEF 14As filed from September 2022 through September 2023 for mentions of board oversight and director skills related to AI.

Special grants — equity awards made outside of regular annual compensation — can be an effective compensation vehicle but can also generate investor concern if they are perceived as excessive or unjustified. These grants may take the form of new hire or promotion awards, one-time retention awards or one-time incentives, and are often rationalized as helping to attract, retain and incentivize executives.

In this report, ISS-Corporate analyzes non-cash special grants awarded to CEOs in the U.S. in fiscal year 2022 to shed light on how they are used in compensation packages and whether the controversy surrounding their use is merited.

Sustainability reporting rules developed by the International Sustainability Standards Board (ISSB) for the IFRS Sustainability Disclosure Standards are set to be adopted across jurisdictions in the next few years, establishing a global baseline for corporate disclosures. This represents an opportunity for companies to harmonize their sustainability data in a complex regulatory environment. Adopting these new standards as early as possible and understanding their interoperability with other regulations are crucial considerations for sustainability leaders.

On Wednesday, March 6, the U.S. Securities and Exchange Commission (SEC) approved a rule that will require climate-related disclosures for many public companies.

The SEC’s climate rule mandates certain standardized climate-related disclosures from registrants, many of which depend on a “materiality” assessment. The final rule contains several substantive changes from the proposed rule, which was first released almost two years ago. Some of the high-profile changes include the removal of all requirements pertaining to Scope 3 emission reporting, the narrowing of Scopes 1 & 2 disclosure requirements to only larger registrants and only when material, the narrowing of several prescriptive board- and management-related climate oversight disclosures, and the removal of certain line-item disclosure requirements.

The 2024 proxy season opened with two explosive court cases: a landmark Delaware court ruling that vacated Elon Musk’s pay and ExxonMobil’s court challenge to exclude a shareholder proposal on greenhouse gas emissions reduction from the proxy. These court cases highlight the emerging tensions between corporates and their shareholders. While calls for more robust governance and board accountability are growing, pressure against Environmental & Social considerations is increasing. Both investors and issuers will need to navigate these sometimes-competing trends carefully and evaluate the impact their actions may have on various constituencies as issuers prepare their proxies and shareholders cast their votes.

ISS-Corporate has examined key themes, trends, and notable shareholder proposals that are likely to shape the discourse during the proxy season.

Over the last few years, a multitude of historic events have contributed to economic turbulence that has unevenly impacted stock price performance across different market segments. Understanding industry and market trends and the key drivers of valuations over the period is crucial in evaluating a company’s performance against its most relevant industry peers and making informed decisions on executive compensation. In this paper, ISS-Corporate breaks down the key factors that are contributing to market volatility and dives into key trends affecting TSR.

California continues to be at the forefront of environmental regulation, enacting the Climate-Related Financial Risk Act (SB261) and the Climate Corporate Data Accountability Act (SB 253) in October 2023. The new legislation adds to a broader global trend of stricter and more extensive climate disclosure requirements for companies.

In this paper, ISS-Corporate breaks down the new regulation and looks at what type of companies and industries are currently the best prepared to meet the new standards. We also take a look at the steps that companies should take to get ready for evolving disclosure requirements in both the U.S. and Europe.

COP28, this year’s annual United Nations climate summit, was marked by a surge in corporate participation, with business and private sector representatives significantly outnumbering government delegates. This shift underscores the growing role of the private sector in shaping the goals, targets and agreements that set the path toward net zero.

Shareholder support for Management Say-on-Pay (MSoP) proposals has declined steadily since 2019 even though U.S. company performance, as measured by Total Shareholder Return, consistently improved.

ISS-Corporate analyzed the relationship between MSoP votes and TSR, CEO compensation, and other pay components over from the beginning of 2019 to July of this year to uncover the possible causes of this rising investor discontent. We looked at the components of pay packages, including how much is based on performance, the mix between stock and cash awards and the total amount of compensation.

More than two-thirds of U.S. CEOs achieved or exceeded their target goals and earnings goals in 2022, with one out of four reaching their maximum goal levels. While these achievement rates result in handsome rewards for executives, consistently elevated rates of achievement raise questions about the rigor of the goal-setting process and may set a dangerous precedent for future payout expectations. In this second installment of our 3-part series, ISS-Corporate examines goal achievement in short-term (or annual) incentive awards as a whole and by metric groups. We also take a closer look at earnings metrics, which are the most prevalent group of financial metrics, and note industry-specific nuances.

Underrepresented ethnic groups have all made progress in obtaining board seats in Canada over the last five years; unfortunately, the pace is slow. At the current rate, it would take 10 years for overall board representation of diverse ethnicities to match the country’s demographic makeup.

In this report, ISS-Corporate looked into Institutional Shareholder Services data on Canadian boards from 2019 to 2023 to track the changes in ethnic composition. Our analysis considers on average 229 S&P/TSX 60 and S&P/TSX Composite companies with around 2,200 board seats per year.

The use of sustainability-linked targets in executive compensation schemes continues to spread among U.S. and European companies.

ESG targets represent a growing percentage of overall pay opportunities for executives in both short-term long-term incentives. However, many questions remain over transparency, their effectiveness and how and when they are used.

In this report, ISS-Corporate examined sustainability incentive trends in the U.S. and Europe to show how they have progressed since our previous report in 2021 and to explore common hurdles to building effective performance metrics that align executive incentives with sustainable long-term value creation.

Information security is increasingly being viewed as a key corporate governance issue within the investment community, and expectations are growing for public issuers to have robust programs and strategies to help mitigate cybersecurity threats. Businesses that fail to adopt such measures risk becoming market laggards and may face increased risk of a material security breach. In this report, ISS-Corporate analyzes trends in cybersecurity governance and finds that while U.S. corporates have shown signs of taking the issue more seriously, progress is mixed.

Q3 2023 saw $176.5bn in GSS+ bond issuances, bringing the year-to-date volume to $716bn, according to Environmental Finance. While that remains shy of the approximately $200bn issuance volume in the same quarter of 2022, the last three months of the year are expected to bridge this gap and replicate the $910bn total issuance in 2022.

Investor scrutiny of executive “golden parachutes” is on the rise, alongside an increase in the average value of such executive exit packages. Amid challenging economic conditions, shareholders and corporate governance advocates are showing increased interest in curbing excessive CEO and executive financial windfalls upon termination.

In this report, ISS-Corporate found that the third most prevalent shareholder proposal by count this year is “Submit Severance Agreements (Change-in-Control) to a Shareholder Vote,” or, put more simply “say on golden parachutes.” This type of proposal has been increasingly cropping up on companies’ proxy ballots and a handful have even won majority support. There could be more to come.

About 19% of the U.S. population identifies as Hispanic, but the proportion of Hispanics serving on U.S. corporate boards is far lower. While representation has seen substantial growth by percentage over the last five years, the starting point was significantly lower than that seen by other ethnic groups. As we celebrate Hispanic Heritage Month (September 15 – October 15), ISS-Corporate examines the current state and trends of Hispanic and Latin American board representation at U.S. corporations.

MGM Resorts International suffered a major cybersecurity breach that affected everything from electronic hotel room keys to the operations of its casinos and websites. How could such a large, well-resourced and security conscious company fall victim to such damaging attacks and what can the rest of the corporate world learn from it?

Maximizing your chances of staying safe requires that you constantly monitor for risk, discovering your own weaknesses, and keeping track of the odds – both for your own company and your industry. Leveraging the ISS ESG Cyber Risk Score, ISS-Corporate compared the cyber security risk of the gaming sector against the broader market and found that companies in the sector are 30% more likely to incur a significant breach event in the next 12 months.

Well-designed performance awards motivate executives to grow their businesses, streamline operations and deliver value to shareholders; but when poorly designed, they serve as cash machines for executives delivering mediocre results. In this report, ISS-Corporate examined the performance of S&P 1500 CEOs against their targets over the last five years to find the similarities and differences between industries and between smaller and larger companies.

With salary, annual bonuses, and long-term equity grabbing most of the headlines, perquisites, or “perks” are often overlooked as a vital component of an executive’s compensation package. Despite their obscurity, incentives ranging from personal use of company aircrafts to relocation expenses remain widely used tools across the U.S. corporate landscape and can act as a guide to broader trends in executive compensation and the business environment.

Each year during proxy season, ISS-Corporate analyzes recently collected data from Russell 3000 company filings. This year we focused on director support and diversity, executive compensation, and shareholder proposals. In this season-ending review, we aggregate our findings for a comprehensive lookback on the 2023 proxy season.

The European Sustainability Reporting Standards (ESRS), adopted at the end of July, require companies to comprehensively report on their due diligence processes under the four pillars of governance; strategy; impact, risk and opportunities; metrics and targets.

This covers how companies embed due diligence in governance, strategy, and business models, engage with affected stakeholders, identify and assess negative impacts on people and the environment, take action to address those impacts and track the effectiveness of these effort.

Bringing on new board members presents a valuable opportunity for companies to benefit from fresh insights and expertise. In the following analysis, ISS Corporate-examined the current directors across Russell 3000 companies to understand the diverse composition of the most recent group of independent directors.

The first half of 2023 saw a significant increase in the number of shareholder proposals calling for an independent board chair that went to a vote. Support levels for such proposals increased slightly, contrasting with a decline in support for shareholder proposals that went to a vote overall.

In this report, ISS-Corporate examines independent chair proposals, shareholder support levels for such proposals, and the presence of combined chair-CEO roles over the last 10 years to assess evolving trends in the landscape over time. For further insights, download the full report.

Under new European Union (EU) sustainability reporting rules, companies will be required to make a deep assessment of their Scope 3 emissions.

The EU’s Corporate Sustainability Reporting Directive (CSRD) calls on companies to disclose information about the integration of climate-related impacts, risks and opportunities into their business strategies. Scope 3 emissions represent the majority of most companies’ GHG emissions.

On July 31, 2023, the European Commission adopted the first set of European Sustainability Reporting Standards (ESRS), which require companies to provide comprehensive and robust information about social and environmental impacts, risks and opportunities to a broad group of stakeholders.

In this report, we break down the ESRS’ implications for companies, investors, customers and other stakeholders. We also examine the practical steps that corporates may take to prepare themselves for the new disclosure requirements.

On July 26, 2023, The Securities and Exchange Commission adopted new rules requiring public companies to annually disclose their cybersecurity risk management strategies and governance methods, and to promptly disclose material cybersecurity incidents. While the rules mandate only disclosures, they will strongly incent companies to adopt more robust cyber risk assessment and monitoring programs. Companies must provide the broader disclosures about their cyber policies beginning with the annual reports for fiscal years ending on or after December 15, 2023. The rules on reporting cybersecurity incidents will go into effect later this year.

In this report, ISS-Corporate takes a deep dive into how and when the regulations apply and looks at their potential impact on companies and their stakeholders and on the improvement of corporate cybersecurity overall.

Gender diversity on boards and among board leadership positions brings financial and non-financial benefits that go beyond a company’s ESG performance. Canada, like many other countries, has seen women make gains both in terms of total board seats and the percentages they represent on boards.

But that only tells part of the story. Our research shows that those numerical gains are not matched by increases in women holding leadership roles such as the heads of compensation, audit and nominating committees, while female CEOs remain few and far between.

In an increasingly connected and networked corporate world, cyber risk generated by third parties is a growing concern for corporate boards and other stakeholders. Applying the ISS ESG Cyber Risk Score’s Incident Type Likelihood model, ISS-Corporate found that a third-party breach is the “most-likely” type of future cyber incident to impact organizations when compared to all other incident types.

With the adoption of Bill S-211, Canada becomes the latest country to pass legislation requiring companies to assess and report on Modern Slavery risks throughout a company’s supply chain.

Certain government institutions and business entities will be required to report annually on their efforts to prevent or reduce the likelihood of forced labor and child labor playing a part in their supply chains. The first of these reports is due by the end of May 2024. Research by ISS-Corporate shows that many of the companies traded on Canada’s benchmark TSX index have not taken initial steps to proactively implement corporate supplier policies and programs that may mitigate compliance risks with future regulations under the Act.

The pay gap between CEOs in the S&P 500 and U.K.’s FTSE 100 widened from 2018 to 2022, with the growing advantage for U.S. chiefs largely driven by long-term incentive plans (LTIPs) and corresponding pay opportunity levels for S&P 500 companies. Corporate growth, both in terms of market value and revenue, was significantly higher on the U.S. side of the Atlantic during the period. In this analysis, ISS-Corporate highlights several key differences in CEO compensation between the U.S. and the U.K.

In this interview with IQ 360, Doug Clare, Managing Director and Head of Cyber Strategy at ISS-Corporate, talks about how third-party risk management, cybersecurity and all the pillars of ESG are becoming ever more interconnected. “This year I noticed a conspicuous change in focus: suddenly, everyone from the keynote speakers to executives meeting in private suites was talking about the full scope of Environmental, Social and Governance (ESG) issues, which are becoming an increasing priority for investors and board members” said Clare.

The Securities and Exchange Commission last year implemented new rules to help stakeholders track the relationship between a company’s performance, as measured by total shareholder return, and executive compensation. ISS-Corporate examines disclosures made since the rule took effect in October 2022 to see how closely pay and performance were aligned.

In this report, ISS-Corporate reviewed proposals submitted for Russell 3000 company AGMs held between Jan. 1 and May 31 for each year since 2019 to shed light on how investors were bringing up their concerns ahead of the May 25 peak U.S. AGM date, which topics carry the greatest currency, and their level of success.

In this report, ISS-Corporate analyzed relative TSR metrics across the S&P 500 to review how companies weathered the storm compared with their peers. We found that less than half (40 percent) of companies maintained the same relative positioning between December 2021 and December 2022, but, as always, high-level aggregate statistics don’t tell the full story.

In this report, ISS-Corporate analyzed relative TSR metrics across the S&P 500 to review how companies weathered the storm compared with their peers. We found that less than half (40 percent) of companies maintained the same relative positioning between December 2021 and December 2022, but, as always, high-level aggregate statistics don’t tell the full story.

In this report, ISS-Corporate examined the rapidly evolving corporate sustainability landscape, including national and international regulatory regimes, and how they influence the level of due diligence practiced by companies.

In this report, ISS-Corporate examined European corporate disclosures from 2022 to identify which areas showed the greatest and least improvement.

To mark Women’s History Month in March, ISS-Corporate examined the latest trends in gender diversity among U.S. public company (Russell 3000) boards and C-suites. We tracked the progress, from 2020 to the beginning of 2023, of female representation on boards, the proportion of women in leadership roles, the percentage of women CEOs, chairs, lead directors, and named executive officers.

In this report, ISS-Corporate reviewed and analyzed ISS Environmental & Social QualityScore data covering companies in Canada’s S&P/TSX Composite Index to identify the most notable environmental and social disclosure improvements in Canada for 2022 and compare disclosures from the end of last year with the end of 2021.

In this report, ISS-Corporate reviewed and analyzed ISS Environmental & Social QualityScore data covering companies in the Russell 3000 Index to identify the most notable environmental and social disclosure improvements in the U.S. for 2022.

ISS-Corporate took a look at the diversity trend in the Russell 3000 over five years, with a special focus on Black/African American directors in recognition of Black History Month.

The proceedings at 2022’s Biodiversity COP15 were closely watched by ISS and reports have been prepared by the ISS ESG & ISS-Corporate business units. In this paper, ISS-Corporate examines the key takeaways for companies.