New ISS 2021 Factors for Governance QualityScore Address Investor Hot Topics
February 25, 2021
Authored by: Katherine Ashton and Vicki Westerhaus
ISS recently released updated methodology for its Governance QualityScore (GQS) rating system for institutional investors. The new factors relate to areas of emerging concern to investors, with 11 of the 17 new factors addressing information security risk and oversight. Other new factors relate to board matters, such as diversity, inclusion, practices and composition, and to compensation matters, such as whether and the extent to which special grants have been made to executive officers. ISS also extended to the U.S. market certain factors regarding the number of boards on which directors serve and shareholder voting rights. ISS further indicated that the updated methodology reflects the rebalancing of certain existing factors in the categories of Board Commitments and Litigation Rights.
ISS reviews its methodology annually to ensure that its approach remains closely aligned with ISS’ benchmark voting policies and reflects developments in regulatory and market practices. Key updates to ISS’ benchmark voting policies for the 2021 proxy season are summarized in our December 11, 2020 post. The new factors and factors newly applied to the U.S. market include:
New Factors as of January 29, 2021:
Audit (Information Security Risk Oversight)
- What percentage of the committee responsible for information security risk is independent? (Q403)
- How often does senior leadership brief the board on information security matters? (Q404)
- How many directors with information security experience are on the board? (Q405)
Audit (Information Security Risk Management)
- Does the company disclose an approach on identifying and mitigating information security risks? (Q402)