Agenda Receiving the Most AGAINST Recommendations
from ISS in 2016

While the top contentious agenda per ISS vote recommendation results differ in each market, the following proposals on average received the highest rate of ISS AGAINST vote recommendations across the markets in Asia Pacific:

Average% AGAINST by Country

  Approve Stock Option Plan/ Approve Restricted Stock Plan Approve Issuance of Equity or Equity-Linked Securities with or without Preemptive Rights
Australia[1] 74% 60%
China 61% 88%[2]
Hong Kong 99% 99%
India[1] 88% 54%
Singapore 99% 86%
Taiwan 80% 39%

Figure 1 Asia (ex. Japan) AGM Season Distribution

Based on sample of large and widely-held companies. Based on ISS definition of independence

Stock option and restricted stock schemes opposed by ISS normally have one or all of the following features: excessive dilution, unreasonable discounted grant price, the absence of challenging performance criteria and meaningful vesting periods, and eligible directors are also administrators of the schemes. All these features weaken the intended effect to incentivize plan participants and to align their interest with that of the company’s.

  • No major improvements were observed from proposals presented in Hong Kong and Singapore compared to 2015.
  • No major shift is expected in the trends of Australia and India in the upcoming proxy season.
  • In China, more companies are granting options at a steep discount to the benchmark price, resulting in a higher rate of ISS opposition of 61% from 38% in 2015.
  • The silver lining, however, lies in Taiwan, where positive changes have been made by roughly 20% of the Taiwan companies who wish to implement their restricted stock plan. These changes include attaching challenging performance hurdles to the plan, and providing adequate disclosure regarding such performance hurdles, which lead to ISS support of those proposals.

Additionally, issuance of equity with or without preemptive rights proposals continued to receive high rate of AGAINST vote recommendations from ISS.

  • This is a major issue in particular in Hong Kong (including Chinese companies dual-listed in Hong Kong) and Singapore, where ISS applies a more stringent issuance threshold than the Exchange requirements, in-line with investor expectations and international governance standards.
  • In Taiwan, around 40% of such proposals received an AGAINST vote recommendation from ISS due to excessive issuance and a lack of compelling reason for the capital raising request.

Proposals that gained support from ISS normally have a prudent level of dilution. Despite the fact that many of these proposals eventually passed at the shareholder meetings, ISS believes the current thresholds it applies reflect the best practices and is in the spirit of good corporate governance.

[1] Voting results from 2015 proxy season

[2] Only at Chinese companies dual-listed in Hong Kong

The 2016 Proxy Season So Far

As we have approached mid-2016, most Asia markets except for India and Australia have concluded their annual general meeting (AGM) season. ISS Corporate Solutions (ICS) would like to share with you the observations and insights we have drawn from the data collected from this past proxy season, to give you a more comprehensive view of the corporate governance landscape in the region.

Explore and download the latest ISS voting guidelines and policies.