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www.issgovernance.com©2016ISS|InstitutionalShareholderServicesNovember2016

OverviewandUpdates

Published:November2016

OverviewandUpdates

TheGlobalLeaderinCorporateGovernance&ResponsibleInvestments 2of159©2016ISS|InstitutionalShareholderServices

TABLEOFCONTENTS

Overview...............................................................................................................................................................................................4

Coverage................................................................................................................................................................................................5

SummaryofUpdates........................................................................................................................................................................7

ScoringMethodology.............................................................................................................................................................10

ISSGovernanceQualityScoreFactorCriteria......................................................................................................................11

BoardStructurePillar....................................................................................................................................................................12

BoardComposition.................................................................................................................................................................12

CompositionofCommittees................................................................................................................................................18

BoardPractices.........................................................................................................................................................................26

BoardPolicies............................................................................................................................................................................32

RelatedPartyTransactions.................................................................................................................................................34

BoardControversies...............................................................................................................................................................36

Compensation/RemunerationPillar.......................................................................................................................................38

PayforPerformance...............................................................................................................................................................38

Non-PerformanceBasedPay..............................................................................................................................................41

UseofEquity..............................................................................................................................................................................42

EquityRiskMitigation...........................................................................................................................................................45

Non-ExecutivePay..................................................................................................................................................................50

CommunicationsandDisclosure......................................................................................................................................51

Termination...............................................................................................................................................................................54

Controversies............................................................................................................................................................................58

ShareholderRights&TakeoverDefenses.............................................................................................................................59

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One-Share,One-Vote..............................................................................................................................................................59

TakeoverDefenses..................................................................................................................................................................64

Meeting&VotingRelatedIssues.......................................................................................................................................70

OtherShareholderRightsIssues.......................................................................................................................................79

Audit&RiskOversight..................................................................................................................................................................80

ExternalAuditor.......................................................................................................................................................................80

AuditandAccountingControversies..............................................................................................................................82

OtherAuditissues...................................................................................................................................................................85

AppendixI:Event-drivenDataUpdates................................................................................................................................86

AppendixII:QualityScoreFactorMethodologyandRegionApplicability.............................................................88

AppendixIII:Region-specificFactorMethodology........................................................................................................120

Addendum.......................................................................................................................................................................................154

OverviewandUpdates


OverviewQualityScoreisadata-drivenscoringandscreeningsolutiondesignedtohelpinstitutionalinvestorsmonitorportfoliocompanygovernance.Atanoverallcompanylevel,aswellasthatrelatingtoBoardStructure,Compensation,ShareholderRights,andAudit&RiskOversight,scoresprovideanindicationofrelativegovernancequalitysupportedbyfactor-leveldata.Thatdata,inturn,iscriticaltotheresearchprocess,whilehistoricalscoresanddataprovidegreatercontextandtrendinganalysistounderstandacompany’sapproachtogovernanceovertime.OriginallybrandedasISSQuickScore,thesolutionhasbeenrenamedasISSQualityScoretobetterreflectthemannerinwhichinvestorsusethesequalitativefactorstosupporttheircompanyanalysis.

Withthecontinuedandgrowingfocusoninvestorstewardshipandengagement,alongsidetheglobalconvergenceofstandardsandbestpractices,governanceplaysanincreasinglyprominentroleininvestmentdecisions.Asanextra-financialdatascreeningsolution,theISSGovernanceQualityScoremethodologydeliversseveralkeybenefits.

Employsrobustgovernancedataandattributes.Governanceattributesarecategorizedunderfourpillars:BoardStructure,ShareholderRights&TakeoverDefenses,Compensation/Remuneration,andAudit&RiskOversight.QualityScorerestsontheanalysisofmorethan220governancefactorsacrossthecoverageuniversewhich,inturn,issupportedbyarobustdataset.QualityScoreanalyzesnotonlyadversepracticesatacompany,butalsohighlightsmitigatingfactorsthathelptellafullerstory.TheunderlyingQualityScoredatasetisupdatedonanongoingbasisascompanydisclosuresarefiled,providingthemosttimelydataavailableinthemarketplace.1

LeveragesISS’globalfootprintandindustryleadership.ISSGovernanceQualityScoreleveragesISS’industryleadingglobalfootprint,whichincludesdeeplegalandlanguageexpertiseacrosskeyglobalcapitalmarkets,includingmanyofthosewithintheQualityScoreuniverse.Factorsusedtoassessrisk-relatedconcernsforagivencompanyineachmarketarebasedonthesameprinciplesthatformthefoundationofISS’globalbenchmarkvotingpolicy.Developedthroughanextensive,transparent,andinclusiveprocess,thesepoliciesreflectbestpracticesacrossjurisdictions,aswellastheviewsofinstitutionalinvestors,issuers,andgovernancepractitionersworldwide.TheQualityScorefactormethodologyisalignedwithISS’benchmarkproxyvotingpolicytoensureitisup-to-dateandtailoredtoaddressappropriatevariationsingovernancepracticesacrossglobalcapitalmarkets.(FormoreonISSbenchmarkpoliciesandtheirformulation,visitwww.issgovernance.com/policy.)

Presentsat-a-glancegovernancerankingsrelativetoindexandregion.ISSGovernanceQualityScorefeaturescompany-leveldecilescores,presentedasintegersfrom1through10,plusunderlyingpillarscoresusingthesamescalethattogetherprovideaclearunderstandingofthedriversofacompany’sgovernancerisk.Ascoreinthe1stdecileindicateshigherqualityandrelativelylowergovernancerisk,and,conversely,ascoreinthe10thdecileindicatesrelativelylowerqualityandhighergovernancerisk.Thesescoresprovideanat-a-glanceviewof

----------------------1PleaseseeAppendixIformorediscussionofevent-drivenupdates.

OverviewandUpdates


eachcompany’sgovernanceriskrelativetotheirindexandregion.Theindividualfactorbreakdowntakesaregionalapproachinevaluatingandscoringcompanies,toallowforcompany-levelcomparisonswithinmarketswherecorporategovernancepracticesaresimilar.

CoverageQualityScoreglobalcoveragecomprisesapproximately5,600publiclytradedcompaniesin30markets,includingconstituentsofthefollowingmajorindices:Russell3000,S&P/TSXComposite,STOXX600,NZX15,ASX200,andlocalEuropeanmarketindicesincludingtheU.K.FTSEAll-Share(ex-investmenttrusts.)QualityScorealsoincludeswidelyheldcompaniesinISS’coverageuniverseforBrazil,China,HongKong,IndiaandJapan.Theterm"widelyheld"referstocompaniesthatISSdesignatesassuchbasedontheirmembershipinamajorindexand/orthenumberofISSclientsholdingthesecurities.

QSRegion Country Coverage

Canada Canada S&P/TSXCompositeIndex

CanadaSmallCap Canada CompaniesoutsidetheS&P/TSXCompositeIndex

LatinAmerica Brazil Widelyheldcompaniesinthemarket

US-R3K UnitedStates Russell3000

US-S&P500 UnitedStates S&P500

Table1:Americascoverage


AsiaPac China Widelyheldcompaniesinthemarket

AsiaPac HongKong Widelyheldcompaniesinthemarket

AsiaPac Singapore StraitsTimesIndex(STI)

Australasia Australia ASX200

Australasia NewZealand NZX15

India India Widelyheldcompaniesinthemarket

Japan Japan Widelyheldcompaniesinthemarket

SouthKorea SouthKorea KOSPI100

Table2:Asia-Pacificcoverage

OverviewandUpdates



-European(multiple)

STOXX600

Africa SouthAfrica FTSEJSE-40/JSE-MidCap

Anglo Ireland ISEQ20

Anglo UnitedKingdom FTSEAll-Share(ex-investmenttrusts)

Germanic Austria ATX20

Germanic Germany DAX30/MDAX50/SDAX50/TecDAX

Germanic Switzerland SMI20/SMIM30

Nordic Denmark OMXCopenhagen20

Nordic Finland OMXHelsinki25

Nordic Norway OBX

Nordic Sweden OMXStockholm30

Russia Russia RTS50

SouthernEurope Greece FTSEATHEXLargeCapIndex25

SouthernEurope Italy FTSE-MIB/FTSE-Midcap

SouthernEurope Portugal PSI20

SouthernEurope Spain IBEX35

WesternEurope Belgium BEL20

WesternEurope France WidelyheldcompanieswithintheCACAlltradable

WesternEurope Luxembourg LuxX

WesternEurope Netherlands AEX25/AMX25

Table3:EMEAcoverage

OverviewandUpdates


SummaryofUpdatesTheISSQualityScoreannualmethodologyreviewensurestheapproachremainscloselyalignedwiththeISS’benchmarkvotingpolicies,whichinturnreflectdevelopmentsinregulatoryandmarketpractice.AsofNovember2016,theQualityScoremethodologyincludesseveralkeyupdatesandinvolvesselectedadjustmentstofactorweightsandscoring.

Highlightsoffactor-levelchangesincludedinthisreleaseinclude:

NewFactorsasofNovember2016:

Board

› Proportionofwomendirectorsinallregions(Q354);› TwoadditionalfactorsonboardrefreshmentforU.S.regions(Q355andQ349);

› Proportionofnon-executivedirectorsontheboardforlessthansixyears(Q355);› Anyothermechanismstoencouragedirectorrefreshment(Q349);

› AppointmentofLeadDirectororavenuesforeffectivecollaborationamongindependentdirectors,managementandstatutoryauditorsinJapan(Q367);

› RegularlyholdingmeetingsofindependentdirectorinJapan(Q366);› ConfirmationofaformalCEOandkeyexecutiveofficerssuccessionplan(U.S.)andtheadoptionofa

mechanismtoappropriatelymonitorandsuperviseCEOsuccessionplanning(Japan)(Q348,andQ368);› MaterialfailuresofgovernanceintheU.S.(Q345);and› AdequateresponsebytheboardtolowsupportforcertainmanagementproposalsintheU.S.(Q350).

Compensation

› Existenceofperformance-basedpayorotherincentivesforexecutivesinJapan(Q375);› DisclosureofapolicyonexecutiveremunerationandcomputationbasisforpayinJapan(Q376);and› Employmentofatleastonemetricthatcomparesthecompany’sperformancetoabenchmarkorpeer

groupintheU.S.(Q353).

Audit&RiskOversight

› TenureoftheexternalauditorintheU.S.andAngloregions.(Q347);and› DisclosureofapolicyonevaluatingthecompetenceandindependenceoftheexternalauditorinJapan

(Q365).

ShareholderRights

› TheexistenceofclassshareswithfullormultiplevotingrightsinJapan(Q369);› ThenumberofdaysbeforeageneralmeetingforpublicationofproxymaterialsinJapan(Q371);› TheprovisionofEnglish-languageproxymaterialsinJapan(Q373);› Disclosureofcross-shareholdingvotingandrelatedpoliciesinJapan(Q370);

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› WhetherthecompanycollaborateswithintermediariestoaccommodatebeneficialownersseekingtoattendshareholdermeetingsinJapan(Q372);

› WhetherthecompanyparticipatesinanelectronicvotingplatforminJapan(Q374);› Exclusivevenue/forumprovisionintheU.S.(Q351);› FeeshiftingprovisionintheU.S.(Q363);› RepresentativeclaimlimitationorothersignificantlitigationrightsintheU.S.(Q364);› ProxyaccessbylawprovisionsintheU.S.,including:

› Ownershipthresholds(Q359);› Ownershipdurationthresholds(Q360);› Caponshareholdernomineestofillboardseats(Q361);› Aggregationlimitsonshareholderstoformanominatinggroup(Q362);

› WhetherthecompanycanclassifyitsboardwithoutshareholderapprovalintheU.S.(Q77);› WhethershareholdershavetherighttoamendthebylawsintheU.S.(Q89);and› WhetherthecompanycanmateriallymodifyitscapitalstructurewithoutshareholderapprovalintheU.S.

(Q352).

ApplicationofExistingFactorstoNewMarkets/Regions:

Board

› ProportionofdirectorswithlengthytenureinAustraliaandNewZealand(Q13);› ClassificationofthechairmanoftheboardinJapan(Q14);› IdentificationofaSeniorIndependentDirectororIndependentLeadDirectorinChina(Q16);› IndependencelevelofthenominationcommitteeinJapan(Q19);› ExecutivesonthenominationcommitteeinChina(Q306);› ClassificationofthechairmanofthenominationcommitteeinChina,SouthKoreaandJapan(Q23);› IndependenceleveloftheremunerationcommitteeinJapan(Q25);› ExecutivesontheremunerationcommitteeinChina(Q27);› ClassificationofthechairmanoftheremunerationcommitteeinChinaandJapan(Q28);› IndependenceleveloftheauditcommitteeinJapan(Q31);› ExecutivesontheauditcommitteeinChina(Q33);› ClassificationofthechairmanoftheauditcommitteeinChinaandJapan(Q34);› DirectorsservingonanexcessivenumberofoutsideboardsinChina(Q309);› ExecutivesservingonasignificantnumberofoutsideboardsintheU.K.andIreland(Q36);› CEOsservingonasignificantnumberofoutsideboardsintheU.K.andIreland(Q37);› Numberofnon-executivedirectorsservingonasignificantnumberofoutsideboardsintheU.K.andIreland

(Q38);› ChairmanoftheboardservingonasignificantnumberofoutsideboardsintheU.K.andIreland(Q39);› DisclosureoftheattendancerecordofeachdirectorinHongKong,SingaporeandIndia(Q337);› Percentageofdirectorsattending75percentofboardandcommitteemeetingsinJapan(Q44);› Directorsattending75percentofboardandcommitteemeetingswithorwithoutavalidexcuseintheU.K.

andIreland(Q45);› DisclosureofapolicyrequiringanannualperformanceevaluationoftheboardinJapan(Q41);and› CEOinvolvedinmaterialrelated-partytransactionsinChina(Q216).

OverviewandUpdates


Compensation

› SizeoftheCEO's1-yearpay,asamultipleofthemedianpayforcompanypeersinallEuropeanregions(Q228);

› Degreeofalignmentbetweenthecompany'stotalshareholderreturn(TSR)andchangeinCEOpayoverthepastfiveyearsinallEuropeanregions(Q229);

› Degreeofalignmentbetweenthecompany'sannualized3-yearpaypercentilerank,relativetopeers,andits3-yearannualizedTSRrank,relativetopeersinallEuropeanregions(Q329);

› Whetherornotthecompanyhasanequity-basedcompensationplaninJapan(Q322);› MaximumdilutionlevelperyearinHongKongandChina(Q128);› Directorseligibletoreceivegrants/awardsundertheplaninvolvedinitsadministrationinChinaandIndia

(Q325);› Disclosureofdetailsofindividualexecutives’remunerationinJapan(Q112);› Disclosureofaperformancemeasurefortheshort-termincentiveplan(forexecutives)inSingaporeand

China(Q113);› Disclosureofperformancemeasuresforstockoptionplans(forexecutives)inChinaandIndia(Q122);› Disclosureofperformancemeasuresforrestrictedshares(forexecutives)inChina(Q123);› Disclosureofperformancemeasuresforotherlong-termplans(forexecutives)inChina(Q125);and› Voluntaryadoptionofamanagement'sayonpay'advisoryvoteresolutionforthemostrecentannual

meetinginSouthAfrica(Q166).

ShareholderRights

› AuthorizationoftheboardtoissueblankcheckpreferredstockinSouthKorea(Q83);› NumberofboardvacanciesinJapan(Q262);› CumulativevotingfordirectorsinHongKongandSingapore(Q338);› LatefilingsofproxymaterialsinHongKongandSingapore(Q335);› DilutionlimitofgeneralmandatetoissuesharesinChina(Q318);› DiscountlimitofgeneralmandatetoissuesharesinChinaandIndia(Q319);› DilutionlimitofthegeneralmandatetoissuerepurchasedsharesinChina(Q320);and› AggregatedilutionlimitofsharesissuanceandresissuancemandatesinChina(Q321).

Audit&RiskOversight

› RestatementoffinancialsinthepasttwoyearsinSouthKorea(Q3);› Non-timelyfinancialdisclosureinthepasttwoyearsinSouthKorea(Q4);› LatefilingsoftheannualreportforthemostrecentfiscalyearinSouthKorea(Q302);› InitiationofenforcementactionbyaregulatorinthepasttwoyearsinHongKong,SingaporeandIndia

(Q200);› Investigationsinitiatedbyaregulatoragainstthecompany,anyofitsdirectorsorexecutivesinSouthKorea

andIndia(Q201);and

OverviewandUpdates


› NumberoffinancialexpertsontheauditcommitteeinChina(Q6).

FactorsNoLongerApplicablebyMarkets/Regions:

› Non-timelyfinancialdisclosureinthepasttwoyearsinChina(Q4);› Percentageofdirectorsattending75percentofboardandcommitteemeetingsintheU.K.andIreland

(Q44);› LowestsupportratefordirectorsatthelastannualmeetinginJapan(Q310);› AnnualdirectorelectionsinChina(Q77);› EmploymentofaU.S.-typeboardcommitteestructureinJapan(Q291);› TakeoverdefenseprovisionsorshareholdingstructuresthathinderhostiletakeoverinJapan(Q317);› Levelofdisclosureonperformancemeasuresforthelatestactiveorproposedlong-termincentiveplanin

ChinaandIndia(Q246);› Disclosurethemetricsusedtoevaluateperformance-basedcompensationinthemostrecentYuhoFilingsin

Japan(Q326);› Disclosureofnumericalfiguresrelatedtoperformance-basedcompensationinJapan(Q327);› IdentificationofaproblematicpaypracticeorpolicythatraiseconcernsinChina(Q301);› DisclosureofthesetupofacompensationcommitteeinthemostreventYuhofilingsinJapan(Q307);and› Disclosureofwhetherornotthecompensationcommitteeiscomprisedofamajorityofoutsidedirectors

(Q308).

AppendixIIincludesacompletelistingofallQualityScorefactorsalongsidetheirmarketapplicability.

AppendixIIIshowsfactorlistingsbymarketandregion.TherationaleandguidelinesforallQualityScorefactorsaredetailedbelow.

ScoringMethodology

ISSGovernanceQualityScoreisderivedfromascoringmethodologythatisbuiltandtestedbyISS’globalteamofgovernanceexperts,andfocusesonquantitativeandqualitativeaspectsofgovernanceincludingtheanalysisthatsupportsISSvotingpoliciesandvotingrecommendations,withafocusontheglobalgovernancebestpracticesineachregion.Ascoreinthe1stdecileindicatesrelativelyhigherqualityandrelativelylowergovernancerisk,and,conversely,ascoreinthe10thdecileindicatesrelativelylowerqualityandhighergovernancerisk.ThemethodologyisupdatedinNovember2016forselectadjustmentstothefactorweightsandscoring.

The1-10scoreisarelativemeasurebasedontherawscorecalculationsoftheothercompaniesintherelativeindexorregion.Thisprocessisconductedateachpillarandattheoverallscorelevels.Eachpillaraswellastheoverallscoregeneratesanindependentrangeofscoresandtheresultingdecilerankings.Forexample,rawscoresforS&P500U.S.companiesarerankedandgroupedintodeciles,withthefirstdecile(designatedwitha

OverviewandUpdates


“1”)beingindicativeofahigherrawscoreandlowergovernancerisk.Seethehypotheticalexampleinthetablebelow.

RatingCategory RawPoints GovernanceQualityScore

Board 23.3 8

Audit 56.9 7

ShareholderRights 28.3 5

Compensation 19.2 10

Total 127.7 8

TheAudit&RiskOversightpillardecilescoringdiffersfromtheotherpillars.WhiletheQualityScoremethodologyisreviewedonanongoingbasistostrengthentheanalysisofgovernancerisk,therearealimitednumberofprevalentriskfactorsorcontroversiesintheAuditandRiskOversightpillar.Consequently,QualityScoredoesnotassigna1-10rankforcompanieswherepracticesaresimilaror“forcerank”toensurecompaniesareineachofthe1-10decilescores.InmostoftheQualityScoreregions,theAuditscoresarelimitedtoafewrelevantdecilesonly.

ISSGovernanceQualityScoreFactorCriteriaTherearemorethan220factorsanalyzedunderISSGovernanceQualityScore,withthespecificfactorsunderanalysisvaryingbyregion.Thefollowingsectiondetailsthequestionsanalyzedandrationaleforinclusioninthefactormethodology.TheparentheticalnumberassociatedwitheachquestionistheISSquestionidentificationnumber,anditishighlightedforeasyreferencethroughouttheQualityScoredocumentationandproducttools.

ThecompleteQualityScoremethodologyandmarketapplicabilityisdetailedinAppendicesIIandIII.

OverviewandUpdates


BoardStructurePillar

BoardComposition

Howmanydirectorsserveontheboard?(Q9)› Ingeneral,theinvestmentcommunityexpectsthatboardsshouldnotbesolargethattheybecome

inefficientandhinderdecision-making.Generally,boardsshouldnothavefewerthansixmembersormorethan15members.Aboardofbetweennineand12boardmembersisconsideredideal.

› Thisquestionwillconsiderthetotalnumberofdirectorsontheboardorwhethernoinformationisdisclosed.

› Thisfactorhasazero-weightimpactonthescoringmodelforU.S.companiesandisincludedforinformationalpurposesonly.

MarketApplicability:Allregions

Whatisthenumberofwomenontheboard?(Q304)› Thisquestionwillevaluatethenumberofwomenontheboard.Accordingtosomeacademicandother

studies,increasingthenumberofwomenonboardsofdirectorscorrelateswithbetterlong-termfinancialperformance.Suchfindingscouldhaveasignificanteffectonthenominationofwomenascorporateofficersanddirectors.

› AccordingtoISS’2014policysurvey,amajorityofallrespondentsindicatethattheyconsideroveralldiversity(includingbutnotlimitedtogender)ontheboardwhenevaluatingboards.2

› Thisfactorisscoredinallregions.

Marketapplicability:Allregions

Whatistheproportionofwomenontheboard?(Q354)› Thisquestionwillevaluatetheproportionofwomenontheboard.Accordingtosomeacademicandother

studies,increasingthenumberofwomenonboardsofdirectorscorrelateswithbetterlong-termfinancialperformance.Suchfindingscouldhaveasignificanteffectonthenominationofwomenascorporateofficersanddirectors.

› AccordingtoISS’2014policysurvey,amajorityofallrespondentsindicatethattheyconsideroveralldiversity(includingbutnotlimitedtogender)ontheboardwhenevaluatingboards.

› Thisfactorisscoredinallregions.

----------------------2http://www.issgovernance.com/file/publications/ISS2014-2015PolicySurveyResultsReport.pdf

OverviewandUpdates


Marketapplicability:Allregions,exceptAustralasia

WhatpercentageoftheboardisindependentaccordingtoISS’classification?(Q10)› Theproportionofindependentdirectorsonaboardisviewedbymanyascriticaltofirmperformance.For

instance,aworkingpaperwhichevaluatedthelinkagebetweenboardcompositionandcompanyproductivityfoundapositiverelationshipbetweenthepercentageofoutsidersonso-calledmonitoringcommittees(i.e.,audit,compensation,andnominatingcommittees)andthefactorsassociatedwiththebenefitsofmonitoring.Thesefactorsincludedthefirm’soutstandingdebtandfreecashflow(Klein).AnotherstudyfoundasignificantcorrelationbetweenboardindependenceandfirmperformanceasmeasuredbyReturnonAssets(Elgaied&Rachdi2008).Otherresearchersfoundapositivelinkbetweenenhancedfirmvalueandboardswhichhaveauditcommitteesthatarecomposedofamajorityofindependentfinance-traineddirectors(Chan&Li2008).

› Directorswithtiestomanagementmaybelesswillingandabletoeffectivelyevaluateandscrutinizecompanystrategyandperformance.Furthermore,boardswithoutadequateindependencefrommanagementmayhaveinherentconflictsofinterest.QualityScorewillconsiderthepercentageofindependentdirectors(asdefinedbyISS)onacompany‘sboard,orwhethernoinformationisgiven.ISS‘definitionofindependenceisspecifiedonISS'votingpolicyguidelines,availableontheISSPolicyGateway.PleaseseeAppendixIconcerningscoringthisquestionwhennewdirectorsareappointedtotheboardbetweenshareholdermeetings.Inmanymarkets,aboardlackingamajorityofindependentmemberswillraisesignificantconcerns.

› InordertodistinguishbetweenrecommendationsforFTSE350andISEQ20companiesandothercompanieswithintheAngloRegion,percentagesofindependentmemberswillbeanalysedfortheconstituentsoftheabovementionedindices,andnumbersofindependentmemberswillbeanalysedfornon-constituents.

› FortheBrazilianmarket,adistinctionwillbemadebetweenconstituentsofthevariouslistingsegmentstotakeintoaccountdifferentbestpracticerecommendations.Aminimumof30%boardindependenceforNovoMercadoandNivel2companiesisexpected,andaminimumof1independentdirectorisexpectedforcompaniestradedundertheotherlistingsegments.

› FortheCanadianmarket,QualityScorewillnotpenalizeamajorityownedcompanywhereboardindependencelevelisbelow50percent;aslongasthecompanyqualifiesformajoritycontrolledexemption.Amajorityownedcompanyisdefinedforthepurposeofthispolicyasacompanycontrolledbyashareholderorgroupofshareholderswhotogetherhaveaneconomicownershipinterestunderasingleclasscommonsharecapitalstructurethatiscommensuratewiththeirvotingentitlementof50percentormoreoftheoutstandingcommonshares.SuchcompanyisdeemedtoenjoymajoritycontrolledexemptionifitmeetscertainindependenceandgovernancecriteriaasoutlinedintheCanadaProxyVotingGuidelines.


OverviewandUpdates


Ifthecompanyiscontrolled,whatpercentageoftheboardisindependentunderISS’standards?(Q203)› Inanumberofmarketswherecompanieshaveacontrollingshareholder,ISSappliesdifferentminimum

standardsofindependentrepresentationontheboard.ISSacceptsthatindependencebelow50percentisstandardinsomemarkets.

› PleaseseeAppendixIconcerningscoringthisquestionwhennewdirectorsareappointedtotheboardbetweenshareholdermeetings.

MarketApplicability:W.Europe,S.Europe

Whatpercentageofthedirectorselectedbyshareholdersareindependent?(Q11)› Bestpracticesuggeststhatatleasthalfoftheshareholder-electedboardshouldbeindependentofthe

company,ofwhichatleasttwomembersshouldbeindependentofmajorshareholders.Incaseswherethereareemployeerepresentatives,ISS’policycallsforatleasthalftheshareholder-electedboardmemberstobeindependentandforatleastone-thirdofthetotalboard(includingemployeerepresentatives)tobeindependent.PleaseseeAppendixIconcerningscoringthisquestionwhennewdirectorsareappointedtotheboardbetweenshareholdermeetings.Aboardlackingamajorityofindependentmemberswillraisesignificantconcerns.

MarketApplicability:Nordic,W.Europe

Isthereanoutsidedirectorontheboard?(Q289)› JapangovernmentrevisedtheCompaniesAct,whichessentiallygivesfirmslittlealternativebuttoappoint

outsidedirectors.Thelegislation,statesthatlargecompaniesmustexplainthedownsidesofappointingoutsidedirectorstoshareholdersiftheyoptnottoacquireany.Similarly,thenonbindingcorporategovernancecode,whichwasdraftedbyapanelofexpertsundertheFinancialServicesAgencyandtheTSE,urgescompanieslistedinthefirstandsecondsectionsofthecountry’sstockexchangestohaveatleasttwooutsidedirectors.

MarketApplicability:Japan

Whatpercentageoftheboardiscomposedofoutsidedirectors?(Q282)› Japaneseboardsareoftendominatedbycompanyinsiders,andthoughanoutsidedirectormaylack

independence,ameaningfulpresenceofoutsidedirectorsontheboardcouldenhancetheboard’smonitoringandoversightabilities.


OverviewandUpdates


Whatistheindependentstatutoryauditor’scomposition?(Q281)› TheboardofstatutoryauditorsinJapanisresponsibleformonitoringthecompany’sfinancialreportingand

auditingpracticesaswellastheboardofdirectors’compliance.Therefore,theboardofstatutoryauditorsshouldhavehighlevelofindependencetoensureaccurateandreliablefinancialdisclosureandadherencetothelawbydirectors.QualityScorewillmeasuretheproportionofindependentstatutoryauditorsaccordingtoISSpolicy.QualityScore


Whatproportionofnon-executivedirectorsontheboardhaslengthytenure?(Q13)› Limitingdirectortenureallowsnewdirectorstotheboardtobringfreshperspectives.Anexcessivetenureis

consideredtopotentiallycompromiseadirector'sindependenceandassuchQualityScorewillconsiderthenon-executivedirectorswheretenureishigherthantherecommendedlocalbestpractice.ISSrecognizesthattherearedivergentviewsonthissubject.Whileanewdirectormaybemorelikelytobackdownfromapowerfulchiefexecutive,adirectorwhohasbeenwiththecompanyforalongtimecouldeasilyhaveloyaltiestothecompanyoveritsmanagement.However,directorswhohavesatontheboardinconjunctionwiththesamemanagementteammayreasonablybeexpectedtosupportthatmanagementteam'sdecisionsmorewillingly.Ingeneral,ISSbelievesthatabalancedboardthatisdiverseinrelevantviewpointsandexperienceisideal.

› Asmallnumberoflong-tenureddirectorsdoesnotnegativelyimpactthegovernanceriskrating.Thisquestionwillconsideralldirectorsexceptexecutives.AffiliatedDirectorsandOutsideDirectors,asclassifiedbyISS,areincluded.

MarketApplicability:AsiaPacific,U.S.,Canada,Russia,India,Australasia

Whatproportionofnon-executivedirectorshasbeenontheboardlessthan6years?(Q355)› Theskills,capabilities,andperspectivesneededintheboardroomcontinuallyevolve.Forinstance,overthe

pastseveralyears,manyboardshaverecognizedtheneedforincreasedtechnologyfluencyamongtheirranks,specificallyfocusingontheboard’sabilitytooverseecybersecurityriskmanagementandassessitseffectiveness.Butthegapsaren’tlimitedtocybersecurity;otherboardshaverecognizedtheneedtoenhanceshareholderengagementskills,financialriskmanagementskills,andmore.Theskillsandcapabilitiesrequiredtoperformkeyboardresponsibilitieswilllikelycontinuetoevolveovertime.

› Inaddition,manyperceiveariskof“groupthink”intheboardroom,particularlyamonglargeblocsofdirectorswhohaveservedtogetherforlongperiods,whichmaythreatentoimpairboardeffectivenessandevenmaymaskindividualdirectorskillsandcapabilities.

OverviewandUpdates


› Thisfactor,inconcertwithrelatedboardcompositionfactors,isdesignedtobalanceboardrefreshment,boardstability,andtheimportanceofsomelong-tenureddirectorstoacompany’ssuccess.Thefactordoesnotencourage(byawardingadditionalcredit)forexcessivelevelsofrefreshment.

› Thefactorawardsincreasingcreditforincreasingproportionsoftheboardrepresentedbydirectorswithlessthansixyearsoftenureasofthemostrecentannualmeeting,withnoadditionalcreditgrantedforproportionsinexcessofone-third.

› Thisquestionwillconsideralldirectorsexceptexecutives.AffiliatedDirectorsandOutsideDirectors,asclassifiedbyISS,areincluded.

MarketApplicability:U.S.

Istheboardchairindependent?(Q14)› Anindependentchairmanoftheboardisbroadlyconsideredbestpractice.Asnotedina2009policybrief

publishedbyYaleUniversity'sMillsteinCenterforCorporateGovernanceandPerformance,the,"independentchaircurbsconflictsofinterest,promotesoversightofrisk,managestherelationshipbetweentheboardandCEO,servesasaconduitforregularcommunicationwithshareowners,andisalogicalnextstepinthedevelopmentofanindependentboard."

› SpecificallyinCanada,NationalPolicy58-201CorporateGovernanceGuidelinesrecommendsthatthechairoftheboardshouldbeanindependentdirector.Wherethisisnotappropriate,anindependentdirectorshouldbeappointedtoactas"leaddirector."However,eitheranindependentchairoranindependentleaddirectorshouldactastheeffectiveleaderoftheboardandensurethattheboard'sagendawillenableittosuccessfullycarryoutitsduties.

› ThisquestionwillconsidertheclassificationofthechairmanoftheboardaccordingtoISSpolicy,outliningwhetherhe/sheisindependent,anaffiliatedoutsider,anexecutive,theChairman,aninsiderdirectorotherthanChairman/President/CEO,oraformerorcurrentPresident/CEO,ofthecompany.

› InJapan,adistinctionwillbemadebetweenthechairmanoftheboard(��gicho)andthechairmanofthecompany(��kaicho)3.Thisquestionwillconsiderwhetherthechairmanoftheboardisaninsideroranoutsidedirectorbasedonthecompany’scorporategovernancereport.

MarketApplicability:Allregions.

Hasthecompanyidentifiedasenior(lead)independentdirector?(Q16)› Aleadindependentdirectorprovidesanimportantleadershipfunctionforaboardwithacombined

CEO/chairstructure.Aneffectiveleaddirector’sfunctionsgenerallyinclude,butarenotlimitedto,the

----------------------3InJapan,thechairmanofthecompany(kaicho)issomeonewhoisatthehelmofthecompany(whoisoftenaformerCEOofthecompany),butdoesnotalwayschairtheboard.EvenwhenacompanyhasthechairmanofthecompanyasadistinctroleseparatefromtheCEO,sucharolemaybesymbolicorhonoraryposition,andtheCEOmaystillchairtheboard.FromtheperspectiveoftheseparationofCEOandchair,itismoreappropriateinJapantoexaminetheseparationofCEOandthechairmanoftheboard(gicho).

OverviewandUpdates


following:presidesatallmeetingsoftheboardatwhichthechairmanisnotpresent,includingexecutivesessionsoftheindependentdirectors;servesasliaisonbetweenthechairmanandtheindependentdirectors;approvesinformationsenttotheboard;approvesmeetingagendasfortheboard;approvesmeetingschedulestoassurethatthereissufficienttimefordiscussionofallagendaItems;hastheauthoritytocallmeetingsoftheindependentdirectors;andifrequestedbymajorshareholders,ensuresthatheisavailableforconsultationanddirectcommunication.

› Thisquestionaddresseswhetherthereisaleadindependentdirectorwithclearlydelineatedandcomprehensiveduties.FortheU.S.:aleadindependentdirectororapresidingdirectorwillbeconsideredifonedirectorservesinthatcapacityforatleastoneyear.Apositionthatrotatesamongmembersoftheboardwithintheyearwillnotbeconsidered.

› Thepresenceofaleadindependentdirectorwillmitigatetosomedegreeconcernsraisedbyanon-independentchairorcombinedCEO-chairstructure.Theabsenceofaleadindependentdirectorwillraiseasmalladditionaldegreeofconcern;anon-independentleaddirectorslightlyless.Inthecasewherethereisanindependentchair(andthusnoleadindependentdirector),thisquestionwillnotbeapplicable.

MarketApplicability:U.S.,Canada,Anglo,AsiaPacific,W.Europe,S.Europe,Germanic,Russia,India

HasthecompanyappointedaLeadIndependentDirectororestablishedotherwaysofeffectivecollaborationbetweenindependentdirectorsandmanagementandstatutoryauditors?(Q367)

› Theleaddirectorservesasanindependentchiefamongallboardmembersandtherebyhelpsensureboardrelationsrunsmoothly.Leaddirectorsdrivehigh-performanceboards.Leaddirectorsmayimproveboardperformancebyfacilitatingboarddiscussions,byhelpingdirectorsreachconsensus,andbykeepingboardmattersontrack.

› TheJapaneseCorporateGovernanceCoderecognizestheimportanceofleadindependentdirectorsandbelievesthatitspresencecouldhelpfaciliateoversightandcollaborationamongdifferentgoverningbodies.However,theCodealsoallowscompaniestoachievesimilaroversightmechanismthroughotherunspecifiedmeans,andcompaniesarenotrequiredtodisclosewhetherithasaleadindependentdirectorornot.Therefore,thisquestionwillexaminethecompliancewiththeprovisionsoftheCode4-8-2.

Marketapplicability:Japan

Whatisthetermofmandateproposedforsupervisoryboardmembers(atthelatestgeneralmeeting)?(Q17)

› Directortermlengthscanaffecttheabilityofshareholderstoissueregularopinionsaboutthecompositionoftheboard.Ingeneral,aone-yearmandateisconsideredbestpractices,butISSrecognizesthatmarketpracticeinsomemarketsisforathree-yearterm,andwillnotpenalizeacompanyifthedirectormandateisforthreeyearsorless.

MarketApplicability:W.Europe,Nordic,S.Europe

OverviewandUpdates


Whatpercentageoftheboardconsistsofimmediatefamilymembersofmajorityshareholders,executives,andformerexecutives(withinthepastfiveyears)?(Q205)

› Thisquestionelaboratesonthegeneralissueofboardindependenceandaddresseswhethermembersoftheboardarerelated(pertheSECdefinitionoffamilymembership)toanycurrentorformerofficers(fiveyearcooling-offperiod)orsignificantshareholdersofthecompany.

› PleaseseeAppendixIconcerningscoringthisquestionwhennewdirectorsareappointedtotheboardbetweenshareholdermeetings.Thisfactorhasazero-weightimpactonthescoringmodelandisincludedforinformationalpurposesonly.

MarketApplicability:U.S.,LatinAmerica,Russia

Whatpercentageoftheboardconsistsofformerorcurrentemployeesofthecompany?(Q206)› Thisquestionelaboratesonthegeneralquestionofboardindependenceandaddresseswhethermembers

oftheboardareformeremployeesofthecompany.ThedefinitionofformeremployeesfollowsISS‘classificationofdirectors,whichappliesacooling-offperiodoffiveyearsforexecutivesotherthantheCEO.UndercurrentISSpolicy,aformerCEOwillalwaysbeconsideredaffiliated(moreinformationisavailableviatheISSPolicyGateway).

› PleaseseeAppendixIconcerningscoringthisquestionwhennewdirectorsareappointedtotheboardbetweenshareholdermeetings.

› Thisfactorhasazero-weightimpactonthescoringmodelandisincludedforinformationalpurposesonly.

MarketApplicability:U.S.,LatinAmerica,Russia

CompositionofCommittees

WhatpercentageofnominatingcommitteemembersareindependentbasedonISS’standards?(Q19)› Mostnominatingcommitteesareresponsiblefordevelopingapolicyonthesizeandcompositionofthe

boardandforidentifyingandapprovingnomineesforvacantpositionsontheboardofdirectors.ThecommitteeshouldhavethebenefitoftheCEO’sinvolvementintheselectionprocess,buttheresponsibilityforselectionofboardnomineesshouldbethatofindependentdirectors.

› PleaseseeAppendixIconcerningscoringthisquestionwhennewdirectorsareappointedtotheboardbetweenshareholdermeetings.Nominationcommitteeswithlessthanindependentmembershipasrecommendedbylocalbestpracticewillraiseincreasinglevelsofconcern.

› QualityScorewillconsider:thepercentageofindependentmembers(i.e.,asdefinedbyISS'proxyvotingguidelines);ifnoinformationisgiven;ifnocommitteeexists;orifthereisnoclearnominationprocess.

› ForJapan,QualityScorewilladditionallyconsiderwhetherthecommitteeisaformalnominatingcommitteeapplicabletocompanieswiththree-committeestructureoravoluntaryadvisorynominatingcommittee,and

OverviewandUpdates


willconsiderthepercentageofoutsidedirectorsonthecommitteebasedonthecompany’scorporategovernancereport.

› FortheCanadianmarket,QualityScorewillnotpenalizeamajorityownedcompanywherenominatingcommitteeindependencelevelisbelow50percent;aslongasthecompanyqualifiesformajoritycontrolledexemption.Amajorityownedcompanyisdefinedforthepurposeofthispolicyasacompanycontrolledbyashareholderorgroupofshareholderswhotogetherhaveaneconomicownershipinterestunderasingleclasscommonsharecapitalstructurethatiscommensuratewiththeirvotingentitlementof50percentormoreoftheoutstandingcommonshares.SuchcompanyisdeemedtoenjoymajoritycontrolledexemptionifitmeetscertainindependenceandgovernancecriteriaasoutlinedintheCanadaProxyVotingGuidelines.

MarketApplicability:U.S.,Canada,W.Europe,Germanic,Anglo,S.Europe,AsiaPacific,Australasia,Africa,Russia,S.Korea,India,Japan

Arethereexecutivesonthenominatingcommittee?(Q306)› Thisquestionwillconsiderwhetherthereareanycompanyexecutivesonthenominatingcommittee.Most

nominatingcommitteesareresponsiblefordevelopingapolicyonthesizeandcompositionoftheboardandforidentifyingandapprovingnomineesforvacantpositionsontheboardofdirectors.ThecommitteeshouldhavethebenefitoftheCEO’sviewsinitsselectionprocess,buttheresponsibilityforselectionofboardnomineesshouldbethatofindependentdirectors.

Marketapplicability:AsiaPacific,Africa,Russia,India

Isthechairofthenominatingcommitteeindependent?(Q23)› Mostnominatingcommitteesareresponsiblefordevelopingapolicyonthesizeandcompositionofthe

boardandforidentifyingandapprovingnomineesforvacantpositionsontheboardofdirectors.ThecommitteeshouldhavethebenefitoftheCEO’sinvolvementintheselectionprocess,buttheresponsibilityforselectionofboardnomineesshouldbethatofindependentdirectors.

› QualityScorewillconsiderwhetherthecommitteechairisanexecutive,affiliatednon-executive,insider,outsider,non-directorcommitteememberorindependent.GovernanceQualityScorealsowillconsiderwhetherthereis,asdisclosedexplicitlybythecompany,achairaswellasacommittee.

MarketApplicability:W.Europe,Germanic,Australasia,S.Europe,AsiaPacific,Russia,India,SouthKorea,Japan

OverviewandUpdates


Doesthecompanymaintainaformalnominatingcommittee?(Q207)› Companiesshouldconsidersettingupanominationcommitteeresponsibleforthefuturecompositionof

theboardofdirectors.

MarketApplicability:Nordic,LatinAmerica

Arethereanyboardmembersonthenominatingcommittee?(Q208)› InsomeNordicmarkets,nominatingcommitteesarecomposedprimarilyofshareholderrepresentatives,

notontheboard,owingtotheveryconcentratedownershipstructure.Withinthiscontext,havinganycurrentboardmembersonthecommitteeconstitutesapotentialconflictofinterest.

MarketApplicability:Nordic

Istheremorethanoneboardmemberwhoisdependentonmajorshareholdersonthenominatingcommittee?(Q210)

› Nominatingcommitteesareformedprimarilyofshareholderrepresentatives,notontheboard,owingtotheveryconcentratedownershipstructureinsomeNordicmarkets.Withinthiscontext,havinganexcessivenumberofboardmembersonthecommitteeconstitutesaconflictofinterest.

MarketApplicability:Nordic

Whatisthenumberofnominationcommitteemembers?(Q211)› ParalleltotheU.K.coderequirementsonremunerationandauditcommittees,bestpracticesuggestshaving

aminimumofthreenon-executiveboardmemberssittingonthenominationcommitteetohaveameaningfulquorum.

MarketApplicability:Anglo,S.Europe

Doesthecompanymaintainaformalremunerationcommittee?(Q330)› Theremunerationcommitteemakesrecommendationsandsetsguidelinesforthecompensationof

executivesofthecompany.Companiesshouldconsidersettinguparemunerationcommitteeassistingtheboardofdirectorsinsettingremunerationforkeymanagementaswellastheboard,

› QualityScorewillconsiderwhetherthecompanyhassetupaformalremunerationcommittee.

MarketApplicability:LatinAmerica

OverviewandUpdates


WhatpercentageofthecompensationcommitteeisindependentunderISS’standards?(Q25)› Thecompensationcommitteemakesrecommendationsandsetsguidelinesforthecompensationof

executivesofthecompany.Bestpracticedictatesthatthepanelshouldbecomposedsolelyofindependentdirectors.

› QualityScorewillconsider:thepercentageofindependentmembers(asdefinedbyISS'proxyvotingguidelines);ifnoinformationisgiven;ifnocommitteeexists;orifthereisnoclearnominationprocess.

› PleaseseeAppendixIconcerningscoringthisquestionwhennewdirectorsareappointedtotheboardbetweenshareholdermeetings.Compensationcommitteeswithlessindependentmembershipasrecommendedbylocalbestpracticeraisesconcernofgovernancerisk.

› ForJapan,QualityScorewilladditionallyconsiderwhetherthecommitteeisaformalcompensationcommitteeapplicabletocompanieswiththree-committeestructureoravoluntaryadvisorynominatingcommittee,andwillconsiderthepercentageofoutsidedirectorsonthecommitteebasedonthecompany’scorporategovernancereport.

› FortheCanadianmarket,QualityScorewillnotpenalizeamajorityownedcompanywherecompensationcommitteeindependencelevelisbelow50percent;aslongasthecompanyqualifiesformajoritycontrolledexemption.Amajorityownedcompanyisdefinedforthepurposeofthispolicyasacompanycontrolledbyashareholderorgroupofshareholderswhotogetherhaveaneconomicownershipinterestunderasingleclasscommonsharecapitalstructurethatiscommensuratewiththeirvotingentitlementof50percentormoreoftheoutstandingcommonshares.SuchcompanyisdeemedtoenjoymajoritycontrolledexemptionifitmeetscertainindependenceandgovernancecriteriaasoutlinedintheCanadaProxyVotingGuidelines.


Arethereexecutivesonthecompensationcommittee?(Q27)› Thecompensationcommitteemakesrecommendationsandsetsguidelinesforthecompensationof

executivesofthecompany.Bestpracticedictatesthatthepanelshouldbecomposedsolelyofindependentdirectors.Whenexecutivesarememberofthecompensationcommittee,thereisaconflictofinterest.

› Thisquestionwillconsiderwhetherthereareanyexecutivesonthecompensationcommittee.

MarketApplicability:W.Europe,Germanic,Nordic,S.Europe,AsiaPacific,Australasia,Africa,India

Isthechairofthecompensationcommitteeindependent?Q28)› Thecompensationcommitteemakesrecommendationsandsetsguidelinesforthecompensationof

executivesofthecompany.Bestpracticedictatesthatthechairshouldbeanindependentdirector.

OverviewandUpdates


› QualityScorewillconsiderwhetherthecommitteechairisanexecutive,affiliatednon-executive,insider,outsider,non-directorcommitteememberorindependent.GovernanceQualityScorealsowillconsiderwhetherthereis,asdisclosedexplicitlybythecompany,achairaswellasacommittee.

MarketApplicability:W.Europe,Germanic,Anglo,S.Europe,AsiaPacific,Australasia,Africa,Russia,India,SouthKorea,Japan

Isthechairoftheboardofdirectorsamemberofthecompensationcommittee?(Q29)› Thecompensationcommitteemakesrecommendationsandsetsguidelinesforthecompensationof

executivesofthecompany.Bestpracticedictatesthatthepanelshouldbecomposedsolelyofindependentdirectors.Inparticular,thechairoftheboardmaybeamemberofthiscommitteeifhe/shewasconsideredindependentonappointmentaschairman.

› TheUKcorporategovernancecodesays:“Theboardshouldestablisharemunerationcommitteeofatleastthree,orinthecaseofsmallercompaniestwo,independentnon-executivedirectors.Inadditionthecompanychairmanmayalsobeamemberof,butnotchair,thecommitteeifheorshewasconsideredindependentonappointmentaschair.Theremunerationcommitteeshouldmakeavailableitstermsofreference,explainingitsroleandtheauthoritydelegatedtoitbytheboard.Whereremunerationconsultantsareappointed,theyshouldbeidentifiedintheannualreportandastatementmadeastowhethertheyhaveanyotherconnectionwiththecompany.”

MarketApplicability:Anglo

Whatisthenumberofremunerationcommitteemembers?(Q212)› TheU.K.Coderecommendsthatthereshouldbeatleastthreenon-executiveboardmemberssittingon

eachremunerationcommittee,allofwhomshouldbeindependent.ThisguidelinewillbeimplementedforFTSE350andISEQ20companies.Forcompanieswhicharenotconsituentsofsaidindices,thebestpracticestandardissetattwomembers.

› InSpain,Recommendation49providesthat:“ThemajorityofNominationCommitteemembers–orNominationandRemunerationCommitteemembersasthecasemaybe–shouldbeindependentdirectors.”InItaly,Principle6.P.3providesthat:“6.P.3.TheBoardofDirectorsshallestablishamongitsmembersaremunerationcommittee,madeupofindependentdirectors.Alternatively,thecommitteemaybemadeupofnon-executivedirectors,themajorityofwhichtobeindependent;inthiscase,thechairmanofthecommitteeisselectedamongtheindependentdirectors.”

› Answerswillconsiderwhetherthecompanyhasaremunerationcommittee,thenumberofmembersonthecompensationcommittee,whetherthecompositionofthecommitteehasbeendisclosed,and,ifso,thecompositionofthecommittee.


OverviewandUpdates


Doesthecompanymaintainaformalauditcommittee?(Q331)› WhilesomecompaniesmaintainastatutoryAuditCommittee,underBrazilianCorporateLaw,most

companieshaveaFiscalCouncil,whichisacorporatebodyindependentofmanagementandacompany’sexternalauditorsthatoperatesonapermanentornon-permanentbasis.TheFiscalCouncilisgenerallynotequivalenttoaU.S.auditcommittee;itsprimaryresponsibilityistomonitormanagement’sactivities,reviewthefinancialstatements,andreportitsfindingstotheshareholders.

› UndertheBrazilianCorporateLaw,theFiscalCouncilmaynotcontainmemberswhoaremembersoftheBoardofDirectorsortheexecutivecommittee,orwhoareemployeesofthecompanyoracontrolledentity,oraspouseorrelativeofanymemberofmanagement.

› WhilesomecompaniesmaintainastatutoryAuditCommitteeinadditiontoaFiscalCouncil,theformerisnotarequirement.UnderRule10A-3(c)(3)oftheU.S.SecuritiesExchangeAct,certainnon-U.S.issuersareexemptfromtheauditcommitteerequirementsofSection303AoftheNYSEListedCompanyManualiftheyestablish,accordingtotheirlocallaworregulations,anotherbodythatactsasanauditcommittee.

› QualityScorewillconsiderwhetherthecompanyhassetupaformalauditcommittee,andwhetherallofitsmembersarealsomembersoftheboardofdirectors.


Doesthecompanymaintainaformalfiscalcouncil?(Q332)› UnderBrazilianCorporateLaw,theFiscalCouncilisacorporatebodyindependentofmanagementanda

company’sexternalauditorsthatoperatesonapermanentornon-permanentbasis.ThefiscalcouncilisgenerallynotequivalenttoaU.S.auditcommittee;itsprimaryresponsibilityistomonitormanagement’sactivities,reviewthefinancialstatements,andreportitsfindingstotheshareholders.

› UndertheBrazilianCorporateLaw,thefiscalcouncilmaynotcontainmemberswhoaremembersoftheBoardofDirectorsortheexecutivecommittee,orwhoareemployeesofthecompanyoracontrolledentity,oraspouseorrelativeofanymemberofmanagement.

› Whilesomecompaniesmaintainastatutoryauditcommitteeinadditiontoafiscalcouncil,theformerisnotarequirement.UnderRule10A-3(c)(3)oftheExchangeAct,non-U.S.issuersareexemptfromtheauditcommitteerequirementsofSection303AoftheNYSEListedCompanyManualiftheyestablish,accordingtotheirlocallaworregulations,anotherbodythatactsasanauditcommittee.

QualityScorewillconsiderwhetherthecompanyhassetupafiscalcouncil,andwhetheritoperatesonapermanentornon-permanentbasis.


OverviewandUpdates


WhatpercentageoftheauditcommitteeisindependentunderISS’standards?(Q31)› Likeotherkeyboardcommittees,auditpanels/committeesshouldincludeonlyindependentnon-executives

toreducetheriskofconflictofinterestwithregardtothecompany’saccounts.› QualityScorewillconsider:thepercentageofindependentmembersasdefinedbyISS'policyguidelines;if

noinformationisgiven;orifnocommitteeexists.› PleaseseeAppendixIconcerningscoringthisquestionwhennewdirectorsareappointedtotheboard

betweenshareholdermeetings.› Auditcommitteeswithlessindependentmembershipasrecommendedbylocalbestpracticeraisesthe

concernofgovernancerisk.› FortheCanadianmarket,QualityScorewillnotpenalizeamajorityownedcompanywhereauditcommittee

independencelevelisbelow50percent;aslongasthecompanyqualifiesformajoritycontrolledexemption.Amajorityownedcompanyisdefinedforthepurposeofthispolicyasacompanycontrolledbyashareholderorgroupofshareholderswhotogetherhaveaneconomicownershipinterestunderasingleclasscommonsharecapitalstructurethatiscommensuratewiththeirvotingentitlementof50percentormoreoftheoutstandingcommonshares.SuchcompanyisdeemedtoenjoymajoritycontrolledexemptionifitmeetscertainindependenceandgovernancecriteriaasoutlinedintheCanadaProxyVotingGuidelines.


Arethereexecutivesontheauditcommittee?(Q33)› Likeotherkeyboardcommittees,auditpanels/committeesshouldincludeonlyindependentnon-

executivestoreducetheriskofconflictofinterestwithregardtothecompany’saccounts.› Answerswillconsiderwhetherthecompanyhasanauditcommittee,thepresenceofexecutiveson

theauditcommittee,whetherthecompositionofthecommitteehasbeendisclosed,andifso,thecompositionofthecommittee.

MarketApplicability:W.Europe,Germanic,Australasia,S.Europe,AsiaPacific,Nordic,India

Isthechairoftheauditcommitteeindependent?(Q34)› Likeotherkeyboardcommittees,auditpanelsshouldideallybecomprisedsolelyofindependentnon-

executivestoensurenopossibilityofconflictofinterestwithregardtothecompany’saccounts.› QualityScorewillconsiderwhetherthecommitteechairisanexecutive,affiliatednon-executive,or

independent.› Answerswillconsidertheclassificationofthechairmanoftheauditcommittee,whetherornotsuch

committeehasbeensetup,andwhetherthecompositionofthecommitteehasbeendisclosed.

OverviewandUpdates


MarketApplicability:W.Europe,Germanic,Anglo,S.Europe,AsiaPacific,Australasia,India,SouthKorea,Japan

Isthechairoftheboardofdirectorsamemberoftheauditcommittee?(Q35)› BoththeU.K.andtheDutchcodesofbestpracticerecommendthatthechairmanoftheboardshouldnot

beamemberoftheauditcommittee.ThiswiththeexceptionofnonFTSE350orISEQ20companies,whereitisacceptedthatthechairmanoftheboardisamemberofthecommittee,providedhe/sheisnotthechairmanofthecommittee.

› Answerscoverwhether:thechairmanoftheboardisamemberoftheauditcommittee;whetherhe/shechairsthecommittee;ifanauditcommitteehasbeenestablished;andifthecompositionofthecommitteehasbeendisclosed.

MarketApplicability:W.Europe,Anglo

Howmanymembersserveontheauditcommittee?(Q213)› TheU.K.Coderecommendsthatthereshouldbeatleastthreenon-executiveboardmemberssittingon

auditcommittees,allofwhomshouldbeindependent.ThisguidelinewillbeimplementedforFTSE350andISEQ20companies.Forcompanieswhicharenotconsituentsofsaidindices,thebestpracticestandardissetattwomembers.

› InSpain,Recommendation39providesthat:“InadditiontotheAuditCommittee[…],theBoardofDirectorsshouldformacommittee,ortwoseparatecommittees,ofNominationandRemuneration.Therulesgoverningthemake-upandoperationoftheAuditCommitteeandthecommitteeorcommitteesofNominationandRemunerationshouldbesetforthintheboardregulations,andincludethefollowing:[…]b)TheseCommitteesshouldbeformedexclusivelyofexternaldirectorsandhaveaminimumofthreemembers.”InPortugal,article423-B.2ofthecommercialCompanyActprovidesthat“Theauditcommitteeshallbecomposedofthenumberofmembersspecifiedinthearticlesofassociation,withatleastthreeeffectivemembers.”InItaly,Principle4.C.1providesthat:“4.C.1.TheestablishmentandfunctioningofthecommitteesgovernedbytheCodeshallmeetthefollowingcriteria:a)committeesshallbemadeupofatleastthreemembers.”

› Thisquestionwillconsiderthenumberofcommitteemembersontheauditcommittee,whethersuchcommitteehasbeensetupandwhetherthecompositionofthecommitteehasbeendisclosed.


Whatgovernancestructurehasthecompanyadopted?(Q283)› TherearethreedifferenttypesofboardstructuresinJapan;(1)Japanesetraditionaltwo-tieredboard

structurewithaboardofdirectorsandaboardofstatutoryauditors(��kansayaku-kai);(2)aunitaryboardwiththreecommitteestructure(alsoknownasU.S.styleboard)withaudit,nomination,and

OverviewandUpdates


compensationcommitteesadoptedbyasmallfractionofJapanesecompanies;and(3)aunitaryboardwithauditcommitteestructure,anewtypeofstructureintroducedin2015.

› Japanesecompaniescanchooseamongthreetypesofgoverningstructures,andthisisascreeningquestionasQualityScorehasalreadyscoredrelavanttopicsinotherquestions.


Hasthecompanydisclosedinformationonkeycommitteeattendance?(Q340)› Directorswhodonotattendasufficientnumberofboardandkeycommitteemeetingsarenotfulfilling

theirobligationtorepresentshareholdersandprovideoversightanddirectiontomanagement.› QualityScorewillconsiderwhetherornotthecompanyhasdisclosedinformationonkeycommittee

attendance.

MarketApplicability:India

BoardPractices

Howmanydirectorsserveonanexcessivenumberofoutsideboards?(Q309)› Thisquestionwillconsiderthenumberofoutsideboardpositionsthatareheldbyeachindividualdirector.

Directorswithanexcessivenumberofboardseatsmaynothavesufficienttimetodevotetotheneedsofindividualboards.Answerswillconsiderthenumberofboardmemberswhoserveonanexcessivenumberofboardpositionsofpubliclytradedcompanies(differentiatingbetweendirectorswhoareactiveCEOsandthosethatarenotactiveCEOs).Excessivenessofoutsideboardpositionsisbasedonmarket-specificISSpolicy,availableontheISSPolicyGateway.

MarketApplicability:AsiaPacific

Dotheexecutivesserveonasignificantnumberofoutsideboards?(Q36)› Anexecutiveroleisapositionofgreatresponsibilityandtimedemands.Sittingonmultipleoutsideboards

maythreatentheabilityoftheexecutivestoattendtothebusinessofhisorherprimaryemployer.› Thisfactorhasazero-weightimpactonthescoringmodelforLatinAmericancompaniesandisincludedfor

informationalpurposesonly.

MarketApplicability:W.Europe,Germanic,Nordic,S.Europe.LatinAmerica,Anglo

DoestheCEOserveonasignificantnumberofoutsideboards?(Q37)

OverviewandUpdates


› Thechiefexecutiveroleisapositionofgreatresponsibilityandtimedemands.SittingonmultipleoutsideboardsmaythreatentheabilityoftheCEOtoattendtothebusinessofhisorherprimaryemployer.

› QualityScorewillconsiderthetotalnumberofpublicboardseatsheldbytheCEO(includingthecompany),orwhethernoinformationisavailable.Allsubsidiarieswiththeirownpublicly-tradedstockarecountedasindividualboards.

› Excessiveboardmemberships-morethantwooutsideboards(threetotalboards)–raisesgovernanceriskconcern.

› Thisfactorhasazero-weightimpactonthescoringmodelforLatinAmericancompaniesandisincludedforinformationalpurposesonly.

MarketApplicability:U.S.,W.Europe,Germanic,Nordic,S.Europe,AsiaPacific,Australasia,Canada,LatinAmerica,Anglo

Howmanynon-executivesserveonasignificantnumberofoutsideboards?(Q38)› Directorswithanexcessivenumberofboardseatsmaynothavesufficienttimetodevotetotheneedsof

individualboards.› QualityScorewillconsiderthetotalnumberofboardseats(includingthecompany)heldbynon-executives

todetermineiftheyareexcessive,asdefinedbytherespectivemarket,orwhethernoinformationisavailable.ISS‘benchmarkpolicydefinesexcessiveintheU.S.asmorethanfivepubliccompanyboardseats.ForU.S.andCanadiancompanies,alldirectorsareincludedexcepttheCEO.


MarketApplicability:U.S.,W.Europe,Germanic,Nordic,S.Europe,Australasia,Canada,LatinAmerica,Anglo

Doesthechairserveonasignificantnumberofoutsideboards?(Q39)› Asforothernon-executives,butevenmoresoforthechairmanoftheboard,holdingmultipleoutsideboard

positionsmayrepresentanimpedimenttothedirector'sabilitytodevotesufficienttimetotheneedsofeachcompany.


MarketApplicability:W.Europe,Germanic,Nordic,S.Europe,Australasia,LatinAmerica,Anglo

Hasthecompanydisclosedtheattendanceofeachdirector?(Q337)

OverviewandUpdates


› InChina,attendancerecordofonlyindependentdirectorsisrequiredtobedisclosed;however,thebestpracticeistodiscloseattendancerecordofalldirectorsontheboard.

› QualityScorewillconsiderwhetherornotthecompanyhasdisclosedinformationonindividualattendanceofboardandcommitteemeetings.

MarketApplicability:AsiaPacific,India

Whatpercentageofallmeetingswasattendedbyatleast50percentofthesupervisoryboard?(Q43)› Directorswhodonotattendasufficientnumberofboardmeetingsarenotfulfillingtheirobligationto

representshareholdersandprovideoversightanddirectiontomanagement.ThisquestionwasdesignedtoaccountforthespecificdisclosureintheGermanicmarkets.

MarketApplicability:Germanic

Whatpercentageofthedirectorsattendedlessthan75percentoftheboardmeetings?(Q44)› Directorswhodonotattendasufficientnumberofboardmeetingsarenotfulfillingtheirobligationto

representshareholdersandprovideoversightanddirectiontomanagement.› InAustralia,ISSlooksatdirectorattendanceatboardandcommitteemeetingsfortwoconsecutiveyears.› InSouthKoreaandJapan,thisquestionwillonlyexaminetheattendanceofoutsidedirectors,asattendance

recordsofinsidedirectorsarenotrequiredtobedisclosedinthesemarkets.

MarketApplicability:W.Europe,S.Europe,AsiaPacific,Australasia,Africa,S.Korea,India,Japan

Didanydirectorattendlessthan75percentoftheaggregateboardandapplicablekeycommitteemeetingswithoutavalidexcuse?(Q45)

› Directorswhodonotattendasufficientnumberofboardandkeycommitteemeetingsarenotfulfillingtheirobligationtorepresentshareholdersandprovideoversightanddirectiontomanagement.

› QualityScorewillconsiderthenumberofdirectorswhoattendedlessthan75percentoftheaggregateoftheirboardandcommitteemeetings,withconsiderationgiventowhetherthemeetingsweremissedforavalidexcuse(e.g.medicalissue,familyemergencies,ormissingonly1meeting.).InCanada,keycommitteesincludetheAudit,CompensationandNominatingcommittees.ForU.S.companies,thisquestionappliestoallboardandcommmitteemeetingsperSECdisclosurerequirements.

MarketApplicability:U.S.,Canada,Anglo

Howmanydirectorsreceivedwithhold/againstvotesof50percentorgreateratthelastannualmeeting?(Q49)

OverviewandUpdates


› Significantoppositiontoaboardmembertypicallysignifiesalackofaccountability,responsiveness,independence,and/orcompetenceonthepartofthetargeteddirector,warrantingfurtherevaluation.

› QualityScorewillconsiderthenumberofdirectorswithmajorityoppositionofvotescast4atthelastannualmeeting.FromthedateofpublicationoftheISSproxyresearchreportuntilthemeetingresultsareavailable,thisquestionwillbependingandtheresultwillindicate“meetingresultsinprogress”forthisfactor.

MarketApplicability:U.S.,Canada

Doesthecompanyroutinelyholdindependentdirectormeetingsorhaveothermechanismstofacilitateeffectivecollaborationofindependentdirectors,managementandstatutoryauditors?(Q366)

› Routinesessionsindependentdirectorswherenomanagementispresentisconsideredaneffectivemeanstofosterunderstandingandshareinformationamongindependentdirectors,andhelpenhancetheiroversightability.

› TheJapaneseCorporateGovernanceCode(4-8-1)stipulatesthatinordertoactivelycontributetotheboard,“independentdirectorsshouldendeavortoexchangeinformationanddevelopasharedawarenessamongthemselvesfromanindependentandobjectivestandpoint”andthatroutinelyheldmeetingsconsistingsolelyofindependnetdirectorscouldhelpachievethisobjective.


Whatpercentageofdirectorsreceivedshareholderapprovalratesbelow80%?(Q312)› QualityScorewillconsiderthepercentageofdirectorswhoreceivedlessthan80percentofvotescastatthe

mostrecentshareholdermeeting.› Oppositiontoaboardmembertypicallysignifiesaperceivedlackofaccountability,responsiveness,

independence,and/orcompetenceonthepartofthetargeteddirector,warrantingfurtherevaluation.QualityScorewillconsiderdirectorswhoreceivedlessthan80percentshareholderapproval.ISScollectsmeetingresultsastheyareavailableandthisfactorwillbeupdatedandrecalculatedaccordingly.

› FromthedateofpublicationoftheISSproxyresearchreportuntilthemeetingresultsareavailable,thisquestionwillbependingandtheresultwillindicate“meetingresultsinprogress”forthisfactor.

Marketapplicability:U.S.

DoesthecompanydisclosetheexistenceofaformalCEOandkeyexecutiveofficerssuccessionplan?(Q348)

----------------------4Forvotescast,ISSusesFor/(For+Against).Abstentionsarenotincluded.

OverviewandUpdates


› Successioneventsdefineperiodsthathavethepotentialtocausesignificantdisruptionanddistractionforcompaniesandfortheirboards,andsometimescanleadtodetrimetalimpactsonshareholdersandthevalueoftheirholdings.Well-craftedandwell-understoodsuccessionplanscanhelpminimizedisruptioninthesescenarios;transitioneventsatcompaniessuchasAppledemonstratehowproperly-plannedsuccessioncaneaseshareholderconcernsandprotectshareholdervalue.

› EstimatesofthefinancialimpactofplannedCEOsuccessionvary.Acknowledgingthedifferencebetweenhavingasuccessionplanandplannedsuccession,therearesomedatapointsthataccentuatethemagnitudeoftheproblem.AccordingtoarecentstudybyStrategy&,“Largecompaniesthatunderwentforcedsuccessionsinrecentyearswouldhavegenerated,onaverage,anestimated$112billionmoreinmarketvalueintheyearbeforeandtheyearaftertheirturnoveriftheirCEOsuccessionhadbeentheresultofplanning.”

› QualityScorewillconsiderwhetheracompanyhasaboard-approved,periodically-evaluatedsuccessionplanfortheCEO,otherseniormanagement,andkeyexecutiveofficers.


DoesthecompanyhaveamechanismtoappropriatelymonitorandsuperviseitsCEOsuccessionplanning?(Q368)

› Whenproperlyplannedandthoughtfullyexecuted,CEOsuccessionoffersacompanyfarmorethanjustthetransitioningofitstopleader.Itenablesorganizationstoenvisionnewopportunitiesforgrowth,andrealignandstrengthenprocessesandsystemsthroughouttheenterprise.Successionplanningisahumancapitalriskbecauseofitspotentialhighimpactonbusinessperformanceandcontinuity.Makinglong-termandemergencysuccessionplansfortheCEOisafundamentalboardresponsibility,onethatshouldbeaddressedonaregularbasisregardlessofCEO’shealthandtenure.

› WhiletheJapaneseCorporateGovernanceCode(4-1-3)doesnotrequiretheestablishmentofaCEOsuccessionpolicyandcompaniesneednotdisclosewhetherithasaformalCEOsuccessionplanornot,theCoderecommendscompaniestoinstituteamechanismformonitoringandfacilitatingCEOsuccessionplan.


Whatwastheaverageoutsidedirectors'totalcompensationasamultipleofthepeermedian?(Q315)› Thisrelativemeasureexpressestheprioryear’saverageoutsidedirector'spay(basedontotalcompensation

reportedforeachnon-executivedirectorinthecompany’sproxystatement)asamultipleofthemedianpayofitsISS-determinedcomparisongroupforthesameperiod.Thecalculationforthismeasureis:theaverageoutsidedirector'stotalpaydividedbythemedianaverageoutsidedirectortotalpaylevelwithinthecomparatorgroup.


OverviewandUpdates


Whatistheaggregatelevelofstockownershipoftheofficersanddirectors,asapercentageofsharesoutstanding?(Q140)

› Bestpracticedictatesthatdirectorsmaintainameaningfullevelofshareownershipbyacertaintimeafterappointmenttobetteraligntheirinterestswiththoseofshareholders.

› QualityScorewillconsiderthetotallevelofholdingsofdirectorsandexecutivesasapercentageofsharesissuedbythecompany.

› ThisfactorhasmovedfromtheCompensationpillarintheEquityRiskMitigationsubcategorytotheBoardpillarintheBoardPracticessubcategory.


MarketApplicability:W.Europe,Germanic,Anglo,Nordic,S.Europe,Australasia,LatinAmerica,Africa,Russia

Doalldirectorswithmorethanoneyearofserviceownstock(whocanlegally/practicallydoso)?(Q144)

› Similartothestockownershiprationaleabove,alldirectorsshouldmaintainanequitystakeinthecompany.› QualityScorewillconsiderwhetherstockisownedbydirectorswithmorethanoneyearofservice,orifthe

informationisnotdisclosed(basedonbeneficialownership,asreported).Incaseswheredetailsregardingownershiparevagueorotherwisenotdefinitivewithregardtothemandatorynatureoftheownershiprequirementorlevelofholdings,ISSwilldeemtheinformation“notdisclosed.”

› ForU.S.markets,thisquestionwillconsiderthedirectorswhocanpracticallyownshares.Certaindirectors,suchasemployeesorrepresentativesofsignificantshareholdersorinvestmentfirms,maybeprohibitedbyinternalpoliciesfrompersonallyholdingshares(forexample,toavoidtheappearanceorpossibilityof“front-running”).Suchdirectorsareexcludedfromthiscalculation.

› IntheU.S.andCanada,deferredshareunitsarealsoconsideredforthisquestion.

MarketApplicability:U.S.,Canada,AsiaPacific,Australasia,S.Korea,India

Didanyexecutiveordirectorpledgecompanyshares?(Q243)› Theprospectthatanexecutiveordirectormaybeforcedtosellasubstantialamountofsharesposes

significantrisksforothershareholders,whomayseethevalueoftheirsharesdecline.Inaddition,ahighlyleveragedexecutivemaybeincentivizedtoriskierbehavior.

› QualityScorewillconsiderwhethercompanyexecutivesordirectorshavepledgedcompanyshares.ISSwillconsiderpledgingofsharesofaninstitutionorcompanywhereadirectororanexecutivehasabeneficialownership.

› Thisquestioncoversallpledging,evenifnotconsideredproblematic.SignificantpledgingthatrisestoalevelofconcernwillalsobecapturedunderQuestion345asafailureofgovernance.

OverviewandUpdates



BoardPolicies

Doesthecompanydiscloseapolicyrequiringanannualperformanceevaluationoftheboard?(Q41)› Evaluatingboardperformanceisawayofmeasuringeffectivecontributionandcommitmentofboard

memberstotheirrole,assessingthewaytheboardoperates,whetherimportantissuesareproperlypreparedaswellaskeycompetencesontheboard.

› Theboard,committeesandeachindividualdirectorshouldberegularlyassessedregardinghis,her,oritseffectivenessandcontribution.Anassessmentshouldconsider(a)inthecaseoftheboardoraboardcommittee,itsmandateorcharter,and(b)inthecaseofanindividualdirector,theapplicablepositiondescription(s),aswellasthecompetenciesandskillseachindividualdirectorisexpectedtobringtotheboard.Evaluatingboardperformanceisawayofmeasuringeffectivecontributionandcommitmentofboardmemberstotheirrole,assessingthewaytheboardoperates,whetherimportantissuesareproperlyprepared,andkeycompetencesontheboard.

› Thisquestionwillevaluatewhetherthecompanyorganizesboardevaluations,aswellasthenatureofsuchevaluation(frequency,individual,outsideassessment).

› IntheU.S.,arobustpolicyiswhenthecompanydisclosesan(1)annualboardperformanceevaluationpolicythatincludes(2)individualdirectorassessmentsand(3)anexternalevaluatoratleasteverythreeyears.Performanceevaluationpoliciesdisclosedordetailedinthecorporategovernanceguidelines,nominating/governancecommitteecharters,ortheproxystatementareevaluatedforthisfactor.

› InJapan,companiesarerecommendedtoconductanannualperformanceevaluationoftheboardinaccordancewiththeCode4-11-3oftheJapanCorporateGovernanceCode.ThisquestioninJapanwillexaminewhetheracompanycomplieswiththeCode4-11-3.

MarketApplicability:U.S.,Canada,W.Europe,Germanic,Anglo,Nordic,S.Europe,Australasia,Russia,Japan

Doesthecompanydiscloseboard/governanceguidelines?(Q46)› NewYorkStockExchangelistedcompaniesarerequiredtopubliclydiscloseboard/corporategovernance

guidelines.Otherexchanges,however,donotyetmandatesuchdisclosure.› QualityScorewillconsiderwhetherthecompanypubliclydisclosesboard/governanceguidelines.When

consideringanswerstothisquestion,GovernanceQualityScorewilllookforguidelinesdisclosedasasingledocumentasopposedtomultipleseparatedocumentscoveringvariouselementsofgovernance.


Doestheboardhaveanymechanismstoencouragedirectorrefreshment?(Q349)

OverviewandUpdates


› Boardrefreshmenthascomeintoinvestorfocus,andmanycompanieshaverecognizedtheneedtoimplementmechanismstoencourageboardrefreshment.Whilethegoldstandardisforarigorousannualevaluationofalldirectorstoensureacontinuedmatchoftheirskillsetsagainsttheneedsofthecompany,ISSisdisplaying,forinformationpurposes,otherstructuralmechanismstheboardmayhaveinplacetoencouragerefreshment.

› Themostpopularstyleofmechanismisamandatoryretirementage.AmongS&P500companies,morethan70%currentlysetamandatoryretirementage.However,astheaverageageofboardshasslowlyincreased,sohasthetrendinsettingtheageformandatoryretirement.

› Termlimitshavealsobeenimplementedbysomeboards,buttoamuchsmallerextentthanmandatoryretirementages.However,theremaybeincreasinginterestintermlimits,particularlyassomeboardsreachouttoyoungerdirectorcandidatestofillcriticalboardroomskillandcapabilitygaps.Therehavebeenafewrecenthigh-profileadoptions,includingatGeneralElectric.

› Asotherboardrefreshmentmechanismsgainprominence,theymayalsobeincludedinthisfactor.› Whilewenotethatsomeinvestorshavequestionedselectiveenforcementofrefreshmentmechanismsat

somecompanies(throughtheissuanceofwaiversortheliberalizationofmechanisms),inthisiterationthisfactorfocusesnarrowlyonthepresenceofrefreshment-promotingmechanisms.

› Thisfactorhasazero-weightimpactonthescoringmodelforU.S.companiesandisincludedforinformationalpurposesonly.


Whatisthequorumfordirectormeetings?(Q215)› Aquorumensuresthatdirectorsmeetingscanonlyconvenewithaminimumnumberofdirectorspresent

eliminatinganydirectorresolutionsthatmaybepassedinameetingwherelessthanhalfofdirectorsarepresent.

MarketApplicability:Canada

Doesthecompanyallowthechairasecondorcastingvoteatdirectormeetingsintheeventofatie?(Q100)

› Acastingorsecondvoteiscontrarytothetenetofone-person,one-vote.› Theabilityofthechairtohaveasecondorcastingvoteontievotesatboardmeetingsisaquestionable

practice.Grantingthechairasecondvoteoncontentiousissuesthatresultinadeadlockedboardcanleadtoconflictsofinterestandpotentialinequalityamongdirectors.

MarketApplicability:Canada,S.Europe

OverviewandUpdates


Aredirectorssubjecttostockownershipguidelines?(Q143)› Bestpracticedictatesthatdirectorsmaintainameaningfullevelofshareownershipbyacertaintimeafter

appointmenttobetteraligntheirinterestswiththoseofshareholders.Thisquestionisansweredasamultipleofthecashportionoftheannualretainerreceivedbyanon-employeedirector.

› FortheCanadianMarket,ISSclassifiesownershipguidelinesasfollows:› (i)Robust:six-timestheannualcashretainerormore;› (ii)Standard:three-tofive-timesretainer;and,› (iii)Sub-Standard:lessthanthree-timesretainer.

› FortheU.S.Market,theISSclassificationis:› (i)Robust:five-timesthecashportionofthedirectors'baseretainerormore;› (ii)Standard:threeorfourtimesthecashportionofthedirectors'baseretainer;and,› (iii)Sub-Standard:twotimesorbelowthecashportionofthedirectors'baseretainer.

› Therigorofthestockownershipguidelinesisafactor.Incaseswherethedetailsregardingownershiparevagueorotherwisenotdefinitive(e.g.,ownershipis"encouraged"or"stressed")withregardtothemandatorynatureoftheownershiprequirementorlevelofholdings,ISSwilldeemtheinformation“notdisclosed.”ForcompaniesincorporatedinAustraliaandNewZealand,thenormaldisclosureofdirectorownershipguidelinesisequivalenttotheirannualretainer.AnadditionalresponseforAustraliaisforeseentoindicateandtakeintoaccountsignificantholdingsbydirectors.

MarketApplicability:U.S.,Canada,Australasia

Doesthecompanyhaveapolicyprohibitinghedgingofcompanysharesbyemployees?(Q244)› Bestpracticeistoincorporatearobustpolicythatprohibitsalltypesofhedgingtransactionswithin

companies’insidertradingpoliciesorseparateanti-hedgingpolicies.Hedgingagainstlossesincompanysharesbreaksthealignmentbetweenshareholderandexecutivesthatequitygrantsareintendedtobuild.

› QualityScorewillconsiderwhetherthecompanyhasinstitutedapolicythatprohibitshedgingofcompanyshares.Tobeconsidered“robust,”thepolicyshouldprohibitafullrangeoftransactions,includingshort-selling,options,puts,andcalls,aswellasderivativessuchasswaps,forwards,futures;alternatively,arobustpolicywouldstipulatethatno“hedging”ofcompanystockispermitted.Additionally,hedgingpoliciesthathaveapre-clearanceorpre-approvalrequirementwillbeconsideredas“notrobust”.

MarketApplicability:U.S.,Canada,Australasia

RelatedPartyTransactions

DoesthecompanydiscloseinformationonRelatedPartyTransactions?(Q336)

OverviewandUpdates


› Related-partytransactionscanleadtoconflictsofinterestthatmaycompromiseindependence,particularlyininstanceswhereparticipationortiestotransactionsarenotfullydisclosed.

› QualityScorewillconsiderthelevelofdisclosureonconflictsofinterest.

MarketApplicability:Russia,India

WhatpercentofthedirectorswereinvolvedinmaterialRPTs?(Q50)› Related-partytransactions(RPTs)canleadtoconflictsofinterestthatmaycompromiseindependence,

particularlyininstanceswhereparticipationortiestotransactionsarenotfullydisclosed.› QualityScorewillconsiderthepercentageofdirectorswhoaredirectlyorindirectly(throughemployersand

immediatefamilymembers)involvedinmaterialrelated-partytransactions,orifnoinformationwithwhichtomakeadeterminationisgiven.IntheU.S.,amaterialtransactionalrelationshipisdefinedasonethat:includesgrantstonon-profitorganizations;existsifthecompanymakesannualpaymentsto,orreceivesannualpaymentsfrom,anotherentityexceedingthegreaterof$200,000or5percentoftherecipient‘sgrossrevenues,inthecaseofacompanywhichfollowsNASDAQlistingstandards;orthegreaterof$1,000,000or2percentoftherecipient‘sgrossrevenues,inthecaseofacompanywhichfollowsNYSE/Amexlistingstandards.Inthecaseofacompanywhichfollowsneitheroftheprecedingstandards,ISSwillapplytheNASDAQ-basedmaterialitytest.(Therecipientisthepartyreceivingthefinancialproceedsfromthetransaction.)

› Amaterialprofessionalservicerelationshipisdefinedasonethat:include,butarenotlimitedtothefollowing:investmentbanking/financialadvisoryservices;commercialbanking(beyonddepositservices);investmentservices;insuranceservices;accounting/auditservices;consultingservices;marketingservices;legalservices;propertymanagementservices;realtorservices;lobbyingservices;executivesearchservices;andITconsultingservices;existsifthecompanyoranaffiliateofthecompanymakesannualpaymentsto,orreceivesannualpaymentsfrom,anotherentityinexcessof$10,000peryear.

› NotethatRPTsofadirectorappointedbetweenshareholdermeetingsmaynotbedeterminableunderISSstandards.Insuchcases,scoringrelatedtodirectorRPTswillnotbeaffectedbysuchappointments(i.e.,thecompany'sQSwillcontinuetoreflecttheRPTstatusasofthelastannualmeeting,untilthenextannualmeetingwhenfinaldeterminationsaremade).SpecificallyforCanadiancompanies,anydisclosureundertheRPTsectionwillbeconsideredforthisquestion.


DodirectorswithRPTssitonkeyboardcommittees?(Q51)› Theindependenceofthenomination,audit,andcompensationcommitteesisvitaltotheireffective

oversightofthesekeyboardfunctions.Theexistenceoftransactionalrelationshipswiththecompanyhasthepotentialtounderminethisindependence.

OverviewandUpdates


› QualityScorewillconsiderwhetherdirectorswithmaterialrelated-partytransactions(RPTs)sitonkeycommittees,ifitisnotapplicable,orifinformationwithwhichtomakeadeterminationisnotgiven.SeeaboveforadefinitionofmaterialRPTs.Keycommitteesaredefinedasnomination,audit,andcompensation.


Aretherematerialrelated-partytransactionsinvolvingtheCEO?(Q216)› TheCEO’sspecialroleinthecompanydemandsparticularattentiontoavoideventheappearanceofself-

dealing.› QualityScorewillconsiderwhethertheCEOhasengagedinmaterialrelated-partytransactionswiththe

company.

MarketApplicability:U.S.,AsiaPacific

BoardControversies

Hastheboardadequatelyaddressedashareholderresolutionsupportedbyamajorityvote?(Q99)› Directorsshouldberesponsivetothecompany’sowners,particularlyinregardtoshareholderproposals

thatreceiveamajorityofthevotescast.› QualityScorewillconsiderwhethermajoritysupportforshareholderproposalswasevidenced,and,ifso,

whethertheboardhasadequatelyaddressedit.

Factorsthatwillbeconsideredare:

› Disclosedoutreacheffortsbytheboardtoshareholdersinthewakeofthevote;› Rationaleprovidedintheproxystatementforthelevelofimplementation;› Thesubjectmatteroftheproposal;› Thelevelofsupportforandoppositiontotheresolutioninpastmeetings;› Actionstakenbytheboardinresponsetothemajorityvoteanditsengagementwithshareholders;› Thecontinuationoftheunderlyingissueasavotingitemontheballot(aseithershareholderor

managementproposals);and› Otherfactorsasappropriate.

› Ingeneral,ISS’determinationofsufficientboardresponsewillbebasedondisclosureintheproxyforthe

annualmeetingafterthemajorityvotewasreceived.


OverviewandUpdates


Hastheboardadequatelyrespondedtolowsupportforamanagementproposal?(Q350)› Certainmanagement-sponsoredballotitemsmaynotbebindingonthecompany,neverthelessitisstill

importantthatcompanieslistentotheirshareholdersonthesevotesandrespondaccordingly.Theseitemsincludedirectorelections,theadvisoryvoteonexecutivecompensation,andthefrequencyofsayonpay.

› Lowsupportfordirectorelectionsisconsideredlessthan50%ofthevotescast.ISSwillexaminewhetherthecompanyadequatelyrespondedtotheunderlyingissuescausingthelowsupportforthenominees.

› Fortheadvisoryvoteonexecutivecompensation(say-on-pay),lessthan70%ofthevotescastisconsideredlowsupport.Thecompany’sdisclosureofitsshareholderoutreachtodeterminethereasonsforthelowsupport,andtheactionstakentoaddresstheissues,arekeyinthisdetermination.

› Adoptionofasayonpayfrequencythatreceivedlowersupportthanthefrequencypreferredbyamajorityorpluralityofshareholdersisexaminedtakingintoaccounttherationaleprovidedbythecompanyforitsadoption,ownershipstructure,andanyhistoryofcompensationconcernsatthecompany.


HasISS'reviewfoundthattheboardofdirectorshastakenunilateralactionthatmateriallyreducesshareholderrightsorthecompanyhashadothergovernancefailures?(Q345)

› Investorsindicatelittletoleranceforunilateralboardroomadoptionofbylawamendmentsthatdiminishshareholderrights.FactorstakingintoconsiderationintheISSreviewincludetherationale,disclosure,levelofimpairment,trackrecord,andothergovernanceconcerns.

› Unilateralbylaw/charteramendmentsthatareconsideredmaterialinclude,butarenotlimitedto:diminishingshareholderrightstocallaspecialmeeting/actbywrittenconsent,classifyingtheboard,increasingauthorizedcapital,andloweringquorumrequirements,withoutshareholderapproval.

› Adversecharterandbylawprovisionsandclassstructureadoptedbynewlypubliccompaniesarealsosubjecttothisscrutiny.

› Governancefailuresthatareconsideredmaterialinclude,butarenotlimitedto:materialfailuresofgovernance,stewardship,riskoversightorfiduciaryresponsibilitiesatthecompany;failuretoreplacemanagementasappropriate;oregregiousactionsrelatedtoadirector’sserviceonotherboardsthatraisesubstantialdoubtabouthisorherabilitytoeffectivelyoverseemanagementandservethebestinterestsofshareholdersatanycompany.

› Themostcommoncategoriesofgovernancefailuresareexcessivepledgingofsharesandfailuretoopt-outofstatelawsrequiringaclassifiedboard(IndianaandIowa.)


OverviewandUpdates


Compensation/RemunerationPillar

PayforPerformance

IsthereacaponCEOannualbonus?(Q114)› BestpracticessuggestcompaniesdisclosebonuscapsforCEOsthataretiedtoafixedand/ordisclosedvalue

suchasbasesalary.› QualityScorewillconsiderthetypeofcap–ifany–isappliedtotheannualbonusgrantedtotheCEO.

MarketApplicability:W.Europe,Germanic,Anglo,Nordic,S.Europe,Australasia

Isthereacaponexecutives'annualbonus?(Q115)› Bestpracticessuggestcompaniesdisclosebonuscapsforexecutivesthataretiedtoafixedand/ordisclosed

valuesuchasbasesalary.› QualityScorewillconsiderthetypeofcap–ifany–isappliedtotheannualbonusgrantedtoexecutives

otherthantheCEO.

MarketApplicability:W.Europe,Germanic,Anglo,Nordic,S.Europe,Australasia

WhatpercentageoftheannualbonusfortheCEOisorcanbedeferred?(Q116)› Deferredcompensationisusedbycompaniestoreducelong-termriskandbetteralignexecutive

compensationwithcompanyperformanceoverthelongterm.Holdbacksordeferralsoncompensationarerecommendedbestpracticeinmanymarkets,particularlyinthewakeofthefinancialcrisisandthesharpenedfocusontyingpaytolong-termcompanyperformance.

› QualityScorewillconsiderwhetheraportionoftheannualbonusgrantedtotheCEOisorcanbedeferred.› ForAustralasiaandAngloitwillbetakenintoaccountwhetherornottheCEOisasignificantshareholder

(representative)orwhetherornotshareholderguidelineshavebeenmet.

MarketApplicability:Canada,W.Europe,Germanic,Anglo,S.Europe,Australasia

Whatpercentageoftheannualbonusforexecutivesisorcanbedeferred?(Q117)› Deferredcompensationisusedbycompaniestoreducelong-termriskandbetteralignexecutive

compensationwithcompanyperformanceoverthelongterm.Holdbacksordeferralsoncompensationare

OverviewandUpdates


recommendedbestpracticeinmanymarkets,particularlyinthewakeofthefinancialcrisisandthesharpenedfocusontyingpaytolong-termcompanyperformance.

› QualityScorewillconsiderwhetheraportionoftheannualbonusgrantedtoexecutives,otherthantheCEO,isorcanbedeferred.

› ForAustralasiaandAngloitwillbetakenintoaccountwhetherornototherexecutivesaresignificantshareholder(s)(representatives)orwhetherornotshareholderguidelineshavebeenmet.

MarketApplicability:W.Europe,Germanic,Anglo,S.Europe,Australasia

Whatisthedegreeofalignmentbetweenthecompany'scumulative3-yearpaypercentilerank,relativetopeers,andits3-yearcumulativeTSRrank,relativetopeers?(Q226)

› TheprimaryfactorsidentifiedinthePayforPerformancesectionarethequantitativemeasuresthatareorhavebeenincorporatedinISS’evaluationofexecutivecompensationforproxyanalysestoassesscompensation-relatedriskindicators.

› Thismeasureaddressesthequestion:IsthepayopportunitydeliveredtotheCEOcommensuratewiththeperformanceachievedbyshareholders,relativetoacomparablegroupofcompanies,overathree-yearperiod?Thisrelativemeasurecomparesthepercentileranksofacompany’sCEOpayandTSRperformance,relativetoanindustry-and-sizederivedcomparisongroup,overathree-yearperiod.Thismeasurerangesfrom-100(representinghighpayforlowperformance)to100(representinglowpayforhighperformance),withamedianofapproximately0.



Whatisthedegreeofalignmentbetweenthecompany'scumulativeone-yearpaypercentilerank,relativetopeers,anditsone-yearcumulativeTSRrank,relativetopeers?(Q227)

› Thismeasureaddressesthequestion:IsthepayopportunitydeliveredtotheCEOcommensuratewiththeperformanceachievedbyshareholders,relativetoacomparablegroupofcompanies,overaone-yearperiod?Thisrelativemeasurecomparesthepercentileranksofacompany’sCEOpayandTSRperformance,relativetoanindustry-and-sizederivedcomparisongroup,overaone-yearperiod.



WhatisthesizeoftheCEO'sone-yeartotalpay,asamultipleofthemediantotalpayforcompanypeers?(Q228)

› Thisrelativemeasureexpressestheprioryear’sCEOpayasamultipleofthemedianpayofitsISS-determinedcomparisongroupforthesameperiod.Calculatingthismeasureisstraightforward:the

OverviewandUpdates


company’sone-yearCEOpayisdividedbythemedianpayforthecomparisongroup.Thismeasurerangesgenerallyfrom0(CEOhasnopay)to25timesmedian.ThemediancompanypaiditsCEOclosetoonetimesthemedianofitspeergroup.

MarketApplicability:U.S.,Canada,W.Europe,Germanic,Anglo,S.Europe,Nordic

Whatisthedegreeofalignmentbetweenthecompany'sTSRandchangeinCEOpayoverthepastfiveyears?(Q229)

› ThisabsolutemeasurecomparesthetrendsoftheCEO’sannualpayandthevalueofaninvestmentinthecompanyoverthepriorfive-yearperiod.Themeasureiscalculatedasthedifferencebetweentheslopesofweightedlinearregressionsforpayandforshareholderreturnsoverafive-yearperiod.ThisdifferenceindicatesthedegreetowhichCEOpayhaschangedmoreorlessrapidlythanshareholderreturnsoverthatperiod.

› Thismeasurerangesfromapproximately-100%toapproximately+100%,negativescoresindicatingmisalignment.

MarketApplicability:U.S.,Canada,W.Europe,Germanic,Anglo,S.Europe,Nordic

WhatistheratiooftheCEO'stotalcompensationtothenexthighest-paidactiveexecutive?(Q232)› Internalpayparityratiosamongexecutivesmaybeanindicatorofpotentialsuccession-planningchallenges

withintheorganization,andmayalsosignalthatpaylevelsfortheCEOareexcessive.› QualityScorewillmeasuretheCEO’stotalcompensationasaratioofthenexthighest-paidactiveexecutive's

pay.


Whatistheperformanceperiodforthelatestactivelong-termincentiveplan(ortheproposedplan)forexecutives?(Q233)

› Incentiveplanswherebylong-termincentivesaregrantedbasedonperformanceshouldhaveaperformanceperiodofatleast24to36monthsinordertocomplywiththelong-termnatureofsuchaplan.

MarketApplicability:W.Europe,Anglo,S.Europe,Australasia,Africa

Whatisthedegreeofalignmentbetweenthecompany'sannualizedthree-yearpaypercentilerank,relativetopeers,anditsthree-yearannualizedTSRrank,relativetopeers?(Q329)

OverviewandUpdates


ISSannuallyconductsapay-for-performanceanalysistoidentifystrongorsatisfactoryalignmentbetweenpayandperformanceoverasustainedperiod.

Marketapplicability:U.S.andCanada,W.Europe,Germanic,Anglo,S.Europe,Nordic

Non-PerformanceBasedPay

AreanyoftheNEOseligibleformultiyearguaranteedbonuses?(Q156)› MultiyearbonusguaranteesareconsideredproblematicunderISS’ProblematicPayPracticespolicyand

severthepay-for-performancelinkage.


Doesthecompanyprovideloanstoexecutives?(Q154)› Intheapplicablemarkets,ISSrecommendsthatloansbemadetoemployeesonlyaspartofabroad-based,

company-wideplantoencourageownershipratherthanbeinggivenonlytoexecutivedirectors.ISSalsocallsforloanswithinterestsetatmarketratestobepaidbackinfulloverareasonablelengthoftime.

› QualityScorewillconsiderwhetherthecompanyhasmadeloanstoanyofitsexecutivesandwhethertheseloansaremadeinthecourseofnormalbusinessactivities.Theloansprovidedtothecompany’sexecutiveofficerswouldaidtheminpurchasingsharesofthecompany.Thisisusuallygivenwithout,orataverylowinterestrate.

MarketApplicability:Canada,W.Europe,Germanic,Anglo,S.Europe,Australasia,Africa,Russia

Ispartofthebonusgrantedortobegrantedguaranteed?(Q118)› Guaranteedbonusestoseniorexecutivesareaproblematicpaypracticebecauseitcouldresultin

disconnectbetweenpayandperformanceandunderminestheincentivizingnatureofsuchawards.

MarketApplicability:Canada,W.Europe,Germanic,Anglo,S.Europe,Australasia,Africa

Didthecompanygrantaone-offrewardtoanyofitsexecutives?(Q159)› One-offrewardsarediscretionarygrantsforexecutivesgrantedforarangeofreasonssuchastransactions,

newcontracts,etc.,oftenoutsidethescopeoftheremunerationpolicy,andnotalwaystiedtoperformance(exceptiftheyareconditionaltoperformanceconditions).

OverviewandUpdates


› QualityScorewillconsiderwhetherone-offgrantswererewarded,and,ifso,whetherperformanceconditionswereattached,orifnoinformationisgiven.

MarketApplicability:S.Europe,Australasia,Africa

WhatistheratiooftheCEO'snon-performance-basedcompensation(AllOtherCompensation)toBaseSalary?(Q237)

› Highlevelsofaggregateperksandotherpayments,suchaspayments-in-lieuofperks,areaggregatedintheAllOtherCompensationamount.Ifthesearegreaterthanbasesalaryitmayreflectasignificantadditionalcompensationstream.

› QualityScorewillconsidertheratioofallothercompensation–typicallyincorporatingperksandothernon-performance-basedpayments–tobasesalary,todeterminewhethersignificantadditionalcompensationisbeingdeliveredthroughthisconduit.


UseofEquity

Doesthecompanyhaveanequity-basedcompensationplan?(Q322)› QualityScorewillconsiderwhetherthecompanyhasestablishedanequity-basedcompensationplan.› InJapan,restrictedsharesandotherequity-basedcompensationsaregenerallycategorizedasperformance-

basedcompensation,whichiscoveredunderQ375.ThisquestionwillapplyonlytostockoptionplansinJapanasdisclosedincorporategovernancereports.

Marketapplicability:AsiaPacific,LatinAmerica,Russia,SouthKorea,India,Japan

Doesthecompanyhaveaperformance-basedpayorotherincentivesforitsexecutives?(Q375)› Boardofdirectorsneedstocreateincentivesthataligntheinterestsofexecutiveswiththoseof

shareholderstomakeitinexecutives’bestinteresttodowhat’sintheshareholders’bestinterests.› Performance-basedpay,thoughgaininginpopularity,isnotcommoninJapan,andfixedsalaryandannual

bonusmakeupmostofexecutivepay.Presenceofaperformance-basedpayorotherincentiveplansforexecutivescouldnotonlyprovideincentivesforexecutivestoenhanceshareholdervaluebutalsocouldbeseenasanindicationofpositiveactionstakenbytheboard.

› Informationregardingpresenceofperformance-basedincentivesiscollectedfromcorporategovernancereports.


OverviewandUpdates


Dothecompany'sactiveequityplansprohibitsharerecyclingforoptions/SARS?(Q129)› Companieswithliberalsharecountingprovisionsreceivemoreutilizationfortheirsharesthanthose

withouttheprovision.Liberaluseoccurswhenoneormoreofthefollowingoccur(i)tenderedsharesinpaymentofanoptionarerecycled,(ii)shareswithheldfortaxesareaddedbackin,(iii)actualstock-settledSARs/sharesdeliveredaretheonlyonescountedagainsttheplanreserve.

› QualityScorewillconsiderwhetherrecyclingofstockoptionsorstockappreciationrightsisprohibitedintheactiveequityplans,orifitisnotapplicabletothecompany.Sourcingoftherelevantinformationwillbefromplandocumentsandwillonlyconsideremployeeplans(excludingplansforoutsidedirectors).


Dothecompany'sactiveequityplansprohibitoption/SARrepricing?(Q138)› Thisquestionaddresseswhetherthecompensationplandocumentsexpresslyprohibitoptionrepricing

withoutpriorshareholderapproval.Optionrepricingoccurswhencompaniesadjustoutstandingstockoptionstolowertheexerciseprice.Optionexchangeoccurswhenthecompanycancelsunderwateroptionsandre-grantsnewoptions.Optionreplacementsmaybeaccomplishedthroughoptionswaps,optionre-grantsorcash.IntheCanadianmarket,extendingthetermofoutstandingoptionsisalsoconsideredoptionrepricing.

› QualityScorewillconsiderwhetherrepricingofstockoptionsorstockappreciationrightsisprohibitedinthecompany'sactiveequityplans,orifitisnotapplicabletothecompany.Sourcingoftherelevantinformationwillbefromplandocumentsandonlyconsidersemployeeequityplans,notoutsidedirectoronlyplans.


Dothecompany'sactiveequityplansprohibitoption/SARcashbuyouts?(Q238)› NASDAQandNewYorkStockExchangerulesstatethatrepricingsaresubjecttoshareholderapprovalunless

the(shareholderapproved)planspecificallystatesotherwise.However,therulesonbothexchangesleavethedooropenforcompaniestoexchangeunderwaterstockoptionsforacashsettlement,withoutseekingshareholderapprovaloftheexchange.

› QualityScorewillconsiderwhethercashbuyoutsofstockoptionsorstockappreciationrightsareprohibitedinthecompany'sactiveequityplansorifitisnotapplicabletothecompany.Sourcingoftherelevantinformationwillbefromplandocumentsandwillonlyconsideremployeeplans(excludingplansforoutsidedirectors).


Dothecompany'sactiveequityplanshaveanevergreenprovision?(Q239)

OverviewandUpdates


› Bestpracticedictatesthatshareholdersapproveeachreplenishmentofsharesavailableforanequitycompensationplan.

› GovernanceQualityScorewillconsiderwhetherthecompany'sactiveequityplanshaveanevergreenprovision,bywhichsharesavailablefortheplanareautomaticallyreplenishedwithoutashareholdervote.


Dothecompany'sactiveequityplanshavealiberaldefinitionofchange-in-control?(Q240)› Whilechange-in-controlagreementshavetheirplaceinordertoinsulateexecutivesfromlossof

employmentinconjunctionwithachangeincontrol,aliberaldefinitionofchange-in-control(e.g.,atriggerlinkedtoshareholderapprovalofatransaction,ratherthanitsconsummation,oranunapprovedchangeinlessthanasubstantialproportionoftheboard,oracquisitionofalowpercentageofoutstandingcommonstock,suchas15percent)mayresultinawardvestingandpayoutevenifanactualchangeincontroldoesnotoccur.Suchadefinitionmayalsodiscourageoutsidebidsthatcouldbenefitshareholders.

› QualityScorewillconsiderwhetherthecompany'sactiveequityplanshavealiberalchange-in-controldefinition,underwhichexecutivesmaybeentitledtoreceiveacceleratedvestingofequitygrantswithouttheoccurrenceofanactualchangeincontrol.


Hasthecompanyrepricedoptionsorexchangedthemforshares,optionsorcashwithoutshareholderapproval?(Q139)

› PerISS’policyandcompensationbestpracticesespousedbyinvestors,repricingsshouldbeputtoshareholdervote.

› QualityScorewillconsiderwhethershareholderapprovalwasobtainedintheeventofanyrepricingorexchangesinthelastthreeyears.DespiteanyprovisionsinthePlanallowingrepricing,thisfactoraddressesactualrepricingactivitywithoutpriorshareholderapproval.


Whatisthetotalproportionofalloutstandingequitybasedplanstowardthesharecapital?(Q127)› Incentiveplanswherestockoptionsperformancesharesaregrantedtoexecutivesandemployeeswilllead

toadilutionofshareholderinterests.Giventheincentivizingnatureofsuchinstruments,shareholdersgenerallyacceptsuchdilution,providedthedilutionislimited.

› QualityScorewillconsiderthetotalproportionofalloutstandingequitybasedincentivesatcompanylevel.

OverviewandUpdates


MarketApplicability:W.Europe,Germanic,Anglo,Nordic,S.Europe,AsiaPacific,Australasia,LatinAmerica,Africa,Russia,SouthKorea,India

Isthereamaximumlevelofdilutionperyear?(Q128)› Inlinewiththequestionabove,dilutionduetolong-termincentivescanbecappedonanannualbasis,

whichisconsideredgoodpractice.› QualityScorewillconsiderwhetherthecompanyhascappedthelevelofdilutiononayearlybasis.› Thisfactorhasazero-weightimpactonthescoringmodelforcompaniesintheGermanicregionandis

includedforinformationalpurposesonly.

MarketApplicability:W.Europe,Germanic,Anglo,AsiaPacific

Doesthecompany'sequitygrantrateexceedthemean+1standarddeviationofitsindustry/indexpeers?(Q130)

› Investorsfavorequitygrantsthataligntheinterestsofexecutivesandemployeeswithshareholderswithoutcreatingexcessivedilutioninsharevalue.QualityScorewillevaluateandconsideracompany’sburnrate,whichreferstotheaverageannualrateatwhichstockoptionsandstockawardsaregranted(sometimesreferredtoasshareutilization)relativetotheratethatisonestandarddeviationhigherthanthemeanofthecompany’sapplicableindexandindustry.Formoredetails,seetheISSPolicyGateway.


Whatarethepricingconditionsforstockoptionsgrantedtoexecutives?(Q136)› Discountedoptionsrepresentanimmediatefinancialgaintothebeneficiaryequaltothemarketpriceminus

thelevelofthediscount.Investorspreferthatoptionsbepricedatnolessthan100percentoftheshares'fairmarketvalue.

› QualityScorewillconsiderpricinganddisclosureofpricinglevels,suchaswhetheradiscountisgiven,thevalueofthediscount,whetherthepriceissetatmarketpriceoratapremium,andifthatpremiumisdisclosed,orifnoinformationisgiven.ForcompaniesinAustraliaandNewZealand,thisisthedifferencebetweenthestrikeprice(exerciseprice)andmarketpriceonthedateofgrant.

MarketApplicability:W.Europe,Germanic,Anglo,Nordic,S.Europe,AsiaPacific,Australasia,LatinAmerica,Africa,SouthKorea,India

EquityRiskMitigation

Doesthecompanydiscloseaclawbackormalusprovision?(Q155)

OverviewandUpdates


› Thepresenceofclawbackprovisionsmayhelpensurethatrealpayisnotgivenforfictitiousperformance.Clawbacksrefertotheabilityforthecompanytorecoupbonusesorotherincentivecompensationintheeventofafraud,restatementofresults,errors/omissionsorothereventsasmaybedetermined.

› FortheCanadianmarket,thesecouldincluderecoupmentofequityawards(unvestedorvested)aswellasannualincentivebonuses.ISSwillconsideronlypubliclydisclosedclawbackprovisionsthatarealreadyinplace.

› FortheU.S.market,ISSdefinesclawbackasthecompany’sabilitytorecoupperformance-basedawards(includinganycash-basedincentiveawards,ataminimum)intheeventoffraud,restatementofresults,errors/omissionsorotheractivitiesrelatedabove.BestpracticeistoincorporateacompanypolicywhichgoesbeyondtherequirementofSection304oftheSarbanes-OxleyAct.

› ForAustraliaandNewZealandmarkets,thisQualityScoreitemmeasureswhetherthecompanyhasaprovisionstatingthatpaidawards,eitherincashorstock,maybereclaimedorwithdrawn(“clawedback”)incertaincircumstances,suchasfinancialrestatementorexecutivemisconduct.Thisprovisionmaybefoundinthecompany’sshort-termorlong-termincentiveplans.

MarketApplicability:U.S.,Canada,W.Europe,Germanic,Anglo,Nordic,S.Europe,Australasia

Whataretheminimumvestingperiodsmandatedintheplandocumentsforexecutives'stockoptionsorSARSintheequityplans(adopted/amendedinthelastthreeyears)?(Q131)

› Aminimumvestingperiodensuresemployeeretentionandalignmentwithshareholderinterest.› Bestpracticedictatesthatcompaniesthatdisclosesuchinformationunderaplandocumentorfulltextof

theplanprovidemoretransparencyonthevestingrequirementsofstockoptionstobegrantedunderaspecificequityplan.

› ForUSmarket,thisquestionisapplicableforequityincentiveplansthatgrantoptionsorSARsthatwereproposedforshareholderapprovalorfromthemostrecentlyconcludedannualgeneralmeetingofthecompany.Actualvestingtermsofgrantsfoundundertheawardagreementsandcompensationdiscussionandanalysissectionoftheproxystatementarenotconsidered.QualityScoreconsiderstheminimumvestingrequirement,whichisspecifiedinashareholderapprovedequityplan.Incasethecompanyhasmultipleequityplansthatareactive,QualityScorewillconsidertheplanwiththeshortestvestingrequirement.VestingforoptionsandSARsmustapplytoallparticipantsforcredittobegiven.

› Fornon-USmarkets:thisquestionisapplicableforequityincentiveplansthatgrantoptionsorSARsthatwereproposedforshareholderapprovaloramendmentwithinthepastthreeyearsfromthemostrecentlyconcludedannualgeneralmeetingofthecompany.Actualvestingtermsofgrantsfoundundertheawardagreementsandcompensationdiscussionandanalysissectionoftheproxystatementarenotconsidered.QualityScoreconsiderstheminimumvestingrequirement,whichisspecifiedinashareholderapprovedequityplan.Incasethecompanyamended/adoptedmultipleplansinthepastthreeyears,QualityScorewillconsidertheplanwiththeshortestvestingrequirement.

› QualityScorewillconsidertheminimumvestingperiodintermsofnumberofmonthsbeforeanyoptions/SARswouldvest,orifnoinformationisgiven.Sourcingoftherelevantinformationwillbefromplandocumentsratherthanindividualgrantagreementsortheproxystatement.

OverviewandUpdates


MarketApplicability:AllregionsexceptJapan

Whataretheminimumvestingperiodsmandatedintheplandocumentsforexecutives'restrictedstock(adopted/amendedinthelastthreeyears)?(Q132)

› Aminimumvestingperiodensuresemployeeretentionandalignmentwithshareholderinterest.› Bestpracticedictatesthatcompaniesthatdisclosesuchinformationundertheplandocumentorfulltextof

theplanprovidemoretransparencyonthevestingrequirementsoffullvalueawardstobegrantedunderaspecificequityplan.

› ForUSmarket,thisquestionisapplicableforequityincentiveplansthatgrantstockawardsthatwereproposedforshareholderapprovaloramendmentfromthemostrecentlyconcludedannualgeneralmeetingofthecompany.Actualvestingtermsofestablishedgrantsundertheawardagreementsandcompensationdiscussionandanalysissectionoftheproxystatementarenotconsidered.Onlytheminimumvestingrequirementwhichisspecifiedinashareholderapprovedequityplanwillbecounted.Incasethecompanyhasmultipleequityplansthatareactive,QualityScorewillconsidertheplanwiththeshortestvestingrequirement.Vestingforfull-valueawardsmustapplytoallparticipantsforcredittobegiven.

› Fornon-USmarket,thisquestionisapplicableforequityincentiveplansthatgrantstockawardsthatwereproposedforshareholderapprovaloramendmentwithinthepastthreeyearsfromthemostrecentlyconcludedannualgeneralmeetingofthecompany.Actualvestingtermsofestablishedgrantsundertheawardagreementsandcompensationdiscussionandanalysissectionoftheproxystatementarenotconsidered.Onlytheminimumvestingrequirementwhichisspecifiedinashareholderapprovedequityplanwillbecounted.Incasethecompanyamended/adoptedmultipleplansinthepastthreeyears,ISSwillconsidertheplanwiththeshortestvestingrequirement.

› QualityScorewillconsiderthevestingperiodintermsofnumberofmonths,or,ifthecompanydoesnotgrantrestrictedstockorthequestionisnotapplicable.Sourcingoftherelevantinformationwillbefromplandocumentsratherthanindividualagreementsortheproxystatement.

MarketApplicability:U.S.,Canada,W.Europe,Germanic,Anglo,Nordic,S.Europe,AsiaPacific,Australasia,LatinAmerica,Africa,Russia,India

Whatarethevestingperiodsmandatedintheplandocuments,adopted/amendedinthelastthreeyears,forexecutives'otherlong-termplan?(Q133)

› Aminimumvestingperiodensuresemployeeretentionandalignmentwithshareholderinterest.› QualityScorewillconsiderthevestingperiodintermsofnumberofmonths,or,ifthecompanydoesnot

grantotherlong-termawardsorthequestionisnotapplicable.Sourcingoftherelevantinformationwillbefromplandocumentsortheproxystatement.

MarketApplicability:Canada,W.Europe,Germanic,Anglo,Nordic,S.Europe,AsiaPacific,Australasia,LatinAmerica,Africa,Russia

OverviewandUpdates


Whatarethevestingperiodsmandatedintheplandocuments,adopted/amendedinthelastthreeyears,forexecutives'Matchingplan?(Q323)

› QualityScorewillconsiderthevestingperiodintermsofnumberofmonths,orifthecompanydoesnotmatchsharesoroptionsorthequestionisnotapplicable.Sourcingoftherelevantinformationwillbefromplandocumentsortheproxystatement.Aminimumvestingperiodensuresemployeeretentionandalignmentwithshareholderinterest.

MarketApplicability:W.Europe

Whatarethevestingperiodsmandatedintheplandocuments,adopted/amendedinthelastthreeyears,forexecutives'deferralplan?(Q324)

› QualityScorewillconsiderthevestingperiodintermsofnumberofmonths,orifthecompanydoesnotdeferthereceiptofsharesoroptionsorthequestionisnotapplicable.Sourcingoftherelevantinformationwillbefromplandocumentsortheproxystatement.Aminimumvestingperiodensuresemployeeretentionandalignmentwithshareholderinterest.


Whatistheholdingperiodforstockoptions(forexecutives)?(Q134)› Executivesshouldholdameaningfulportionofthesharesacquiredafterexercise.Ameaningfulportion

wouldgenerallybeviewedas50percentormoreofnetshares(afterpayingtaxliabilities)heldor25percentofgrossshares.

› Researchpointstosuperiorfinancialperformancewhenofficeranddirectorstockownershipfallswithinacertainrange.Thesearerequirementstoretainownershipofaportionofsharesacquiredaftertheexercisingofanoption,oncespecifiedstockownershipguidelineshavebeenmetbytheexecutiveandhe/sheisabletoexercisetheoptions.Itisgenerallynetoftaxes,andmaybeofferedasapercentageofsharesacquired.Theguidelinescanapplytostockawardsaswell.Theholdingrequirementsofthestockcanbeforasetnumberofyearsfollowingtheexerciseoftheoptionorthroughthetermoftheexecutive’semploymentorretirement,oraspecifiedlengthoftimefollowingdeparturefromcompany(holduntilafterretirement).

› QualityScorewillconsidertherequiredpost-exerciseholdingperiod,ifany,basedonthenumberofmonthsoriftheperiodextendstoorthroughretirement,orifnooptionsaregranted,ornoinformationisgivenintheproxystatement.Ameaningfulportionofnetsharesheldwouldgenerallybeviewedas50percentormore,andwhenevaluatingthisquestionforU.S.companies,QualityScorewillconsiderholdingperiodsstipulatedfornamedexecutiveofficers.

OverviewandUpdates


MarketApplicability:U.S.,Canada,W.Europe,Germanic,Anglo,S.Europe,AsiaPacific,Australasia,LatinAmerica

Whatistheholdingperiodforrestrictedshares(forexecutives)?(Q135)› Seeabove.

MarketApplicability:U.S.,W.Europe,Germanic,Anglo,S.Europe,AsiaPacific,Australasia,LatinAmerica

Whatproportionofthesalaryissubjecttostockownershiprequirements/guidelinesfortheCEO?(Q145)

› Bestpracticesuggeststhatexecutivesattainsubstantiveshareownershipbyacertaintimeafterappointmenttobetteraligntheirinterestswiththoseofshareholders.

› QualityScorewillconsiderthepercentage/multipleofsalarysubjecttostockownershiprequirements,orifnoinformationisdisclosed.CEOstockownershipguidelinesrequireorencourageexecutivestoownacertainamountofstockwithinaperiodoftime.Theseguidelinesaregenerallydisclosedasamultipleofbasesalary,numberofshares,oradollarvalue.ThisfactorrelatestothemultipleoftheCEO'scashfixedremunerationorbasesalaryasabasisforthestockownershipguidelines.

› FortheAustralianandNewZealandMarkets,thismayalsobedisclosedamultipleofcashfixedremuneration.

› FortheU.S.,multiplesoflessthanthreetimessalaryraisethelevelofgovernanceriskconcern.Forothermarkets,multiplesoflessthanonetimesalaryornondisclosurewouldraisegovernanceriskconcern.

MarketApplicability:U.S.,Canada,W.Europe,Anglo,S.Europe,Australasia

Whatproportionofthesalaryissubjecttostockownershiprequirements/guidelinesfortheotherexecutives?(Q146)

› Bestpracticesuggeststhatexecutivesattainsubstantiveshareownershipbyacertaintimeafterappointmenttobetteraligntheirinterestswiththoseofshareholders.

› GovernanceQualityScorewillconsiderthepercentage/multipleofsalarysubjecttostockownershiprequirements,orifnoinformationisdisclosed.FortheAustraliaandNewZealandmarkets,executivestockownershipguidelinesrequireorencourageexecutivestoownacertainamountofstockwithinaperiodoftime.Theseguidelinesaregenerallydisclosedasamultipleofcashfixedremuneration,basesalary,numberofshares,oradollarvalue.Thisfactorrelatestothemultipleoftheotherexecutives’cashfixedremunerationorbasesalaryasabasisforthestockownershipguidelines.

MarketApplicability:W.Europe,Anglo,S.Europe,Australasia

OverviewandUpdates


Non-ExecutivePay

Doesthecompanyprovideloanstodirectors?(Q104)› Anyloansmadetodirectorsshouldbeaspartofabroad-based,company-wideplanavailabletoall

employeestoencourageownershipratherthanbeinggivenonlytonon-executivedirectors.Loansshouldbesetatmarketinterestrates,andrequirefullrepaymentoverareasonablelengthoftime.

› QualityScorewillconsiderwhetherthecompanyhasgrantedloanstoitsnon-executivedirectorsandwhethersuchloansaregrantedinthecourseofnormalbusinessactivities.

MarketApplicability:Canada,S.Europe,Russia

Dodirectorsparticipateinequitybasedplans?(Q109)› Bestpracticesuggestsnon-executivedirectorsnottoparticipateinequity-basedplansasthisputsthemat

thesamelevelofexecutiveswhoshouldbemonitoredandremuneratedbynon-executivedirectors.Deferredshareunits(DSUs)receivedin-lieuofcashcompensationarenotconsideredforthisquestion;however,DSUsoranyotherequity-basedcompensationgiventodirectorsinadditiontoretainerareincluded.

› QualityScorewillconsiderwhethernon-executivedirectorswillparticipateinequitybasedplans.

MarketApplicability:Canada,W.Europe,Germanic,Nordic,S.Europe,Russia

Dodirectorsparticipateinperformance-relatedremuneration?(Q110)› Bestpracticerequiresnon-executivedirectorsnottoparticipateinperformancebasedremunerationasthis

putsthematthesamelevelofexecutiveswhoshouldbemonitoredandremuneratedbynon-executivedirectors.

› QualityScorewillconsiderwhethernon-executivedirectorsparticipateinperformancerelatedremunerationschemes.

MarketApplicability:W.Europe,Germanic,Anglo,S.Europe,Australasia,LatinAmerica,Africa,Russia,India,AsiaPacific

Whatpartofthetotalremunerationreceivedbydirectorsisoptions-based?(Q107)› Bestpracticesuggeststhatdirectorsshouldnotreceiveoptionsasremunerationbutinsteadshouldreceive

equityasaretainerorinlieuofcash.Theunderlyingrationaleisthatdirectors’independencecouldbecompromisedandtheirinterestsmorealignedwithmanagementthanwithshareholdersinsituationswheredirectorcompensationissimilartoexecutivecompensation.

OverviewandUpdates


› QualityScorewillconsiderthepercentageofoptionsgrantedrelativetothetotalremunerationreceivedbynon-executivedirectorsifsuchinformationisdisclosed.


Aredirectorswhoareeligibletoreceivegrants/awardsundertheplanalsoinvolvedintheadministrationoftheplan?(Q325)

› QualityScorewillconsiderwhetherdirectorsreceivegrantsorawardsunderaplanwhichtheyareresponsiblethemselvesfortheadministrationof.Directorsreceivinggrantsunderaplanthattheyareresponsibleforadministeringpresentsaclearconflictofinterest.

Marketapplicability:AsiaPacific,LatinAmerica,India

CommunicationsandDisclosure

DoesthecompanydisclosetheremunerationpaidtotheboardinAGMproxyfilings?(Q341)› Thebestpracticeistodisclosetheaggregateremunerationpaidtotheboardmembersinthecompany's

proxyfilings.Mostcompaniesdonotdisclosesuchinformationintheproxymaterials.› QualityScorewillconsiderwhetherornotsuchdisclosurewasmadeintheproxyfilings.

MarketApplicability:SouthKorea

Doesthecompanydisclosedetailsofindividualexecutives’remuneration?(Q112)› Bestpracticesuggestscompaniestodisclosecompleteandindividualinformationonexecutives'

remuneration,especiallyfortheCEO.› QualityScorewillconsiderthelevelofdisclosureonremunerationgrantedtoexecutives,whether

informationisdisclosedperindividualandwhetherinformationcontainsbreakdownsofthevariousremunerationcomponents.

MarketApplicability:AsiaPacific,S.Europe,LatinAmerica,Russia,India,Japan

Doesthecompanyhaveapolicyonexecutiveremunerationandcomputationbasisforthepay?(Q376)› Executiveremunerationistypicallyamixtureofsalary,bonuses,sharesoforcalloptionsonthecompany

stock,benefits,andperquisites,ideallyconfiguredtotakeintoaccountgovernmentregulations,taxlaw,thedesiresoftheorganizationandtheexecutive,andrewardsforperformance.Corporateexecutive

OverviewandUpdates


remunerationshouldbealignedwithlong-termgoalsandstrategiesandwithlong-termshareownerinterests.Remunerationshouldbestructuredtoachievelong-termstrategicandvalue-creationgoals.

› UntilrecentyearslittleattentionhadbeenpaidtoexecutiveremunerationandexecutivepaypolicyinJapanandmanystilllacksaframeworkforsettinganddecidingexecutivepay.Thisquestionwillconsiderwhetherthecompanyhasestablishedapolicyonexecutivepayasdisclosedinthecorproategovernancereport,butdoesexamimetherigorofsuchpolicy.


Doesthecompanydiscloseperformancemetricsfortheshorttermincentiveplan(forexecutives)?(Q113)

› Poorormissingdisclosureofthefinancialbasisforperformancemetricsmakeitdifficultforinvestorstojudgethequalityand/orrigorofthesemetrics.ISSlooksintoperformancemeasuresusedinawardingshort-termincentivesorannualbonusestoexecutives.Bestpracticeistodisclosethetargetperformancemetricsatleastonaretrospectivebasis.

› QualityScorewillconsidertheextentofdisclosureofspecificperformancecriteriaanddisclosedhurdleratesforshort-term,typicallyannual,cashincentiveplans.Bydefinition,theplanisone-yearorlessintheU.S.Theperformancemeasure(s)canbeanytypeofobjectivepre-determinedgoal,oftenfinancialinnature,suchasearningspershareorearningsbeforeinterest,tax,depreciation,andamortization.

MarketApplicability:U.S.,Canada,W.Europe,Germanic,Anglo,Nordic,S.Europe,AsiaPacific,Australasia,Africa,Russia

Whatisthelevelofdisclosureonperformancemeasuresforthelatestactiveorproposedlong-termincentiveplan?(Q246)

› Poorormissingdisclosureofthefinancialbasisforperformancemetricsmakeitdifficultforinvestorstojudgethequalityand/orrigorofthesemetrics.ISSwillevaluatelong-termequityandcashawardsgrantedinthemostrecentfiscalyearbasedonpre-determinedmetricsandtargetgoals.

› GovernanceQualityScorewillevaluateandconsiderwhetherperformanceconditionsforthelatestproposedlong-termincentiveplansaredisclosedandmeasuredbyincluding,forexample,targetscomparedwithpeergroupperformance,etc.Thisquestioncombinesseveralquestionsthatexamineddisclosureofperformancemeasuresfordifferentlong-termpayinstruments.

MarketApplicability:U.S.,Australasia,Russia

Doesthecompanydiscloseaperformancemeasureformatching?(Q121)

OverviewandUpdates


› Poorormissingdisclosureofthefinancialbasisforperformancemetricsmakeitdifficultforinvestorstojudgethequalityand/orrigorofthesemetrics.

› QualityScorewillconsiderthelevelofdisclosureonperformancemeasuresformatchingplansifsuchincentiveshavebeengrantedtoexecutivesinthepastyear.

MarketApplicability:W.Europe,Germanic,Anglo,Nordic,S.Europe,Africa

Doesthecompanydiscloseaperformancemeasureforstockoptionsplans(forexecutives)?(Q122)› Poorormissingdisclosureofthefinancialbasisforperformancemetricsmakeitdifficultforinvestorsto

judgethequalityand/orrigorofthesemetrics.› QualityScorewillconsiderthelevelofdisclosureonperformancemeasuresforstockoptionplansifsuch

incentiveshavebeengrantedtoexecutivesinthepastyear.

MarketApplicability:Canada,W.Europe,Germanic,Anglo,Nordic,S.Europe,AsiaPacific,LatinAmerica,Africa,India

Doesthecompanydiscloseaperformancemeasureforrestrictedshareplans(forexecutives)?(Q123)› Poorormissingdisclosureofthefinancialbasisforperformancemetricsmakeitdifficultforinvestorsto

judgethequalityand/orrigorofthesemetrics.FortheCanadianmarket,fullvalueawardsarepartoftheexecutives'long-termincentive.Awardsgivenunderlong-termincentiveplansareeithertime-based,whicharecalledrestrictedshareunits(RSUs);orperformance-based,calledperformanceshareunits(PSUs);oracombinationofboth.Ifthecompanyhasbothplans,thePSUplansupersedestheRSUplan.ISSconsidersfullvalueawardswhichareeithergrantedfromthecompany'streasuryorpurchasedinopenmarket.

› QualityScorewillconsiderthelevelofdisclosureonperformancemeasuresforrestrictedshareplansifsuchincentiveshavebeengrantedtoexecutivesinthepastyear.

MarketApplicability:Canada,W.Europe,Germanic,Anglo,Nordic,S.Europe,AsiaPacific,LatinAmerica,Africa

Doesthecompanydiscloseaperformancemeasureforotherlong-termplans(forexecutives)?(Q125)› Poorormissingdisclosureofthefinancialbasisforperformancemetricsmakeitdifficultforinvestorsto

judgethequalityand/orrigorofthesemetrics.› QualityScorewillconsiderthelevelofdisclosureonperformancemeasuresforotherlong-termplansifsuch

incentiveshavebeengrantedtoexecutivesinthepastyear.

MarketApplicability:W.Europe,Germanic,Anglo,Nordic,S.Europe,AsiaPacific,LatinAmerica,Africa

OverviewandUpdates


Doesthecompanyemployatleastonemetricthatcomparesitsperformancetoabenchmarkorpeergroup(relativeperformance)?(Q353)

QualityScorewillconsiderwhethercompanypre-establishedmetric,inanyshorttermorlongtermincentiveplan,issetrelative(meauredonrelativeterms)toanexternalgroup,suchasapeergroup,anindex,orcompetitors.


Hasthecompanyvoluntarilyadoptedamanagementsay-on-payadvisoryvoteresolutionforthemostrecentannualmeetingorcommittedtoaresolutiongoingforward?(Q166)

› AstheMSOPresolutionisnotmandatoryinallmarkets,QualityScorewillconsiderwhetherthecompanyhasadoptedavoluntarysay-on-payadvisoryvoteformanagementatthelatestannualgeneralmeeting,orwhetherthecompanycommittedtosucharesolutiongoingforward.

MarketApplicability:Canada,W.Europe,SouthAfrica

DidthemostrecentSay-on-Payproposalreceivesignificantoppositionfromshareholders?(Q328)› QualityScorewillconsiderthelevelofshareholdersupportonthemostrecentSay-on-Payproposalatthe

lastannualmeetingwherethesayonpayproposalwasupforvote.U.S.companymeetingresultsarecomparedto70percentofvotescast,whileAustralasiancompanymeetingresultsarecomparedto75percent,whicharewhenISS’policiesinitiateareviewoftheBoard’sresponsivenesstothelowshareholdersupportfortheappliedmarkets.

› FromthedateofpublicationoftheISSproxyresearchreportuntilthemeetingresultsareavailable,thisquestionwillbependingandtheresultwillindicate“meetingresultsinprogress”forthisfactor.


WhatisthelevelofdisclosureonCEOownershipguidelines?(Q250)› AsownershipguidelinesintheGermanregionarenotcommon,ISSwillonlyanalyzethelevelofdisclosure.› QualityScorewillconsiderthelevelofdisclosureonCEOownershipguidelines.

MarketApplicability:Germanic

Termination

Whatisthetriggerunderthechange-in-controlagreements?(Q148)

OverviewandUpdates


› Asingletriggerrequiresonlyachangeincontrolandnosubsequentterminationofemploymentorsubstantialdimunitionofdutiesfortheexecutivetoreceivehis/herexitpaypackage.Amodifiedsingletriggerissimilar,butprovidesaspecificwindowperiodduringwhichtimetheexecutivecanleaveemploymentforanyreason.Inbothinstances,theexecutivecanunilaterallydecidewhethertocontinueemploymentandmaynotbesufficientlymotivatedtostaywiththecompanylongtermgiventheprospectofunconditionalpayment.Moreover,iftheboardofthenewcompanywishestoretaintheservicesoftheexecutive,theymaynegotiateanycontractundercircumstancesthatgivetheexecutiveconsiderableleverageinseekingretentionpaymentsoradditionalcompensation.Adoubletriggergenerallyrequiresanactualterminationofemploymentbythecompanyorbytheexecutiveforgoodreasonorasubstantialdiminutionofresponsibilitiesundertheexecutive'snewrole.

› QualityScorewillevaluateandconsiderthetypeoftriggeremployedinchange-in-controlagreements,andtheyearthechange-in-controlagreementwasenteredinto.


Doequitybasedplansorlong-termcashplansvestcompletelyonchangeincontrol?(Q153)› Whilechange-in-controlagreementshavetheirplaceinordertoinsulateexecutivesfromlossof

employmentinconjunctionwithachangeincontrol,acceleratedvestingoftheCEOornexthighestpaidofficer'salloutstandingequitygrantstendstodisconnectpayfromperformanceandmayincentivizeexecutivestopursuetransactionsnotinthebestinterestsofshareholders.Bestpracticedictatesthatequitybasedplansvestintheeventofterminationofemploymentcombinedwithachangeofcontroltransaction(double-trigger).

› QualityScorewillconsidervestingtriggersfortheCEO’soutstandingequityawards.Thisfactorisspecificallyforthecompany'sCEO.IfthecompanyhasanewCEO,theprovisionsforhis/herequityremunerationwouldbecaptured.QualityScorewillconsidervestingtriggersforalloutstandingequityawardsoftheCEO.IfthecompanydisclosedmultipleeventsrelatedtothetreatmentofequityuponCIC,ISSwillconsiderthespecificeventapplicabletothehighestnumberofoutstandingequityawards.

› Thepossibleanswersforthisquestionare:Autoacceleratedvesting;Converted/Assumed;Acceleratedifnotassumed;Vestonlyupontermination;Fullboarddiscretion;Other;Informationonchange-of-controlprovisionscannotbedeterminedduetoinadequatedisclosure;andthecompanydoesnotissueequitybasedawards.

MarketApplicability:U.S.,Canada,Australasia,LatinAmerica

Intheeventofterminationofthecontractofexecutives,doestheequitybasedremunerationvest?(Q150)

› Acceleratedvestingofequitygrantsorevencontinuedvestingafterterminationofcontractsofexecutivestendstodisconnectpayfromperformance.

OverviewandUpdates


› QualityScorewillconsiderthetreatmentofequityawardsuponterminationofanexecutive’scontract.Thisquestionaddressesexecutives’contractsonly,nottheCEO’swhichisinaseparatequestion.QualityScorewilllookforprovisionsonthetreatmentofequityintheeventtheexecutive’scontracthasbeenterminatedwithoutcause,suchasredundancy.

MarketApplicability:Australasia,S.Europe

WhatisthemultipleofsalaryplusbonusintheseveranceagreementsfortheCEO(uponachange-in-control)?(Q161)

› UnderISS'benchmarkpolicy,severancepayments(inEurope)uponachangeofcontrol(allotherregions)thatareinexcessofaonetime(Netherlands),twotimes(CanadaandEurope),orthreetimes(U.S.)thebasesalaryandbonusareproblematicinallinstancesandconsideredexcessiveforallnamedexecutiveofficers.The'pay'mentionedinthisquestionincludesonlybasesalaryandbonus.Long-termcashand/orequityawardsarenotconsideredforthisquestion.

MarketApplicability:U.S.,Canada,W.Europe,Germanic,Anglo,Nordic,S.Europe,Africa,Russia

Whatisthebasisforthechange-in-controlorseverancepaymentfortheCEO?(Q247)› QualityScorewillconsiderthebasisuponwhichchange-in-controlorseverancepaymentsfortheCEOare

calculated.› Thepossibleanswersforthisquestionare:NoInformation;Salary;Salary+AverageBonus;Salary+Most

RecentBonus;Salary+MaximumBonus;Salary+Other;Salary+Last/HighestPaidBonus;andSalary+TargetBonus

› FormarketsoutsidetheU.S.,terminationpayelementsmayincludeeither(oracombination)ofthefollowing:salary,bonus,andbenefits.

MarketApplicability:U.S.,Canada,W.Europe,Germanic,Anglo,Nordic,S.Europe,Africa,Russia

WhatisthemultipleofsalaryplusbonusintheseveranceagreementsforexecutivesexcludingtheCEO(uponachange-in-control)?(Q160)

› UnderISS’benchmarkpolicy,paymentsthatareinexcessofonetime(Netherlands),twotimes(CanadaandEurope),orthreetimes(U.S.)baseandbonusmultipleareproblematicinallinstancesandconsideredexcessiveforallnamedexecutiveofficers.Multiplesequaltoorbelowmentionedbaseandbonusareconsideredacceptable,perISS’policy.

› QualityScorewillconsiderwhatmultipleofsalaryplusbonusexecutiveswillreceiveunderemploymentagreementsduetoachange-in-controleventorterminationofcontract.

OverviewandUpdates


MarketApplicability:W.Europe,Germanic,Anglo,Nordic,S.Europe,Africa,Russia

Whatisthebasisforthechange-in-controlorseverancepaymentforexecutivesexcludingtheCEO?(Q248)

› Paymentsbasedonbasesalaryplustargetoractualbonusesareacceptable.Apaymentbasedonthemaximumbonus,orparticularlyonthe“greaterof”actualandmaximum,isconsideredexcessive.

› QualityScorewillconsiderwhatthebasisuponwhichchange-in-controlorseverancepaymentsforexecutivesarecalculated.

› InmarketsoutsidetheUS,terminationpayelementsmayincludeeither(oracombination)ofthefollowing:salary,bonusandbenefits.


HowlongisthenoticeperiodfortheCEOifthecompanyterminatesthecontract?(Q152)› WhenacompanyterminatesthecontractoftheCEO,itis,inmostcases,obligedtocontinuecontractual

paymentuntilacertainperiod.Shareholdersacceptthisprovidedthenoticeperiodislimitedtosixmonths.› QualityScorewillconsiderthelengthofthenoticeperiodfortheCEOifthecompanyterminatesthe

contract.

MarketApplicability:Australasia,S.Europe

Doesthecompanyprovideexcisetaxgross-upsforchange-in-controlpayments?(Q162)› AnexcisetaxisanadditionaltaximposedbytheIRSforchange-in-controlrelatedseverancepaythat

exceedsthreetimesanexecutive'saveragetaxableincome--includingsalary,bonus,andthegainsonanyequitycompensation--overthepreviousfiveyears.Whileexcisetax-gross-upsbecamesomewhatcommonduringthe1990s,recentshareholderoppositiontothepracticehasledmanycompaniestoeliminatetheprovision,basedonrationalethatexecutiveofficersshouldberesponsiblefortheirindividualtaxliabilitiesandthatcommonmarketpracticedoesnotjustifyextraordinaryfinancialburdenstocompaniesandtheirshareholders.Further,theexcisetaxgross-upprovisionleadstosuchsubstantialincreasesinpotentialterminationpaymentsthatitmayencourageexecutivestonegotiatemergeragreementsthatmaynotbeinthebestinterestsofshareholders.Companieshavebeguntoprovideforpackagestobereducedtotheextentnecessarynottotriggertheexcisetax.Insomeinstances,thecompanymaycommittoloweraseverancepaymenttojustbelowthecapinlimitedcircumstances,buttopayagross-upifthepaymentexceedsthatlevel,whichdoesnotaddressthefundamentalproblemswiththesefeatures.

› QualityScorewillconsiderwhethergross-upsforchange-in-controlpaymentsaremade,whetherthecompanyprovidedgross-ups,butmadeacommitmentnottoprovidethemuponchange-in-controlinthefuture,whetherthecompanyimplementedgross-upprovisionsinacontractthatwasnewormaterially

OverviewandUpdates


amendedwithinthepastyear,andwhetherthecompanyprovidestaxgross-upsinoneormorecontracts,butnonewereenteredintoormateriallyamendedlastyear.Thequestionappliestoallexecutives,notjusttheCEO.


WhatisthelengthofemploymentagreementwiththeCEO?(Q163)› Bestpracticesdictatethatcompaniesshouldnotenterintofixed-durationemploymentcontractswith

executives,andiftheydo,onlyenterintoemploymentcontractsunderlimitedcircumstancesforashorttimeperiod(e.g.,newexecutivehiresforathree-yearcontract)forafinitenumberofexecutives.Theindividualagreementsshouldnothaveanautomaticrenewalfeatureandshouldhaveaspecifiedterminationdate.Anauto-renewfeatureindicatesthattheagreementcanbeextendedinperpetuity,forallintentsandpurposes,unlesseitherpartyprovidesdirectiontothecontrarypursuanttoadefinednoticeperiod.



Controversies

HasISS'qualitativereviewidentifiedapay-for-performancemisalignment?(Q300)› ISS’qualitativeanalysisofexecutivecompensationidentifiespaypracticesanddesignfeaturesthatmay

strengthenorweakenthelinkagebetweenexecutivepayandcompanyperformance.FeaturesandpracticestobeexaminedinISS’qualitativeanalysismayinclude(butarenotlimitedto):therigorofperformanceconditionsonincentiveplans,theproportionofperformance-basedequitypay,whetherterminationprovisionsmayenable“payforfailure,”thepresenceofretentionorotherdiscretionaryawards,“realizable”payrelativetograntedpay,andotherfeaturesofthepaydesignasdeemedappropriatetothecompany’sspecificcircumstances.


HasISSidentifiedaproblematicpaypracticeorpolicythatraisesconcerns?(Q301)› ISS’focusisonspecificexecutivecompensationpracticesthatruncountertoapay-for-performance

philosophy,including,butnotlimitedto:problematicpracticesrelatedtonon-performance-basedcompensationelementssuchasexcessiveperquisites;incentivesthatmaymotivateexcessiverisktaking;andspecificproblematicpracticessuchasoptionsbackdatingorrepricingoptionsheldbytopexecutivesand/ordirectorsorrepricinganyoptionswithoutshareholderapproval.

OverviewandUpdates


MarketApplicability:U.S.,Canada,W.Europe,Germanic,Anglo,Nordic,S.Europe,Australasia,LatinAmerica,Africa,Russia,India

ShareholderRights&TakeoverDefenses

One-Share,One-Vote

Doesthecompanyhaveclassesofcommonstockwithdifferentvotingrights?(Q54)› Dual-classcapitalstructurescanservetoentrenchcertainshareholdersandmanagement,insulatingthem

frompossibletakeoversorotherexternalinfluenceoraction.Theinterestsofpartieswithvotingcontrolmaynotbethesameasthoseofshareholdersconstitutingamajorityofthecompany’soutstandingcapital.Additionally,researchsuggeststhatcompanieswithdual-classcapitalstructuresorotherantitakeovermechanismsoftentradeatadiscounttosimilarcompanieswithoutsuchstructures.

› Thequestionwillevaluatewhetherthecompanyhasissuedstocktypeswithdifferentvotingrights.Convertiblesecuritiesentitledwithvariousvotingrightwhichisequaltothenumberofconvertedcommonsharesareexcluded.

› Thisfactorhasazero-weightimpactonthescoringmodelforAustralasiancompaniesandisincludedforinformationalpurposesonly.

MarketApplicability:U.S.,Canada,W.Europe,Germanic,Anglo,Nordic,S.Europe,Australasia,LatinAmerica,Africa,Russia

Doesthecompanyhaveclassshareswithfullormultiplevotingrights?(Q369)› Issuingshareswithmultiplevotingrightsisoftenclaimedbyproponentsthatitallowsthefoundersand

managementtomaintaincontroloverthestrategicdirectionofthecompany.Suchastructurehelpsthemfocusonthelong-termgrowthofthecompanyinsteadofimmediatefinancialreturn.Itisalsoseentobeatooltodefendagainstunwantedtakeoverattempts,asthecontrollingpartiescanvotedowntakeoverproposalsbyexercisingtheirvotingpower.Ontheotherside,weightedvotingrightstructuresareconsideredtobeproblematic,becausesuchgovernancestructures,withsuperiorvotingpowerheldbyagroupofassociatedpersons,increasetheriskthatthemanagementmaypursueprojectsthatarenotinthebestinterestsofthecompanybutfortheirowngood.Thisdeterioratedagencyproblemmayimplyhighercostofcapitalonfuturefundraising.

› Similarly,classshareswithfullvotingrightsviolatestheprincipleofone-share-one-vote,andcouldcontributetoboardandmanagemententrenchment.


OverviewandUpdates


Arethereanydirectorsontheboardwhoarenotupforelectionbyallclassesofcommonshareholders?(Q55)

› Barringsomeholdersofcommonstockfromvotingondirectorsmayservetoentrenchboardmembersandperpetuatecontrolbycertainblocksorgroups.

› QualityScorewillconsiderwhetheranydirectorsarenotelectedbyallclassesofcommonstock.


Isthereasunsetprovisiononthecompany'sunequalvotingstructure?(Q56)› Somecompanieswithunequalvotingstructureshavesettheconditionsuponwhichtheunequalvoting

structurewillbeterminatedandanequalvotingstructurewilltakeplace.Suchaconditioniscalledasunsetprovisioninthisregard.

› QualityScorewillconsiderwhetherunequalvotingstructuresincludeasunset(termination)provision,orwhetherthequestionisnotapplicablebecausethereisnosuchstructure.


Whatistheproportionofmultiplevotingrights(orvotingcertificates)relativetothetotalnumberofvotingrights?(Q57)

› Thisisthefirstpartofadoublematerialitytestwheretheimpactofthemultiplevotingrightsonthetotalnumberofvotingrightsismeasured.

› QualityScorewillconsiderthepercentageofmultiplevotingrightsrelativetototalvotingrights.

MarketApplicability:W.Europe,Germanic,Anglo,Nordic,Africa

Whatistheleveloffreefloatofthemultiplevotingrightsorvotingcertificates?(Q58)› ISSwillconsiderthepercentageoffreefloatofthemultiplevotingrights,orifnoinformationisgiven.Thisis

thesecondpartofadoublematerialitytestwheretheleveloffreefloatofmultiplevotingrightsismeasured.

› QualityScorewillconsiderthepercentageoffreefloatofthemultiplevotingrights,orifnoinformationisgiven.

MarketApplicability:W.Europe,Germanic,Anglo,Nordic,Africa

Whatpercentageofthecompany'ssharesisrepresentedbydepositaryreceiptswhereafoundationvotesunexercisedproxies?(Q59)

OverviewandUpdates


› DepositaryreceiptshavetypicallybeenissuedbyDutchcompaniesinordertokeepminorityshareholdersfromexertingdisproportionateinfluenceatgeneralmeetingswhereattendanceisoftenlow.Underthissystem,theunderlyingsharesarenearlyallheldbyafoundation,whichisusuallyindependentofthecompany(Question62)thathasissuedthedepositaryreceipts.Theseinstrumentsaresoldonthemarket.Holdersofsuchinstrumentsareentitledtothesamerightsasordinaryshareholders,saveforvotingrights.Inordertovote,theholdersneedtorequestavotingproxyfromthefoundation,ortheycanexchangetheirdepositaryreceiptsfortheunderlyingshares.Takingthesestepscansometimesberestrictedeitherbylimitationsontheabilitytorequestvotingproxiesortoexchangedepositaryreceiptsforshares.

› QualityScorewillmeasurethepercentageofcompanyshareswhicharerepresentedbydepositoryreceiptsforwhichthefoundationwillexecutevotingrightsunlessavotingproxyhasbeenrequestedshouldthispossibilityexist.


Hasthecompanyindicatedanintenttoeliminatethesystemofdepositaryreceipts?(Q60)› Overthepast10years,Dutchcompanieshavegraduallyeliminatedthesystemofdepositoryreceiptsbased

onattendanceofshareholdersatgeneralmeetings.Ingeneral,ifattendanceofshareholdersinthepastthreeyearshasreachedthresholdsof30percentorhigher,anumberofDutchcompanieshavecommittedtoeliminatingthesystem.

› Thisquestionwillconsiderwhetherthecompanyhasindicatedpubliclytoconsidereliminatingthesystemofdepositoryreceipts.


Aredepositaryreceiptholdersrestrictedintheirvotingrights?(Q61)› Traditionallydepositaryreceiptscouldbeexchangedforsharesorholdersofsuchdepositaryreceiptscould

requestavotingproxy,butonlytoacertainlimit(usuallybetween1and2percentofthesharecapital).Dutchcompanieshavemostlyeliminatedthesebarriers.

› QualityScorewillconsiderwhetherholdersofdepositaryreceiptscanrequestforvotingproxiesorexchangingtheirdepositaryreceiptsinsharesarelimitedintheirright.


Whatpercentageofthecompany'ssharecapitalismadeupofnon-votingshares?(Q63)› Thisisthefirstpartofadoublematerialitytestwheretheimpactofthenon-votingsharesonthetotalshare

capitalismeasured.Theissueofpreferentialnon-votingshareswherethelackofvotingiscompensatedbyahigherorguaranteeddividendisaccepteduptoacertainlevel.However,beyondthatlevel,theinfluence

OverviewandUpdates


ofshareholdersoncompanydecisionscanbehampered,especiallyiftheleveloffreefloatofthevotingrightsislimited.

Thisquestionwillmeasuretheproportionofnon-votingsharesrelativetothetotalsharecapitalofthecompany.


Whatistheleveloffreefloatofvotingsharesinrelationtothenon-votingshares?(Q64)› ISSwillmeasuretheleveloffreefloatofthevotingrightsinasystemofvarioussharetypeswithatleastone

ofthesharetypeslackingvotingrights.Thisisthesecondpartofadoublematerialitytestwheretheleveloffreefloatofvotingrightsismeasured.

› QualityScorewillmeasuretheleveloffreefloatofthevotingrightsinasystemofvarioussharetypeswithatleastoneofthesharetypeslackingvotingrights.


Doesthecompanyhaveanabsolutevotingrightceiling?(Q65)› Theexistenceofanabsolutevotingrightceiling,whichcapsthevoteafteracertainthresholdhasbeen

reached,alwayscreatesavotingrightdistortionfortheshareholderswhosestakeliesabovetheceiling.Thelowertheceiling,themoreshareholdersseetheirvotingrightsreducedandthelargerthevotingrightdistortion.

› QualityScorewillconsiderwhetheraceilingexpressedasaproportionofallsharesoutstandingisinplace,thepercentageoftheceiling,orifnoinformationisdisclosed.

MarketApplicability:W.Europe,Germanic,Nordic,S.Europe,LatinAmerica

Doesthecompanyhavearelativevotingrightceiling?(Q66)› Theexistenceofarelativevotingrightceiling,whichcapsthevoteafteracertainthresholdhasbeen

reached,alwayscreatesavotingrightdistortionfortheshareholderswhosestakeliesabovetheceiling.Thelowertheceiling,themoreshareholdersseetheirvotingrightsreducedandthelargerthevotingrightdistortion.

› QualityScorewillconsiderwhetheraceilingexpressedasaproportionofallsharesrepresentedatthegeneralmeetingisinplace,thepercentageoftheceilingorifnoinformationisdisclosed.

MarketApplicability:W.Europe,Germanic,Nordic,S.Europe

OverviewandUpdates


Doesthecompanyhaveanownershipceiling?(Q67)› Adiscountedscorefortheexistenceofownershipceilingsismeanttoreflectthetendencyofinvestorsto

discountcompaniesfeaturingownershipceilings;assuchceilingscurbinvestmentsandthuslimitthevotingpowershareholdersmayattain.

› QualityScorewillconsiderwhetheranownershipceilingexpressedasaproportionofallsharesoutstandingisinplace,thepercentageoftheceiling,orifnoinformationisdisclosed.

MarketApplicability:Japan,W.Europe,Germanic,Anglo,Nordic,S.Europe,Australasia,LatinAmerica,Africa,Russia

Doesthecompanyhaveownershipceilingsforspecificparties?(Q68)› Adiscountedscorefortheexistenceofownershipceilingsismeanttoreflectthetendencyofinvestorsto

discountcompaniesfeaturingownershipceilings,assuchceilingscurbinvestmentsandthuslimitthevotingpowershareholdersmayattain,especiallyifsuchceilingappliesonlytoonegroupofshareholders.

› QualityScorewillconsiderwhether,intheeventthecompanyhasinstalledanownershipceiling,itisapplicabletoallshareholdersoronlytoacertaincategoryofshareholders(suchasforeigninvestors).

MarketApplicability:W.Europe,Germanic,Anglo,Nordic,S.Europe,Australasia,LatinAmerica,Africa,Russia

DoshareholdersortheStatehavethepriorityright?(Q69)› Theinvestorcommunitygenerallydisapprovesofspecialsharesthatgrantdisproportionatelyhighvoting

powerstotheState(goldenshares)orotherspecificshareholders(referredtoaspriorityshares).› QualityScorewillevaluateandconsidertheexistenceofpriorityrightsheldbytheStateorspecific

shareholdersandwillqualifythenatureofsuchrightsintohighorlowimportance.

MarketApplicability:W.Europe,Germanic,Anglo,Nordic,S.Europe,LatinAmerica,Africa,Russia

Isthereacoattailprovisionattachedtothecompany'sunequalvotingstructure?(Q217)› Coattailprovisionsprovideprotectionforminorityshareholderswhenamajorityshareholderexistsundera

dualcapitalstructure,i.e.duringatake-overbid,asimilarofferismadetothe"subordinate"sharewiththatofthe"superior"shares.

› QualityScorewillconsiderwhetherthecompanyhasanunequalvotingstructureandwhetheracoattailprovisionhasbeenattachedtothestructure.


OverviewandUpdates


TakeoverDefenses

Doesthecompanyhavetargetedstockplacementthatcanbeusedasatakeoverdefense?(Q72)› Attheirholders’discretion,financialinstrumentsgivingpotentialaccesstothecompany’scapitalmaybe

exercisedandmaycompromisethesuccessofatakeoverattemptthroughthedilutionofthepercentageofvotingrightsavailableonthemarket.Holdersoftheseinstrumentsmayormaynotbeexistingshareholdersofthecompany.

› Thisquestionwillmeasuretheimpactoftargetedstockplacementintheeventofatakeoverbidwhichthecompanycanuseasadefense.

MarketApplicability:W.Europe,S.Europe,S.Korea

Doesthecompanymaintainpreemptiverightsintheeventofatakeoverbid?(Q73)› Authorizationsgiventothemanagementboardtoincreasesharecapitaldonotalwayspreservepreemptive

rightsforexistingshareholders,andmayevensometimesbeallowedduringatakeoverincertainmarkets.› Thisquestionwillmeasuretheimpactofthepossibilityofthecompanytoissuesharesandrestrict

preemptiverightswhichitcanuseasadefenseintheeventofatakeoverbid.

MarketApplicability:W.Europe,S.Europe

Canthecompanytargetrepurchasedsharesintheeventofatakeoverbid?(Q74)› Sharesareusuallyrepurchasedeithertominimizethedilutionofemployeeshareplans,tofundashare

exchangeforacquisitions,ortoincreaseearningspershare(bystabilizingtheshareprice).Atthesametime,asharerepurchasecouldalsobeusedasatakeoverdefense,whichreducesthevotingpowerofthefloatingcapitalandincreasestherelativevotingpowerofthereferenceorcoreshareholder(s).Thismayhappenwhenthecompanyrepurchasesitsownsharesduringatakeoverandwhenvotingrightsofrepurchasedsharesaretemporarilyorpermanently(whenrepurchasedsharesaredestroyed)cancelled.Itcouldalsoincreasethevotingpoweroffriendlyparties(existingreferenceorcoreshareholders,the“WhiteKnight”defense)whenthecompanyresellssharesthathavebeenrepurchasedpriortoorevenduringatakeover.

› Thisquestionwillmeasuretheimpactofthepossibilityofthecompanytorepurchaseownshareswhichitcanuseasadefenseintheeventofatakeoverbid.

MarketApplicability:W.Europe,Nordic,S.Europe

Arethereownershipfactorsthataffectthetakeoverdefenses?(Q218)

OverviewandUpdates


› Ownershipfactors,suchasceilings,precludethesuccessofatakeoverattemptwhiledenyingshareholdersatakeoverpremiumandpotentiallyentrenchingthecompany’smanagement.

› QualityScorewillconsidertheexistenceofownershipceilingswhichhamperthesuccessofatakeoverbidonthecompany.


Aretherepriorityrightsthataffectthetakeoverdefenses?(Q219)› Priorityrightsaffordholderstherighttodecideonkeycorporateactionssuchastakeoversthatarenormally

sanctionedbyshareholderscollectively.Suchrightscanbevestedinspecificsharetypes,suchaspriorityshares.Theserightsmaybelinkedtoaspecificcompanystructurewherecertainshareholdersholdrightsbeyondnormalvotingrights.Ifsuchrightsaregrantedtothestate,theyarecalledgoldenshares.

› QualityScorewillconsidertheexistenceofpriorityrightswithwhichtheStateorspecificshareholderscanblocktakeoverbidsonthecompany.


Arealldirectorselectedannually?(Q77)› Classifyingtheboardmakesitmoredifficultforshareholderstoremoveineffectivedirectors,ortochange

controlofacompanythroughaproxycontestinvolvingtheelectionofdirectors.Becauseonlyaminorityofthedirectorsiselectedeachyear,adissidentwillbeunabletowincontroloftheboardinasingleelectionandwouldneedtwoyearstogaincontrolofthecompanyunlesstherearevacanciesintheotherclasses.Studieshaveshownanegativecorrelationbetweentheexistenceofaclassifiedboardandafirm'svalue.

› QualityScorewillconsiderwhetheralldirectorsareelectedeachyear,ratherthaninstaggeredterms—oftenreferredtoasaclassifiedboard.QualityScorewillalsoconsiderwhethercompaniesaretransitioningtoadeclassifiedboard,asdefinedwhenacompanyreceivesshareholderapprovalfortheswitch,butannualelectionsofallmembershasnotyetcommenced.

› QualityScorewillalsoconsiderwhetheracompany,thoughcurrentlyelectedannually,couldclassifyitsboardwithoutshareholderapproval.


MarketApplicability:U.S.,Canada,Japan,LatinAmerica

Istheboardauthorizedtoissueblankcheckpreferredstock?(Q83)› Authorizationtoissueblankcheckpreferredstockgivestheboardthepowertoissue,atitsdiscretion,

preferredstockwithvoting,conversion,distribution,andotherrightstobedeterminedbytheboardatthe

OverviewandUpdates


timeofissue.Althoughauthoritytoissuepreferredsharesgivesthecompanyflexibilitytomeetthecompany'sbroadfinanceneeds,theseplacementscandiluteexistingshareholders'equityandvotingpositions.

› Preferredstockcanbeusedforsoundcorporatepurposessuchasraisingcapitalormakingacquisitions.Inthesecases,blankcheckimpliesflexibilityinmeetingthecompany’sbroadfinanceneeds.Bynotestablishingthetermsofpreferredstockatthetimetheclassofstockiscreated,companiesmaintaintheflexibilitytotailortheirpreferredstockofferingstoprevailingmarketconditions.Nevertheless,blankcheckpreferredstockcanbeusedasanentrenchmentdevice,tofundapoisonpillforexample.Albeitlesscommontoday,anotherpowerfultakeoverdefenseistheplacementoflargeblocksofblankcheckpreferredstock,withfriendlythirdparties—theso-called“whiteknight”rescue.Blankcheckpreferredstockwouldnotbeasobjectionabletoshareholdersifacompanystatedinwritingthatsuchshareswouldbe“declawed”andnotbeusedtothwartapotentialtakeover.Declawedblankcheckpreferredstockmeansthattheboardcannotauthorizesharesofpreferredstockwithoutshareholderapprovalthatcanbeusedintakeoverdefensepurposes.

› QualityScorewillconsiderwhethertheboardisauthorizedtoissueblankcheckpreferredstock,andwhetherthestock,ifauthorized,isdeclawed.

MarketApplicability:U.S.,Canada,SouthKorea

Doesthecompanyhaveapoisonpill(shareholderrightsplan)ineffect?(Q78)› Institutionalinvestorsviewpoisonpills,whichcanmakeahostileacquisitionattemptprohibitively

expensive,asamongthemostonerousoftakeoverdefensesthatmayservetoentrenchmanagementandhaveadetrimentalimpactontheirlong-termsharevalue.Whilerecognizingthatboardshaveafiduciarydutytouseallavailablemeanstoprotectshareholders'interests,investorsoftenarguethat,asabestgovernanceprinciple,boardsshouldseekshareholderratificationofapoisonpill(oranamendmentthereof)withinareasonableperiod.

› QualityScorewillconsiderwhetherthecompanyhasashareholderplanineffect,andwhetherthepoisonpillhasbeenapprovedbyshareholders.ForCanadiancompanies,ISSwillalsoconsideriftheshareholderrightsplanmeetsthenecessaryrequirementsundertheguidelinesfornewgenerationpills.

MarketApplicability:U.S.,Canada,Japan

Whatisthetriggerthresholdforthepoisonpill?(Q79)› Poisonpilltriggerstypicallyrangefrom10to25percent.Bestpracticeisforapill(otherthananNOLpill)to

haveatriggernolowerthan20%.› QualityScorewillconsiderthetriggerpercentageforthepill.


OverviewandUpdates


Doesthepoisonpillhaveasunsetprovision?(Q80)› Poisonpillswithscheduleddatesofterminationmeanthatthedecisiontomaintainthepoisonpillmustbe

periodicallyrevisitedand,ideally,resubmittedforshareholderapproval.› QualityScorewillconsiderwhethertheplanincludesaprovisionwhichpermitsshareholderstoreaffirmor

redeemapoisonpillwithinaspecifiedtimeperiod.


DoesthepoisonpillhaveaTIDEprovision?(Q81)› TIDEprovisionsrequirethecompany’sindependentdirectorstoreviewtheplaneverythreeyearsto

evaluatewhetheritisstillinshareholders’bestinterest.› GovernanceQualityScorewillconsiderwhethertheplanincludesaThree-YearIndependentDirector

Evaluation(TIDE)provision,aprovisionwheretheindependentdirectorsoftheboardmeetperiodicallytoreviewtheneedtokeeptheplaninplace.

› Thisfactorhasazero-weightimpactinthescoringmodelforU.S.companiesandisincludedforinformationalpurposesonly.


Doesthepoisonpillhaveaqualifiedofferclause?(Q82)› Well-designedpillsprovidethecompanywithnegotiatingpowerandtimetoreceivethebestpossibleoffer

forshareholders.Qualifiedofferclausesempowershareholderstoredeemthepillandacceptavalidtakeoveroffer.

› QualityScorewillconsiderwhethertheplanincludesaclauseallowingshareholderstoredeemthepillinthefaceofabonafidetakeoveroffer.


Whatistheexpirationdateofthepoisonpill?(Q91)› Whilelong-termpillsmaytendtoserveasadevicetoentrenchmanagement,shorter-termpillsaremore

likelytobeinresponsetoparticularmarketorcompanycircumstances,andrequire,theboardtorevisitthedecisiontoinstitutetherightsplan.

› QualityScorewillconsiderthenumberofyearsuntilsunsetorterminationdateoftheplan.


OverviewandUpdates


Isthepoisonpilldesignedtopreservetaxassets(NOLpill)?(Q220)› AnNOLPillisashareholderrightsplanwithalowtriggerthatismeanttopreservethevalueofnet

operatinglosscarryforwards(NOLs),ataxbenefitaccruedbycompaniesthatcanpotentiallyreducetheirfuturetaxliability.PerIRSrules,thesetax-lossassetsareforfeiteduponadefinedchangeincontrol;assuch,NOLpillsaredesignedtopreserveshareholdervalue

› QualityScorewillconsiderwhetherthepillisdesignedtopreservetaxassets.


Whenwasthepoisonpillimplementedorrenewed?(Q222)› QualityScorewillconsiderhowlongagotheboardmostrecentlytookactiononthepill,whetherto

implementitorrenewit.


Doesthecompany'spoisonpillincludeamodifiedslow-handordead-handprovision?(Q223)› “Deadhand”and“slowhand”provisionsthatpreventtheredemptionofthepoisonpillareegregiousand

unjustifiableviolationofshareholders’rightstoacceptanattractivetakeoveroffer,evenafterreplacingmembersoftheboard.

› QualityScorewillconsiderastowhethertheimplementationofthepillinhibitsorprohibitstheabilityoffutureboardsofdirectorstoredeemthepill.Aslow-handprovisionforcesadelayintheredemptionofthepoisonpillevenifshareholdersofthetargetfirmfavorthetakeover.Adead-handprovisionprovidesthatonlytheincumbentdirectors,continuingdirectors,ortheirdesignatedsuccessorscanredeemthepoisonpill,evenaftertheyhavebeenvotedoutofoffice(thusprecludingredemption).


Wasthepoisonpillapprovedbyshareholders?(Q221)› Theboardofdirectorsshouldseekshareholderratificationofapoisonpill(oranamendmentthereof).› QualityScorewillconsiderwhetherthepoisonpillwasapprovedbyamajorityofshareholders.Voting

resultsareconsideredasamajorityofvotescast,abstentionsincludedbutexcludingbrokernon-votes.


Doesthecompanyhaveacontrollingshareholder?(Q290)

OverviewandUpdates


› Whenthereisacontrollingshareholder,theminorityshareholdersmayfacechallengesinmatterswheretheirinterestsdivergefromthoseofthemajorityshareholder.

› QualityScorewillconsiderwhetherthecompanyhasashareholderorshareholdersactinginconcertandholdingamajorityofthevotingrights.

› Thisfactorhasazero-weightimpactonthescoringmodelforU.S.,SouthernEuropean,andAustralasiancompaniesandisincludedforinformationalpurposesonly.

MarketApplicability:U.S.,AsiaPacific,Japan,S.Europe,Australasia,LatinAmerica,Africa,RussiaSouthKorea,India

Ifthecompanyhasamajorityvotingstandard,isthereapluralitycarve-outinthecaseofcontestedelections?(Q224)

› Bestpracticecallsforamajorityvotestandardinuncontesteddirectorelections,andapluralityvotestandardincontestedelections.Otherwise,inacontestedelection,evenifadissidentnomineereceivesmorevotesthanamanagementnominee,themanagementnomineewouldbeseated.QualityScorewillconsiderastowhetherthemajorityvotingstandard–ifinplace–doesnotapplyinthecaseofcontestedelections.SomecompaniesincorporatedoutsideoftheU.S.donothavea“contestedsituation”:allnominees(whethermanagementorshareholder-nominated)whoreceiveamajorityofvotescastareseatedontheboard.Thissituationisincludedinthepossibleanswers.


Doestheremovalofadirectorrequireasupermajorityvote?(Q284)› Japanesedirectorscanberemovedbyasimplemajorityshareholdervote,unlessthearticlesrequirea

supermajority.Thesupermajorityrequirementcanserveasaformofmanagemententrenchment.


Whatistheleveloftagalongrightsforminorityshareholders?(Q333)› Tagalongrightsaregrantedtominorityshareholderswhenacompanyreachedanagreementwithamajor

shareholdertotakeoverthecompanyatacertainprice.Thetagalongrightswillindicateatwhatlevelminorityshareholdercanselltheirsharestotheacquiringshareholder.Inprincipleminorityshareholdersshouldbeallowedtoreceivethesameprice.

› TagalongrightsareprovidedbyBrazilianlaw(LeidasS.A.,Article254-A)andassurethatthedisposal,directorindirect,ofacompany’scontrolshallbecarriedoutonconditionsthatthebuyerundertakestotenderapublicofferforacquisitionofallcommonsharesheldbytheothershareholdersinthecompany,sothattheymaybeaccordedasminimumprice80%ofthevaluepaidforthesellingcontrollingshareholder.Some

OverviewandUpdates


companieshavedecidedvoluntarilytoextendtagalongrightstopreferredshareholders,and/orassuretothecommonshareholdersapriceabove80%.

› QualityScorewillconsidertheleveloftagalongrightsintheeventofatakeoverbid.

Marketapplicability:LatinAmerica

Meeting&VotingRelatedIssues

Doesthecompanyrequireasuper-majorityvotetoapproveamendmentstothecharterandbylaws?(Q89)

› Supermajorityprovisionsviolatetheprinciplethatasimplemajorityofvotingsharesshouldbeallthatisnecessarytoeffectchangeregardingacompanyanditscorporategovernanceprovisions.Requiringmorethanthismaypermitmanagementtoentrenchitselfbyblockingamendmentsthatareinthebestinterestsofshareholders.

› QualityScorewillconsiderwhetherasuper-majorityvoteisrequired,orifnoinformationisgiven.Supermajorityisdefinedasanythingabovesimplemajority.ISSgenerallyseesthresholdsoftwo-thirdsor75percentbutanythingabovesimplemajority(typically,66.66percentorhigher)ischaracterizedassupermajority.

› QualityScorewillalsoconsiderwhethershareholdershavetherighttoamendthebylaws.IntheU.S.,underSECRule14a-8,shareholderswhohaveheldsharesvaluingatleast$2,000foroneyeararepermittedtosubmitshareholderproposals,bothprecatoryandbinding,toamendbylaws.However,somestatesallowcompanies,intheircharters,torestrictshareholders’righttoamendthebylawsthroughbindingbylawamendmentsorproxyfights.

MarketApplicability:U.S.,S.Europe,Canada

Doesthecompanyrequireasuper-majorityvotetoapprovemergers/businesscombinations?(Q90)› Supermajorityprovisionsviolatetheprinciplethatasimplemajorityofvotingsharesshouldbeallthatis

necessarytoeffectamerger.Forcompaniesthatarecontrolled,however,supermajorityprovisionsmayhelpensurethatthecontrollingshareholdercannotunilaterallyforceamergerdespitetheoppositionofminorityshareholders.

› QualityScorewillconsiderwhetherasuper-majorityvoteisrequired,orifnoinformationisgiven.Supermajorityistypicallydefinedasanythingabovesimplemajority.ISSgenerallyseesthresholdsoftwo-thirdsor75percentbutanythingabovesimplemajorityischaracterizedassupermajority.


Doesthecompanyhavediscretionoverdividendpayments?(Q285)

OverviewandUpdates


› AccordingtoJapanesecorporatelaw,dividendpaymentsrequireshareholderapproval,unlessthecompanyarticlesstatethattheboardhasthisauthority.

› QualityScorewillconsiderwhetherthecompanyhasdiscretionoverdividendpayments.

MarketApplicability:Japan,SouthKorea

Aretheshareholdersallowedtosubmitdividendproposals?(Q286)› Investorsshouldhavetheabilitytosubmitshareholderproposalsondividendsincaseswhereinvestorssee

existingdividendpracticeasproblematic.› QualityScorewillconsiderwhethershareholdersareallowedtosubmitproposalsondividends.


Arethenamesofthenomineedirectorsdisclosed?(Q334)› Inordertohaveameaningfulvoteonthenominationofdirectors,thecompanyneedstodisclosecrucial

informationonitscandidates.› QualityScorewillconsiderwhetherthenamesofthenomineedirectorsaredisclosedaheadofthegeneral

meeting.


Whatproportionofsharesmustberepresentedatthegeneralmeetingtocancelthebindingnatureofthenominationofsupervisoryboardmembers(andorexecutiveboardmembers)?(Q84)

› AccordingtotheDutchCodeofCorporateGovernance(December2008),thegeneralmeetingofshareholdersofacompanynothavingstatutorytwo-tierstatusmaypassaresolutiontocancelthebindingnatureofanominationfortheappointmentofamemberofthemanagementboardorofthesupervisoryboardand/oraresolutiontodismissamemberofthemanagementboardorofthesupervisoryboardbyanabsolutemajorityofthevotescast.Itmaybeprovidedthatthismajorityshouldrepresentagivenproportionoftheissuedcapital,whichproportionmaynotexceedone-third.Ifthisproportionofthecapitalisnotrepresentedatthemeeting,butanabsolutemajorityofthevotescastisinfavorofaresolutiontocancelthebindingnatureofanomination,ortodismissaboardmember,anewmeetingmaybeconvenedatwhichtheresolutionmaybepassedbyanabsolutemajorityofthevotescast,regardlessoftheproportionofthecapitalrepresentedatthemeeting.‖

› QualityScorewillconsiderthepercentageofsharesneededtocancelthebindingnatureofboardormanagementnominations.


OverviewandUpdates


Didthecompanyhaveaslateballotatitslastshareholders'meeting?(Q53)› Bundled,orslate,directorelectionsprovideshareholderswithonlyasinglevotefororagainstallofthe

nomineesasagroup.Ashareholderwhowishestowithholdsupportfromasingledirectordoesnothavetheabilitytodosowhenthecompanybundlesdirectorelections.Bestpracticeistoprovideaseparateballotitemforeachdirectorupforelection.QualityScorewillconsiderwhetherthecompanyhadbundledorindividualelectionsatthemostrecentshareholdermeetingwithelectionofdirectors.

MarketApplicability:W.Europe,Germanic,LatinAmerica,SouthKorea

Whatisthenumberofvacanciesontheboard?(Q262)› Therearevacanciesontheboardifthecurrentnumberofdirectorsislessthanthemaximumnumberof

directorsallowedunderthecompany'sbylaws.Iftherearevacanciesontheboardandtheboardhasnotdeclared"novacancy"(subjecttoprovisionsoftheAustralianCorporationsAct),itiseasierforshareholdernominatedcandidatestobeelectedtotheboard.

› QualityScorewillconsiderthemaximumnumberofboardseatsprovidedinthecompany'sconstitutionminusthecurrentnumberofdirectorsontheboard.

MarketApplicability:Australasia,Japan

Whatisthepercentageofsharecapitalneededtoconveneaspecialmeeting?(Q97)› MostU.S.statecorporationstatutesallowshareholderstocallaspecialmeetingwhentheywanttotake

actiononcertainmattersthatarisebetweenregularlyscheduledannualmeetings.Generally,thisrightappliesonlyifashareholderorgroupofshareholdersownsaspecifiedpercentageoftheoutstandingshares.Intermsofday-to-daygovernance,shareholdersmayloseanimportantright–theabilitytoremovedirectorsorinitiateashareholderresolutionwithouthavingtowaitforthenextscheduledmeeting–iftheyareunabletocallatimelyspecialmeeting.Shareholderscouldalsobepowerlesstorespondtoabeneficialofferifabiddercannotcallaspecialmeeting.Therefore,theinabilitytocallaspecialmeetingandtheresultinginsulationofmanagementmayresultinthedeclineofcorporateperformanceandshareholderreturns.

› QualityScorewillconsiderwhethershareholderscancallaspecialmeeting,and,ifso,theownershipthresholdrequired.

MarketApplicability:U.S.,W.Europe,Canada

Canshareholdersactbywrittenconsent?(Q98)

OverviewandUpdates


› Consentsolicitationscanbeadvantageoustobothshareholdersandmanagementinthattheprocessdoesnotinvolvetheexpenseofholdingaphysicalmeeting,anditiseasierforshareholderswhocansimplyrespondtotheproposalbymail.Aconsentsolicitationissimilartoaproxysolicitation:consentsaremailedtoshareholdersfortheirvoteandsignatureanddeliveredtomanagement.Thedifferencesarethat1)thereisnophysicalmeeting,2)aconsentperiod(generally60days)issetforthedeliveryoftheconsents,and3)assoonasthethresholdlevelofconsentsaredelivered,theproposalsaredeemedratifiedandtheconsentsolicitationends..Incontrast,aproxysolicitationmustendwithameetingbecauseproxycardsmerelyauthorizetheindicated"proxy"tocastavoteatashareholdermeeting.Asignedconsentcardisitselfthefinalvoteand,assuch,doesnotrequireavotebyproxyatashareholdermeeting.

› Limitationsonwrittenconsentaregenerallyconsideredcontrarytoshareholderinterests.Intermsofday-to-daygovernance,shareholdersmayloseanimportantright–theabilitytoremovedirectorsorinitiateashareholderresolutionwithouthavingtowaitforthenextscheduledmeeting–iftheyareunabletoactbywrittenconsent.Beneficialtenderoffersalsomaybeprecludedbecauseofabidder'sinabilitytotakeactionbywrittenconsent.

› QualityScorewillconsiderwhethershareholderscanactbywrittenconsent,oriftheinformationisnotdisclosed.Companiesthatmandateunanimouswrittenconsentmaintainapracticethatincreasesconcern.


Doesthecompanyusecumulativevotingfordirectorelection?(Q338)› Undercumulativevoting,oncetheGeneralAssemblyfixestheboardsize,shareholdersmayfocusalloftheir

votesononeormorecandidates.Thenomineesreceivingthemostvotescomprisethenewboard.Underarticle141ofBrazilianCorporateLaw,shareholdersmustrequestcumulativevotingatleast48hourspriortothemeetingdate.Shareholdersmustalsohave5percentofsharecapitaltorequestcumulativevoting(thispercentageisbasedonsharecapital;smallercompanieshavehigherthresholds.

MarketApplicability:AsiaPacific,SouthKorea

Doesthecompanyhaveamajorityvotestandardinuncontestedelections?(Q52)› Amajorityvotestandardrequiresthat,fordirectorstobeelected(orreelected)toserveonthecompany's

board,theymustreceivesupportfromholdersofamajorityofsharesvoted.Apluralitystandardonlyrequiresthemostvotes,meaningadirectornomineeinanuncontestedelectioncanbeelectedtotheboardwith,intheory,asinglevote.

› Amajorityvotestandard,incombinationwithapluralitystandardinelectionswithmorenomineesthanseats,andadirectorresignationpolicytoaddresspost-electionresults,hasemergedintheU.S.asawaytomakedirectorelectionsmeaningfulratherthanmerelysymbolic,andisconsideredbestpractice:shareholdershaveaclear,legallysignificantvote,andtheboardretainstheabilitytoaddressthesituation

OverviewandUpdates


of"holdover"directorstoaccommodatebothshareholderconcernsandtheneedforstabilityandcontinuityoftheboard.

› IntheU.S.,a“majorityvotepolicy”isatermsometimesusedtodescribeadirectorresignationpolicy,whichisthepost-electionprocesstobefollowedifadirectordoesnotreceiveamajorityofvotescast.Suchresignationpoliciesareusuallyfoundinacompany’scorporategovernanceguidelines,andcanaccompanyeitheramajorityorapluralityvotestandard.Itisnotthesameasamajorityvotestandard.

› Whilemajorityvoting,byitself,doesnotaddresstheholdoversituationifadirectorfailstogetmajoritysupport,thedirectorinquestionisstillnotlegally"elected."Thisistrueevenifthedirectortendershis/herresignationandtheboardrejectsit;thatdirectorwasnot"elected"totheboard.Ontheotherhand,pluralityvotinglacksteeth:theincumbentdirectorstilldetermineswhethertotenderhisorherresignation.Evenifthecompanyhasadirectorresignationpolicywiththepluralitystandard,iftheboarddoesnotaccepttheresignation,thedirectorwhodidnotgarnermajoritysupportisstilllegallyconsidered"elected."

› ForCanada,theadoptionofmajorityvotingpolicyconnotesthateachdirectorofalistedissuermustbeelectedbyamajority(50%+1vote)ofthevotescastwithrespecttohisorherelectionotherthanatcontestedmeetings.Ifnot,thedirectornomineewillprovidehisorherresignationtotheboard.Theboardwillthenconsidertheresignationanddecidewhethertoaccepttheresignationornot.

› QualityScorewillconsiderthevotingstandardsforelectingdirectorstotheboard.


Ifthecompanyhasamajorityvotingpolicyindirectorelections,doesapluralitystandardapplyforcontestedelections?(Q343)

› Bestpracticecallsforamajorityvotestandardinuncontesteddirectorelections,andapluralityvotestandardincontestedelections.Otherwise,inacontestedelection,evenifadissidentnomineereceivesmorevotesthanamanagementnominee,themanagementnomineewouldbeseated.QualityScorewillconsiderastowhetherthemajorityvotingstandard–ifinplace–doesnotapplyinthecaseofcontestedelections.


Aretherematerialrestrictionsastotimingortopicstobediscussed,orownershiplevelsrequiredtocallameeting?(Q225)

› QualityScorewillconsiderwhethertherearematerialrestrictionstotherighttocallaspecialmeetingofshareholders.Materialrestrictionsinclude:restrictionsthatprohibitspecialmeetingsmorethan90daysawayfromtheprior(orplannedfuture)annualmeetingdate,restrictionsthatmaybeinterpretedtoprecludedirectorelectionsorothersignificantbusiness,andrestrictionsthateffectivelyraisetheownershipthresholdrequiredtocallthemeeting.


OverviewandUpdates


Isthequorumforshareholders'meetingsatleasttwopersonsrepresentingatleast25percentoftheoutstandingshares?(Q101)

› Shareholdermeetingsshouldonlyconvenewithaminimumacceptablelevelofattendance,therebyeliminatinganyshareholderresolutionsthatmaybepassedinameetingwithinsufficientshareholderrepresentation.

› QualityScorewillconsiderwhetherquorumrequirementsareatleasttwopersonsrepresenting25percentofoutstandingshares,orifrequirementsarelessthantwopersonsand/orrepresenting25percentofoutstandingshares.QualityScorealsowillconsiderifthecompanyhasacontrollingholderwhomeetsorexceedsquorumrequirements.


Didthecompanyfileitsproxymaterialslateinthepastyear?(Q335)› Relevantproxymaterialsshouldbedisclosedinatimelymannerwellinadvanceofthegeneralmeetingto

allowforameaningfulshareholderreview.› QualityScorewillconsiderwhetherthetimingofthefilingofproxymaterialsmeetlocalbestpractice.The

assessmentisbasedonwhenacompanyshouldbedisclosingmaterials,nottheminimumrequiredunderthelocalregulations.

MarketApplicability:AsiaPacific,Russia,SouthKorea,India

Howmanynumberofdaysbeforethegeneralmeetingdidthecompanypublishitsproxymaterials?(Q371)

› Companyshouldpublishproxymaterialasearlyaspossiblebeforethemeetingdateinordertoprovideforampletimeforshareholderstoreviewandevaluatethemandmakeinformedvotingdecisions.


DoesthecompanyprovideproxymaterialsinEnglish?(Q373)› Accesstoinformationisintegraltoexerciseofownershiprights.AsignificantnumberofcompaniesinJapan,

however,disclosesproxymaterialsinJapanaeseonly,creatinghurdlesforforeigninvestorstomakeaninformedvotingdecision.MakingEnglishproxymaterialsreadilyavailabletoinvestorsisconsideredabestpractice.


OverviewandUpdates


Doesthecompanydisclosethepolicyoncross-shareholding,includingvotingpolicyforsuchshares?(Q370)

› Cross-shareholdingstructures,whichtendtolockupcontrolamonglong-standingbusinesspartnersorfellowcompaniesinaconglomerate,arecommoninJapan.Ingeneral,sellingcross-shareholdingswillbegoodforbroaderequitymarket,reducingmanagemententrenchment,offeringpossibleimprovementsincapitalefficiency,puttingmoresharesinthepublic’shandsandsupportingmerger-and-acquisitionactivity.

› NewJapaneseCorporateGovernanceCode(1-4)encouragescompaniestoevaluateeconomicbenefitsandrisksofcross-shareholdingsandtoestablishapolicyonmanagingsuchequitypositions.


Doesthecompanyholditsgeneralmeetingonapeakdate?(Q287)› ManyJapanesecompaniesholdtheirannualshareholdermeetinginthelastfewdaysofJune,usuallywith

anoverwhelmingconcentrationononeortwodays.InvestorshaveaskedcompaniesnottoholdshareholdermeetingsonthisJune"peak"date.SimilarlyinSouthKoreamostcompaniesholdtheirgeneralmeetingontwodaysinMarch.

MarketApplicability:Japan,SouthKorea

Doesthecompanycollaboratewithintermediariestoaccommodatebeneficialownerstoattendshareholdermeetings?(Q372)

› Allshareholders,whetherregisteredinthecompany’sshareholderregistryorholdingsharesthroughcustodianaccounts,shouldhavetherighttoattendgeneralmeetings.TheJapaneseCorporateGovernanceCode(1-2-5)encouragesmoreactiveparticipationbyshareholdersatgeneralmeetings,anddiscouragescompaniesfromrestrictingbeneficialowners’participations.


Doesthecompanyparticipateinanelectronicvotingplatform?(Q374)› TheTokyoStockExchange(TSE)andBroadridgeFinancialSolutions,Inc.(Broadridge)haveestablishedan

"ElectronicVotingPlatformforForeignandInstitutionalInvestors,"andstartedoperationoftheplatformfromcompanieswith2005Decemberyear-end.Useoftheelectronicvotingplatformaffordsgreatervotingflexibilityforinvestorsasthevotingdeadlinescouldbesignificantreducedandinvestorscouldrelativelyeasilychangetheirvotingdecisionsclosetothemeetingdate.Currentlymorethan700companieshavealreadyagreedtoparticipateintheplatform.

OverviewandUpdates



Doesthecompanyhaveanexclusivevenue/forumprovision?(Q351)› Exclusivevenueprovisionsrestrictshareholderlitigationagainstthecompanytoalimitednumberof

jurisdictions.Themostcommonvenuechosenisthestateofincorporation,thoughsomecompanieshavechosenothervenues,suchasthestateorcountywherethecompanyisheadquartered.Therationaleistolimitpotentiallitigationcostsbypreventingsimilarlawsuitsinmultiplestates,andtohavethecasesheardbyjudgesmostfamiliarwiththeapplicablestatelaw.However,thesearerestrictionsonshareholders’rights,and,intheabsenceofpastharm,itisnotalwayscleartherestrictionsarejustified.


Doesthecompanyhaveafeeshiftingprovision?(Q363)› Fee-shiftingprovisionsprovidesfortheshiftingoflitigationexpensestoanunsuccessfulplaintiffwhodoes

notobtainajudgmentonthemeritsthatsubstantiallyachievesthefullremedysought.Broadprovisionsandscopemaydissuadeshareholdersfrompursuingmeritoriouslegalactionagainstthecompanyduetothesignificantfinancialhurdlesimposed.TheyalsoviolatetheordinaryAmericanpracticewhereeachpartyisresponsibleforitsownlitigationcosts.

› ForDelaware-incorporatedcompanies,theDelawareGeneralCorporationLawwasamendedin2015toinvalidatefee-shiftingbylawsastheypertainedtomattersofDelawarelaw,butdidnotextendtomattersunderfederaljurisdiction.


Doesthecompanyhavearepresentativeclaimlimitationorothersignificantlitigationrightslimitations?(Q364)

› Representativeclaimsprovisionsrequirethataminimumlevelofsupportisrequiredforashareholdertoinitiatealawsuitagainstthecompany.Theaimistopreventfrivolouslawsuitsbroughtbyshareholderswithsmallstakes,buttheprovisionsdonotdistinguishbetweenfrivolousandmeritoriouslawsuits,andpreventsmallshareholders,unlessbandedtogether,fromsuingthecompany.

› Limitationsonshareholders’litigationrightscontinuetoproliferate.Asothertypesoflimitationsemerge,theywillbecapturedinthisdatapointaswell.


Doesthecompanyprovideproxyaccesstoshareholders?(Q346)

OverviewandUpdates


› Theabilityofshareholderstonominateboarddirectorsinthecompanyproxyalongwithmanagementnominees(knownas“proxyaccess”intheU.S.)isincreasinglyseenasafundamentalshareholderright.Companiescanprovideshareholderswiththisrightthroughadoptionofbylawprovisions,buttheymaylimitorputrestrictionsontheright.Restrictionstypicallyincludelimitsontheproportionanddurationofownershiprequiredtobeanominator,thenumberofshareholdersthatmayaggregateholdingstomeetthosethresholds,andthenumberofproxyaccesscandidatesthatmaybeputforward.

› Thisquestionwillconsiderwhetherproxyaccessisprovided,whetherproxyaccessisrequiredbyregulation,andwhethertheproxyaccessbylawincludesproblematicprovisionsthatnullifyitasapracticalrightforshareholders.

› The“requiredbyregulation”coversforeign-incorporatedU.S.DomesticIssuerssubjecttorulesallowingshareholdernominationsduetotheirjurisdictionofincorporation.Forexample,U.K.incorporatedcompaniesaresubjecttorulesthatallowshareholdersowning5%ofsharestonominatedirectors.TheserequirementsdifferfromproxyaccessbylawsadoptedvoluntarilyintheU.S.thatgenerallyfollowtheSEC’svacatedRule14a-11formulation,yettheystillprovidemechanismsforshareholderaccesstotheballot

› Inclusionofproblematicprovisions,suchas:countingdifferentmutualfundsundercommonmanagementasseparateshareholdersundertheaggregationlimits;requiringnominatingshareholderstopledgetoholdtheirsharespastthedateofthemeeting;providingtheboardwithbroadandbindingauthoritytointerprettheprovision;orcombinationsofotherproblematicprovisionsthataredeemedsufficienttonullifytheproxyaccessrightwillcausenocredittobegivenfortheadoptionofaproxyaccessbylaw.


Whatistheownershipthresholdforproxyaccess?(Q359)› Thisproxyaccessprovisionistheownershipthresholdthatneedstobemetbytheproxyaccessnominating

group,asmeasuredastheownershipoverthetotalvotingpowerofacompany’ssecuritiesentitledtovoteintheelectionofdirectors.Athresholdisneededtobesettoensureshareholdershavesufficientinvestmentinthecompany,butthelevelshouldnotbetoohightopreventshareholdersfrombeingabletousetheright.MostcompaniesintheU.S.haveadoptedthevacatedSECRule14a-11formulationof3%ofthevotingpowerasfavoredbyinvestors.


Whatistheownershipdurationthresholdforproxyaccess?(Q360)› Thisprovisionistheholdingrequirementofcontinuousownershipforeachmemberoftheproxyaccesss

nominatinggroup.Thisensuresthatthenominatorsarelong-termshareholders.TheSECformulationofaminimumof3yearsofownershiphasfoundacceptanceamonginvestorsandcompanies.Longerholdingperiodrequirementsareconsideredexcessive.

OverviewandUpdates



Whatisthecaponshareholdernomineestofillboardseatsfromproxyaccess?(Q361)› Proxyaccessisnotdesignedtoallowachangeofcontrol,thus,amaximumisplacedonthenumberof

boardseatsthatcanbefilledbyproxyaccessnomineeseachyear.UndertheSECformulation,thispercentagewassetat25%.Generally,investorshaveapprovedarangeof20%to25%oftheboard.Manycompanieshaveadopteda“greaterof2personsor20%”standard.


Whatistheaggregationlimitonshareholderstoformanominatinggroupforproxyaccess?(Q362)› Thisprovisionconcernsanyrestrictiononthenumberofshareholderspermittedtojointogethertoform

thenominatinggrouptoachievethenecessaryownershipthreshold.ThevacatedSECrulehadnolimitonthenumberofshareholderspermitted.However,manyinvestors(notall)havepermittedareasonable,minimallimitation,onethatbalancestheadministrativeneedsofcompaniesvs.thedifficultyofachievingtheownershipthreshold.Alimitationofnofewerthan20shareholdershasgenerallybeenconsideredaminimalrestriction.


OtherShareholderRightsIssues

Arethererelated-partytransactions(RPTs)withsignificantshareholders?(Q263)› Related-partytransactionswithasignificantshareholdercanrepresentguaranteedbusinesswhichcanhelp

tojustifysignificantinvestments,butcanalso"crowdout"transactionswithunrelatedpartieswhichmaybemoreprofitableforthecompany.

› QualityScorewillconsiderwhetherthecompanyhasRPTswithitsmajorshareholder.Majorshareholderandreportabletransactionsaregenerallydefinedbytherelevantstockexchange.

MarketApplicability:AsiaPacific,Australasia,LatinAmerica,Russia,SouthKorea,India

Cantheboardmateriallymodifythecompany'scapitalstructurewithoutshareholderapproval?(Q352)› Companiesgenerallyarerequiredtoputauthorizedcapitalincreasesorreductiontoashareholdervote,as

suchchangesrepresentsignificantpotentialdilutionofshareholdervalue.› Maryland-incorporatedREITshavetheabilitytoincrease/decreaseauthorizedcapitalwithoutashareholder

vote.OtherMarylandincorporatedcompaniescanoptinwithaspecificcharterprovision.

OverviewandUpdates



Whatisthedilutionlimitofthegeneralmandatetoissueshares?(Q318)› QualityScorewillconsiderthemaximumproportionofshareswhichcanbeissuedunderageneralmandate

approvedatthegeneralmeeting.

Marketapplicability:AsiaPacific,Australasia,SouthKorea,India

Whatisthediscountlimitofthegeneralmandatetoissueshares?(Q319)› QualityScorewillconsiderthemaximumdiscountlimitappliedonthemarketpriceofshareswhichcanbe

issuedunderageneralmandateapprovedatthegeneralmeeting.

Marketapplicability:AsiaPacific,Australasia,India

Whatisthedilutionlimitofthegeneralmandatetoissuerepurchasedshares?(Q320)› QualityScorewillconsiderthemaximumproportionofrepurchasedshareswhichcanbeissuedundera

generalmandateapprovedatthegeneralmeeting.

Marketapplicability:AsiaPacific

Whatistheaggregatedilutionlimitofshareissuanceandreissuancemandate?(Q321)› QualityScorewillconsiderthemaximumaggregateproportionofshareswhichcanbeissuedunderthe

generalissuanceandreissuancemandateapprovedatthegeneralmeeting.

Marketapplicability:AsiaPacific

Audit&RiskOversight

ExternalAuditor

Non-Auditfeesrepresentwhatpercentageoftotalfees?(Q1)› Thepracticeofauditorsprovidingnon-auditservicestocompaniescanproveproblematic.Whilelarge

auditorsmayhaveeffectiveinternalbarrierstoensurethattherearenoconflictsofinterest,anauditor'sabilitytoremainobjectiveisquestionablewhenfeespaidtotheauditorfornon-auditservices,suchas

OverviewandUpdates


managementconsultingandspecialsituationaudits,exceedthestandardannualauditfees.Whilesomecompensationfornon-auditservicesiscustomary,theimportanceofmaintainingtheindependenceoftheauditorisparamount,andanimportantgaugeforthatistheportionthatnon-auditfeescompriseoftotalauditfees.

› Thisquestionwillevaluatewhethernon-auditfeesconstituteamajorityoffeespaidtothecompany‘sexternalauditor.

› AuditFeesconsistofallfeesnecessarytoperformtheauditorreview,whichinclude:statutoryaudits,comfortletters/duediligence,attestservices,consents,reviewoffilings,financialstatementauditandreview.Thefollowingareconsideredasaudit-relatedfees:assuranceandrelatedservices,employeebenefitplan/audits,duediligencerelatedtomergersandacquisitions,auditsinconnectionwithacquisitions,internalcontrolreviews,consultationonfinancialaccountingandreportingstandards.OtherFeesincludestaxfeesingeneral,taxservices,reviewoftaxlaws,taxrestructuring,taxplanning-excludesfeesresultedfromone-timecapitalstructureevents,initialpublicofferings(IPOs),bankruptcyemergence,andspinoffs,reviewofnetoperatinglosses,taxassistanceforpotentialtransactionssalesandusetaxexaminations,andotherfeesthatcannotbecategorizedunderthethreeclassifications.

MarketApplicability:AllregionsexceptJapan

Whatisthetenureoftheexternalauditor?(Q347)› Auditortenureisthelengthoftheauditor-clientrelationship.Someacadamicstudiesfoundlimitingauditor

tenuremayensureauditorindependence,reducetheauditfailurerisksandprotectauditquality.TheSarbanes-OxleyActof2002requirestheperiodicrotationofcertainkeyauditfirmstaff,butsomeinvestorsseektherotationoftheauditfirmitselftoensureauditorindependence.ThismustbebalancedagainsttheadditionalexpensesinvolvedandthelimitednumberofauditfirmsintheUS.

› Ifmultipleexternalauditorsexist,theoneidentifiedastheprimaryisevaluatedforU.S.companies,whiletheonewiththelongesttenureisevaluatedforAnglocompanies.


MarketApplicability:U.S.,Anglo

Didtheauditorissueanadverseopinioninthepastyear?(Q2)› Auditoropinionreportsarecriticaltoensuringacompany’sfinancialsarepresentedcorrectlyandfreeof

materialmisstatements.IntheU.S.,an“adverse”auditoropinioniswhentheauditorbelievesthatnopartofthecompany’sfinancialstatementsshouldbereliedon.A“qualified”auditoropinioniswhentheauditorbelievesthatingeneralthefinancialstatementscanberelieduponwithcertainexceptions.An“unqualified”opinionisthebest.

OverviewandUpdates


› Thisquestionwillevaluatewhetheracompanyreceivedanadverseopinionfromitsauditor,havingreceivedeitheranUnqualifiedopinion,Qualifiedopinion,Adverseopinion,Emphasisofmatter,orGoingConcerndetermination.


Doesthecompanyhaveapolicyonevaluatingcompetencyandindependenceoftheexternalauditor?(Q365)

› Anexternalauditfirmperformingauditingservicesshouldnotonlyhavenecessarycompetenciesandskillstoperformtheauditbutalsomaintainhighdegreeofindependence.CompaniesshouldputinplaceaformalpoliciesandprocessestoroutinelyreviewtheindependenceandeffectivenessoftheauditorasrecommendedundertheJapaneseCorporateGovernanceCode(3-2-1).


AuditandAccountingControversies

Hasthecompanyrestatedfinancialsforanyperiodwithinthepasttwoyears?(Q3)› Companiesmayrestatetheirfinancialsduetomisrepresentationoraccountingirregularities,forexample,

or,inothercases,duetoclericalerrorsintheproductionoffinancialstatementsorbusinesscombinationsorachangeinaccountingpolicies.QualityScorewillconsidertheformer,focusingonthoserestatementsthatposeamaterialrisktoshareholdersand/orstakeholders.Restatementscanresultinsignificantreputational,legal,andfinancialrisks.

› Whendeterminingifacompanyhasamaterialrestatement,ISS’guidelinesare:› Hasthecompanyrestatedfinancialresultsforanyperiodduringthepast24months(thisreferstowhen

thecompanyrestateditsfinancialstatements,nottheperiodrestated);› Didtherestatementcausematerialchanges(whetherpositiveornegative)tothefinancialstatements?

Possibleexceptionstotherulewouldbeindustry-specificissues,suchaspoorinventorycontrolinamanufacturing/industrialcompanyorpoorassetvaluationsforfinancialinstitutions;

› Includeannouncedrestatementsthatarebeingmadetocorrectmaterialmisstatementsofpreviouslyreportedfinancialinformation;

› Excludeannouncementsinvolvingstocksplits,changesinaccountingprinciples(rulechanges),andotherrestatementsthatwerenotmadetocorrectmistakesintheapplicationofaccountingstandards;

› Revisionsandrestatementslinkedtoamaterialweaknessareconsideredmaterial.› Someexamplesofrestatementsthataregenerallyexcluded:

› Thoseresultingfrommergersandacquisitions;› Discontinuedoperations;› Stocksplits,issuanceofstockdividends;

OverviewandUpdates


› Currency-relatedissues(forexample,convertingfromJapaneseyentoU.S.dollars);› Changesinbusinesssegmentdefinitions;› Changesduetotransfersofmanagement;› Changesmadeforpresentationpurposes;› Generalaccountingchangesundergenerallyacceptedaccountingprinciples(GAAP);and› Litigationsettlements.

› Thisquestionwillevaluatewhether,inthepasttwoyears,thecompanyhasrestateditsfinancialsforanyperiod,oriftheinformationisnotdisclosed.

MarketApplicability:U.S.,Canada,SouthKorea

Hasthecompanymadenon-timelyfinancialdisclosurefilingsinthepasttwoyears?(Q4)› Non-timelyfinancialfilingscouldresultinpenaltiesfortheissuerandcouldbeindicativeofinternalprocess

orcontrolissues.› QualityScorewillconsiderwhetherthecompanyfilednon-timelyfilingsinthepasttwoyears,orthereisno

disclosuretoindicateithasdoneso.IntheU.S.,any“NT”SECfilingisconsideredevidenceofnon-timelyfilings.

MarketApplicability:U.S.,Canada,Japan,SouthKorea

HasthecompanyfiledbelatedlyitsAnnualReportforthemostrecentfiscalyear?(Q302)› ThisquestionwillevaluatewhetherthecompanyfileditsAnnualReportontimeforthemostrecentfiscal

year.Latefinancialfilingscouldresultinpenaltiesfortheissuerandadverselyimpactthecompany’sreputationandshareholdervalue.

Marketapplicability:AsiaPacific,India,SouthKorea

Hasaregulatortakenenforcementactionagainstthecompanyinthepasttwoyears?(Q5)› Regulatoryenforcementactionscouldresultinsignificantpenaltiesfortheissuerandadverselyimpactthe

company’sreputationandshareholdervalue.Enforcementactioncoversawidebreadthofcircumstances,forexample,freezingofacompany'sassets,fines,probationaryperiodsofanysort,oranyotheractiontakenbyanyregulatorybodyunderanyjurisdictioninwhichthecompanyoperates.

› Thisquestionwillevaluatewhetheracompanywassubjecttoenforcementactionbyaregulatorwithinthepasttwoyears.ISSwillalsoanalyzeiftheinvestigationwasresolvedwithamaterialpenalty.

› Inassessingthematerialityofanypenalties,QualityScorewillconsiderthenatureoftheunderlyinginvestigation(s),thesizeofanymonetarypenalties,bothonanabsolutebasisandrelativetocertainfinancialmetrics,includingbutnotlimitedto,revenues,earnings,cashflows,andmarketvalue,aswellas

OverviewandUpdates


anynon-monetarypenaltiesorrequirements.Settlementagreementswithregulatorybodiesarealsoconsidered,evenifthecompanydeniestheallegationsunderlyingtheinvestigation.


Hasaregulatortakenenforcementactionagainstadirectororofficerofthecompanyinthepasttwoyears?(Q200)

› Enforcementactionscouldresultinsignificantpenaltiesfortheissuerandadverselyimpactthecompany’sreputationandshareholdervalue.

› Thisquestionwillevaluatewhetheradirectororofficerwassubjecttoenforcementactionbyaregulatorwithinthepasttwoyears,includingenforcementactionsrelatedtoemploymentorboardserviceatotherfirms.ISSwillalsoanalyzeiftheinvestigationwasresolvedwithamaterialpenalty.Inassessingthematerialityofanypenalties,QualityScorewillconsiderthenatureoftheunderlyinginvestigation(s),thesizeofanymonetarypenalties,aswellasanynon-monetarypenaltiesorrequirements.IntheU.S.,ingeneral,anypenaltyagainstanindividualisconsideredmaterial.Settlementagreementswithregulatorybodiesarealsoconsidered,evenifthedirectororofficerdeniestheallegationsunderlyingtheinvestigation.

MarketApplicability:U.S.,Canada,AsiaPacific,SouthKorea,India

Isthecompany,adirectororofficerofthecompanycurrentlyunderinvestigationbyaregulatorybody?(Q201)

› Disclosedinvestigationsindicatethepotentialforcontroversythatcouldresultinenforcementactions,significantpenaltiesfortheissuer,andadverseconsequencesforthecompany’sreputationandshareholdervalue.

› Thisquestionwillevaluatewhetherthecompany,oranyofitsdirectorsorofficers,iscurrentlyunderinvestigationbyaregulatorybody.ISSwillcategorizeinvestigationsaseitherroutineornon-routine.FCPA-relatedinvestigationsandWellsNoticesaregenerallyconsideredtobenon-routineinvestigations,unlessthecompanystatesthatitdoesnotexpecttheoutcometohaveamaterialadverseeffectonthecompany.Non-routinewillalsoincludeinvestigationswhichraiseseriousethicalconcernsorposepotentialrisktothebroaderfinancialsystem(LIBORmanipulation,mortgagefraud,highfrequencytrading,orotherseriousone-offinvestigations).

› Thefollowingtypeswillgenerallybeconsidered"routine",unlessthereisindicationthattheyinvolvemajorfraudorrisk:› "Promotion,marketingorsaleofproducts"and"billing/falseclaims;"› Accounting(unlesstiedtoarestatement);and› Civilinvestigationdemands.

MarketApplicability:U.S.,AsiaPacific,SouthKorea,India

OverviewandUpdates


Hasthecompanydisclosedanymaterialweaknessesinitsinternalcontrolsinthepasttwofiscalyears?(Q8)

› Companieswithsignificantmaterialweaknessespotentiallyhaveineffectiveinternalcontrols,whichmayleadtoinaccuratefinancialstatements,hamperingshareholders’abilitytomakeinformedinvestmentdecisions,andmayleadtoaweakeninginpublicconfidenceandshareholdervalue.

› QualityScorewillevaluateandconsidermaterialweaknessesoverthepasttwofiscalyearsandwhethertheywereevidencedinthemostrecentyear;inthepreviousyear;inconsecutiveyears;ifallmaterialweaknesseswerefullyremediated;oriftheinformationisnotdisclosed.

MarketApplicability:U.S.,Canada,Japan,Anglo,Africa

OtherAuditissues

Howmanyfinancialexpertsserveontheauditcommittee?(Q6)› Thosedeemedfinancialexpertsmustpossessaccountingandauditskills.Localbestpracticerequirements

orrulesdetailingspecificcriteriawillapplyfortherelevantjurisdictions.Forexample,Germany’sgovernancecodecallsforthechairmanoftheauditcommitteetopossessspecialistknowledgeandexperienceintheapplicationofaccountingprinciplesandinternalcontrolprocesses.‖TheDutchcorporategovernancecode,meanwhile,issimilarbutnotthesame,suggestingthatatleastonememberofthesupervisoryboardshallbeafinancialexpertwithrelevantknowledgeandexperienceoffinancialadministrationandaccountingforlistedcompaniesorotherlargelegalentities.Insomemarkets,bestpracticealsorecommendsthatthefinancialexpertbeindependent.

› Thisquestionwillevaluatewhetherthecompanyhasindicatedamemberontheauditcommitteewithsufficientfinancialskillsinauditandaccounting.AmemberoftheAuditCommitteeisconsideredafinancialexpertifhe/sheisorwasachieffinancialOfficer,charteredaccountant,certifiedmanagementaccountant,fellowcharteredaccountant(FCA),fellowcertifiedpracticingaccountant(FCPA),orpartnerofanaccountingfirm.IntheUSandCanada,QualityScorewillincludethefinancialexpert(s)disclosedbythecompany.

› Thisfactorhasazero-weightimpactonCanadiancompaniesandisincludedforinformationalpurposesonly.IntheU.S.,thisisnowascoredfactorforcompanieswithzero,one,ortwofinancialexpertssittingontheauditcommittee.

MarketApplicability:U.S.,Canada,W.Europe,Germanic,Anglo,S.Europe,AsiaPacific,Australasia,AsiaPacific,Africa,Russia,SouthKorea

Hasthecompanychangeditsauditfirmwithoutavalidreasoninthepasttwofiscalyears?(Q288)› Bestpracticedictatesthatacompanytoprovideavalidreasonforanauditorchange.

OverviewandUpdates


› Thisquestionwillevaluatewhetherthecompanygaveavalidexplanationforchangingitsauditfirminthepasttwofiscalyears.

MarketApplicability:Japan,AsiaPacific,LatinAmerica

Cantheauditfirmbeindemnifiedwithoutshareholdervote?(Q280)› Somecompaniesallowtheboardtoindemnifytheauditfirmwithoutshareholdervote.Institutional

investorstypicallyarguethatsuchindemnificationshouldbesubjecttoashareholdervoteandnotleftsolelytoboarddiscretion.

› QualityScorewillconsiderwhetherauditfirmscanbeindemnifiedwithoutshareholdervotes.


AppendixI:Event-drivenDataUpdatesMuchoftheinformationincludedinQualityScorecomesfromthecompany’scircular/proxyfilingforitsannualshareholdermeeting,andtheISSResearchteams’interpretationandproxyvotingrecommendationstoourclientsforthatmeeting.WhilecompanieshavetheabilitymostoftheyeartoupdateinformationforQualityScore,thisabilityisrestrictedduringthetimeISSisgatheringtheinformationfromtheproxyandpreparingitsproxyanalysis.Oncetheproxyvotingrecommendationsreportisreleasedtoinstitutionalclients,companiesareabletoonceagainreviewtheirQualityScoredataprofilesandupdate/correctinformation.

OnlineQualityScoreprofilesareupdatedoncedaily,atapproximately5amEastern.Therefore,whentheISSproxyanalysisisreleasedcontainingtheupdatedQualityScorescores,theonlinewebsitemaynotyetreflecttheupdatedscoresandprofile.Theonlinescoreandprofilewillbeupdatedthenextday.

Duringtheyearoutsideoftheannualmeeting,ISSreviewsnewfilingstokeepQualityScoreuptodate,incorporatingchangestobylaws,adoptionsandredemptionsofpoisonpills,andotherevents.TwocategoriesofsuchupdatesareaccordedspecialtreatmentinQualityScore:

ClassificationofNewly-AppointedDirectors

ISSwillmonitor8-Kfilingsfornewdirectordisclosures,suchasnewdirectorsbeingappointedtotheboard,orincumbentdirectorsleavingtheboard.Ingeneral,thestandard8-KdisclosureisinsufficientforISStodetermineifthenewdirectorisindependentunderISS’classification.However,ifthecompanyprovidessufficientdisclosure,ISSmaymakeapreliminarydetermination(forQualityScorepurposes)ofthedirector’sISSclassification.Thisclassificationistentativeandsubjecttochangeoncethefulldisclosureonthedirectorisavailableintheproxy.

OverviewandUpdates


IfISSisunabletomakeapreliminarydeterminationofthenewlyappointeddirector’sclassificationbasedonacompany'sdisclosure,ISSwillconsiderthedirector“unclassified”untilthereissufficientinformationtodeterminetheclassification.Insuchacase,thecompany’sboardpercentages,includingboardindependence,committeeindependencecalculations,andpercentageofdirectorsthatarefamilymembersorwithrelatedpartytransactions,arefrozenatthecalculatedvaluesbasedonthelastcompletedisclosures.Thecompletelistsoffactorsare:10,11,19,25,31,50,51,203,205,206,and208.Assuch,thereisnoimpactoncompanyscoresforthesefactors.Whenalldirectorshavebeenclassifiedaseitherindependentorotherwise,thecalculationwillbeupdatedtoreflectthesechanges.

ForISStobeabletomakethepreliminarydeterminationofwhetheranewlyappointeddirectorisindependentunderISSstandards,thefollowingminimuminformationonthedirector(perhapsintheformofashortbiography)isrequired:

1. Currentposition;2. Thecompany’sdeterminationofwhetherthedirectorisindependentunderitslistingstandards;3. Anypreviousemploymentatthecompany;4. Anyfamilialrelationshipswiththecompany’sexecutivesordirectors;5. Anytransactions(perItem404aofRegulationS-K)betweenthedirector,thedirector’semployer,orthe

director’simmediatefamilymember’scurrentemployer,andthecompanyinthelastfiscalyear.

OverviewandUpdates

TheGlobalLeaderinCorporateGovernance&ResponsibleInvestments 88of159

©2016ISS|InstitutionalShareholderServices

AppendixII:QualityScoreFactorMethodologyandRegionApplicability(Ü Indicatesthefactorhaszero-weightimpactonthescoringmodelandisforinformationalpurposesonly)

QualityScore US Canada Anglo AsiaPac Japan W.Europe S.Europe Nordic Germanic Australasia LatinAmerica Africa Russia SouthKorea India

Audit&RiskOversight

1Non-Auditfeesrepresent

whatpercentageoftotal

fees?x x x x X x x x x x x x x x

347Whatisthetenureofthe

externalauditor? * *

365

Doesthecompanyhave

apolicyonevaluating

competencyand

independenceofthe

externalauditor?

x

2Didtheauditorissuean

adverseopinioninthe

pastyear?x x x x x X x x x x x x x x x

3

Hasthecompany

restatedfinancialsfor

anyperiodwithinthe

pasttwoyears?

x x x

4

Hasthecompanymade

non-timelyfinancial

disclosurefilingsinthe

pasttwoyears?

x x x x

302Hasthecompanyfiled

belatedlyitsAnnual x x x

OverviewandUpdates




Reportforthemost

recentfiscalyear?

5

Hasaregulatortaken

enforcementaction

againstthecompanyin

thepasttwoyears?

x x x X x X x x x x x x x x x

200

Hasaregulatortaken

enforcementaction

againstadirectoror

officerofthecompanyin

thepasttwoyears?

x x X x x

201

Isthecompany,a

directororofficerofthe

companycurrentlyunder

investigationbya

regulatorybody?

x X x x

8

Hasthecompany

disclosedanymaterial

weaknessesinitsinternal

controlsinthepasttwo

fiscalyears?

x x x x x

6Howmanyfinancial

expertsserveonthe

auditcommittee?x * x X X x x x x x x

288

Hasthecompany

changeditsauditfirm

withoutavalidreasonin

thepastthreefiscal

years?

X x x

OverviewandUpdates




280Cantheauditfirmbe

indemnifiedwithout

shareholdervote? X x

Board

9Howmanydirectors

serveontheboard? * x x X x X x x x x x x x x x

304Whatisthenumberof

womenontheboard?x x x X x X x x x x x x x x x

354Whatistheproportionof

womenontheboard?x x x X x X x x x x x x x x

10

Whatistheindependent

directorcompositionof

theBoardaccordingto

ISSclassification?

x x x X x X x x x x x x x x x

203

Ifthecompanyis

controlled,what

percentageoftheboard

isindependentunderISS’

standards?

X x

11

Whatpercentageofthe

directorselectedby

shareholdersare

independent?

X X x

289Isthereanoutside

directorontheBoard? X *

282Whatpercentageofthe

boardiscomposedof

outsidedirectors? X x

OverviewandUpdates




281Whatistheindependent

statutoryauditors’

composition? x

13

Whatproportionofnon-

executivedirectorson

theboardhaslengthy

tenure?

x x X * x x

355

Whatproportionofnon-

executivedirectorshas

beenontheboardless

than6years?

x

14Istheboardchair

independent?x x x X x X x x x x x x x x x

16Hasthecompany

identifiedasenior(lead)

independentdirector?X x x X X x x x x

367

Hasthecompany

appointedaLead

IndependentDirectoror

establishedotherwaysof

effectivecollaboration

betweenindependent

directorsand

managementand

statutoryauditors?

x

17

Whatisthetermof

mandateproposedfor

supervisoryboard

members(atthelatest

generalmeeting)?

X x x

OverviewandUpdates




205

Whatpercentageofthe

boardconsistsof

immediatefamily

membersofmajority

shareholders,executives

andformerexecutives

(withinthepastfive

years)?

* * *

206

Whatpercentageofthe

boardconsistsofformer

orcurrentemployeesof

thecompany?

* X * *

19

Whatpercentageof

nominatingcommittee

membersare

independentbasedon

ISS’standards?

x x x X x X x x x x x x x

306Arethereexecutiveson

thenominating

committee? X x x x

23Isthechairofthe

nominatingcommittee

independent? X x X x x x x x x

207Doesthecompany

maintainaformal

nominatingcommittee? x x

208Arethereanyboard

membersonthe

nominatingcommittee? x

OverviewandUpdates




210

Istheremorethanone

boardmemberwhois

dependentonmajor

shareholdersonthe

nominatingcommittee?

x


nominatingcommittee

members? x x

330

Doesthecompany

maintainaformal

remuneration

committee?

X x

25

Whatpercentageofthe

compensationcommittee

isindependentunderISS’

standards?



thecompensation

committee? X X x x x x x x

28Isthechairofthe

compensationcommittee

independent? x X x X x x x x x x x

29

Isthechairoftheboard

ofdirectorsamemberof

thecompensation

committee?

x


remunerationcommittee

members? x x

OverviewandUpdates




331Doesthecompany

maintainaformalaudit

committee? x

332Doesthecompany

maintainaformalfiscal

council? x

31

Whatpercentageofthe

auditcommitteeis

independentunderISS’

standards?



theauditcommittee? X X x x x x x

34Isthechairoftheaudit

committeeindependent? x X x X x x x x x x x

35Isthechairoftheboard

ofdirectorsamemberof

theauditcommittee? x X

213

Howmanymembers

serveontheaudit

committee?

x x

283Doesthecompanyhave

athreecommittee

system? *

340

Hasthecompany

disclosedinformationon

keycommittee

attendance?

x

OverviewandUpdates




309

Howmanydirectors

serveonanexcessive

numberofoutside

boards?

X

36Dotheexecutivesserve

onasignificantnumber

ofoutsideboards? x X x x x *

37DoestheCEOserveona

significantnumberof

outsideboards?x x x X x x x x *

38

Howmanynon-

executivesserveona

significantnumberof

outsideboards?

x x x X x x x x *

39Doesthechairserveona

significantnumberof

outsideboards? x X x x x x *

337Hasthecompany

disclosedtheattendance

ofeachdirector? X

43

Whatpercentageofall

meetingswasattended

byatleast50%ofthe

supervisoryboard?

x

44

Whatpercentageofthe

directorsattendedless

than75%ofboard

and/orkeycommittee

meetings?

X x X x x x x x

OverviewandUpdates




45

Didanydirectorsattend

lessthan75%ofthe

aggregateboardand

applicablekeycommittee

meetingswithoutavalid

excuse?

x x x

49

Howmanydirectors

receivedwithhold/

againstvotesof50%or

greateratthelastannual

meeting?

x x X

366

Doesthecompany

routinelyhold

independentdirector

meetingsorhaveother

mechanismstofacilitate

effectivecollaborationof

independentdirectors,

managementand

statutoryauditors?

x

312

Whatpercentageof

directorsreceived

shareholderapproval

ratesbelow80%?

x X

348

Doesthecompany

disclosetheexistenceof

aformalCEOandkey

executiveofficers

successionplan?

x


amechanismto x

OverviewandUpdates




appropriatelymonitor

andsuperviseitsCEO

successionplanning?

315

Whatwastheaverage

outsidedirector'stotal

compensationasa

multipleofthepeer

median?

x

140

Whatistheaggregate

levelofstockownership

oftheofficersand

directors,asa

percentageofshares

outstanding?

x X x x x x x x

144Doalldirectorswith

morethanoneyearof

serviceownstock?x x X x x x

243Didanyexecutiveor

directorpledgecompany

shares?x

41

Doesthecompany

discloseapolicy

requiringanannual

performanceevaluation

oftheboard?

x x x x X x x x x x

46

Doesthecompany

disclose

board/governance

guidelines?

x X

OverviewandUpdates




349

Doestheboardhaveany

mechanismsto

encouragedirector

refreshment?

*

215Whatisthequorumfor

directormeetings x

100

Doesthecompanyallow

thechairasecondor

castingvoteatdirector

meetingsintheeventof

atie?

x x

143Aredirectorssubjectto

stockownership

guidelines?x x x

244

Doesthecompanyhave

apolicyprohibiting

hedgingofcompany

sharesbyemployees?

x x x

336

Doesthecompany

discloseinformationon

RelatedParty

Transactions?

x x

50Whatpercentofthe

directorswereinvolved

inmaterialRPTs?x x

51Dothedirectorswith

RPTssitonkeyboard

committees?x x

OverviewandUpdates




216

Aretherematerial

related-party

transactionsinvolvingthe

CEO?

x X

99

Hastheboard

adequatelyaddresseda

shareholderresolution

supportedbyamajority

vote?

x

350

Hastheboard

adequatelyrespondedto

lowsupportfora

managementproposal?

x

345

HasISS’reviewfound

thattheboardof

directorsrecentlytook

actionthatmaterially

reducesshareholder

rights?

x X

ShareholderRightsandTakeoverDefenses


classesofstockwith

differentvotingrights?x x x X x x x x * x x


classshareswithfullor

multiplevotingrights? x

55Arethereanydirectors

ontheboardwhoarenot

upforelectionbyallx x

OverviewandUpdates




classesofcommon

shareholders?

56

Isthereasunset

provisiononthe

company'sunequal

votingstructure?

x x

57

Whatistheproportionof

multiplevotingrights(or

votingcertificates)

relativetothetotal

numberofvotingrights?

x X x x x

58

Whatistheleveloffree

floatofthemultiple

votingrightsorvoting

certificates?

x X x x x

59

Whatpercentageofthe

company'ssharesis

representedby

depositaryreceipts

whereafoundationvotes

unexercisedproxies?

X

60

Hasthecompany

indicatedtoeliminate

thesystemofdepositary

receipts?

X

61Aredepositaryreceipt

holdersrestrictedintheir

votingrights? X

OverviewandUpdates




63

Whatpercentageofthe

company'ssharecapital

ismadeupofnon-voting

shares?

x X x x x x x

64

Whatistheleveloffree

floatofvotingsharesin

relationtothenon-

votingshares?

x X x x x x x


anabsolutevotingright

ceiling? X x x x x


arelativevotingright

ceiling? X x x x


anownershipceiling? x x X x x x x x x x


ownershipceilingsfor

specificparties? x X x x x x x x x

69Doshareholdersorthe

Statehavethepriority

right? x X x x x x x x

217

Isthereacoattail

provisionattachedtothe

company'sunequal

votingstructure?

x

OverviewandUpdates




72

Doesthecompanyhave

targetedstockplacement

thatcanbeusedasa

takeoverdefense?

X x x

73

Doesthecompany

maintainpre-emptive

rightsintheeventofa

takeoverbid?

X x

74

Canthecompanytarget

repurchasedsharesin

theeventofatakeover

bid

X x x

218Arethereownership

factorsthataffectthe

takeoverdefenses? x X x x x x x x

219Aretherepriorityrights

thataffectthetakeover

defenses? x X x x x x x x

77Arealldirectorselected

annually?x x x *

83Istheboardauthorized

toissueblankcheck

preferredstock?x x x


apoisonpill(shareholder

rightsplan)ineffect?x x x

OverviewandUpdates




79Whatisthetrigger

thresholdforthepoison

pill?x

80Doesthepoisonpillhave

asunsetprovision?x X


aTIDEprovision? *


aqualifiedofferclause?x

91Whatistheexpiration

dateofthepoisonpill?x

220Isthepoisonpill

designedtopreservetax

assets(NOLpill)?x

222Whenwasthepoisonpill

implementedor

renewed?x

223

Doesthecompany's

poisonpillincludea

modifiedslow-handor

dead-handprovision?

x

221Wasthepoisonpill

approvedby

shareholders? x

OverviewandUpdates





acontrolling

shareholder?* X x * * x x x x x

224

Ifthecompanyhasa

majorityvotingstandard,

isthereapluralitycarve-

outinthecaseof

contestedelections?

x

284Doestheremovalofa

directorrequirea

supermajorityvote? x

333Whatistheleveloftag

alongrightsforminority

shareholders? X x

89

Doesthecompany

requireasuper-majority

votetoapprove

amendmentstothe

charterandbylaws?

x x x

90

Doesthecompany

requireasuper-majority

votetoapprove

mergers/business

combinations?

x x


discretionoverdividend

payments? x x

286Aretheshareholders

allowedtosubmit

dividendproposals? x

OverviewandUpdates




334Arethenamesofthe

nomineedirectors

disclosed? x

84

Whatproportionof

sharesmustbe

representedatthe

generalmeetingto

cancelthebindingnature

ofthenominationof

supervisoryboard

members(andor

executiveboard

members)?

X

53Didthecompanyhavea

slateballotatitslast

shareholders'meeting? X x x x x


vacanciesontheboard? x x

97

Whatisthepercentage

ofsharecapitalneeded

toconveneaspecial

meeting?

x x X

98Canshareholdersactby

writtenconsent?x *

338Doesthecompanyuse

cumulativevotingfor

directorelection? X x

OverviewandUpdates





amajorityvotestandard

inuncontestedelections?x x

343

Ifthecompanyhasa

majorityvotingpolicyin

directorelections,does

thepluralitystandard

applyforcontested

elections?

x

225

Aretherematerial

restrictionsastotiming

ortopicstobediscussed,

orownershiplevels

requiredtocallthe

meeting?

x

101

Isshareholderquorum

forshareholders'

meetingsatleast2

personsrepresentingat

least25%ofthe

outstandingshares?

x

335

Didthecompanyfileits

proxymaterialslatein

thepastyear?

X x x x

371

Howmanynumberof

daysbeforethegeneral

meetingdidthecompany

publishitsproxy

materials?

x

OverviewandUpdates




373Doesthecompany

provideproxymaterials

inEnglish? x

370

Doesthecompany

disclosethepolicyon

cross-shareholding,

includingvotingpolicy

forsuchshares?

x

287Doesthecompanyhold

itsgeneralmeetingona

peakdate? x x

372

Doesthecompany

collaboratewith

intermediariesto

accommodatebeneficial

ownerstoattend

shareholdermeetings?

x

374

Doesthecompany

participateinan

electronicvoting

platform?

x


anexclusive

venue/forumprovision?x


afeeshiftingprovision?x


arepresentativeclaim

limitationorotherx

OverviewandUpdates




significantlitigation

rightslimitations?

346Doesthecompany

provideproxyaccessto

shareholders?x

359Whatistheownership

thresholdforproxy

access?x

360Whatistheownership

durationthresholdfor

proxyaccess?x

361

Whatisthecapon

shareholdernomineesto

fillboardseatsfrom

proxyaccess?

x

362

Whatistheaggregation

limitonshareholdersto

formanominatinggroup

forproxyaccess?

x

263ArethereRPTswith

significantshareholders? X x x x x x

352

Cantheboardmaterially

modifythecompany's

capitalstructurewithout

shareholderapproval?

x

318Whatisthedilutionlimit

ofthegeneralmandate

toissueshares? X x x x

OverviewandUpdates




319Whatisthediscountlimit

ofthegeneralmandate

toissueshares? X x x

320

Whatisthedilutionlimit

ofthegeneralmandate

toissuerepurchased

shares?

X

321

Whatistheaggregate

dilutionlimitofshare

issuanceandreissuance

mandate?

X

Compensation/Remuneration

114IsthereacaponCEO's

annualbonus? x * X x x x x

115Isthereacapon

executives'annual

bonus? x X x x x x

116Whatpercentageofthe

annualbonusforCEOis

orcanbedeferred? x X x x x

117

Whatpercentageofthe

annualbonusfor

executivesisorcanbe

deferred?

x X x x x

226

Whatisthedegreeof

alignmentbetweenthe

company'scumulative3-

yearpaypercentilerank,

relativetopeers,andits

* *

OverviewandUpdates




3-yearcumulativeTSR

rank,relativetopeers?

227

Whatisthedegreeof

alignmentbetweenthe

company's1-yearpay

percentilerank,relative

topeers,andits1-year

TSRrank,relativeto

peers?

* *

228

Whatisthesizeofthe

CEO's1-yearpay,asa

multipleofthemedian

payforcompanypeers?

X x x X x x x

229

Whatisthedegreeof

alignmentbetweenthe

company'sTSRand

changeinCEOpayover

thepastfiveyears?

X x x X x x x

232

Whatistheratioofthe

CEO'stotalcompensation

tothenexthighestpaid

executive?

X

233

Whatistheperformance

periodforthelatest

activelongterm

incentiveplan(orthe

proposedplan)for

executives?

x X x x x

OverviewandUpdates




329

Whatisthedegreeof

alignmentbetweenthe

company'sannualized3-

yearpaypercentilerank,

relativetopeers,andits

3-yearannualizedTSR

rank,relativetopeers?

X x x X x x x

156AreanyoftheNEOs

eligibleformulti-year

guaranteedbonuses?X x

154Doesthecompany

provideloansto

executives? x x X x x x x x

118Ispartofthebonus

grantedortobegranted

guaranteed? x x X x x x x

159Didthecompanygranta

one-offrewardtoanyof

itsexecutives? x x x

237

Whatistheratioofthe

CEO'snon-performance-

basedcompensation(All

OtherCompensation)to

BaseSalary?

X


anequity-based

compensationplan? X x x x x x


aperformance-basedpay x

OverviewandUpdates




orotherincentivesforits

executives?

129

Dothecompany'sactive

equityplansprohibit

sharerecyclingfor

options/SARS?

X

138Dothecompany'sactive

equityplansprohibit

option/SARrepricing?X x

238

Doesthecompany's

activeequityplans

prohibitoption/SARcash

buyouts?

X x

239Dothecompany'sactive

equityplanshavean

evergreenprovision?X X

240

Dothecompany'sactive

equityplanshavea

liberal

definitionofchange-in-

control?

X

139

Hasthecompany

repricedoptionsor

exchangedthemfor

shares,optionsorcash

withoutshareholder

approvalinthelastthree

years?

X x

127Whatisthetotal

proportionofall x x x x x x x x x x x x

OverviewandUpdates




outstandingequitybased

planstowardstheshare

capital?

128Isthereamaximumlevel

ofdilutionperyear? x X x *

130

Doesthecompany’s

equitygrantrateexceed

themean+1standard

deviationofits

industry/indexpeers?

X

136

Whatarethepricing

conditionsforstock

optionsgrantedto

executives?

x X x x x x x x x x x

155Didthecompanydisclose

aclawbackormalus

provision?X x x x x x x x

131

Whatarethevesting

periodsmandatedinthe

plandocumentsfor

executives'stockoptions

orSARSintheequity

plans(adopted/amended

inthelast3years)?

X x x X x x x x x x x x x x

132

Whatarethevesting


plandocuments,

adopted/amendedinthe

lastthreeyears,for

x x x x x x x x x x x x x

OverviewandUpdates




executives'restricted

stock/stockawards?

133

Whatarethevesting


plandocumentsfor

executives'restricted

stock/stockawards

(adopted/amendedin

thelastthreeyears)?

x x X x x x x x x x x

323

Whatarethevesting


plandocuments,


lastthreeyears,for

executives'Matching

plan?

x

324

Whatarethevesting


plandocuments,


lastthreeyears,for

executives'deferralplan?

X x

134

Whatisthe

holding/retentionperiod

forstockoptions(for

executives)?

X x x x x x x x

135Whatisthe

holding/retentionperiod

forrestrictedshares/x x x x x x x

OverviewandUpdates




stockawards(for

executives)?

145

Whatproportionofthe

salaryissubjecttostock

ownership

requirements/guidelines

fortheCEO?

X x x x x x

146

Whatproportionofthe

salaryissubjecttostock

ownership

requirements/guidelines

fortheotherexecutives?

x x x x

104Doesthecompany

provideloansto

directors? x x x

109Dodirectorsparticipate

inequitybasedplans? x x x x x x

110

Donon-executive

directorsparticipateto

performancerelated

remuneration?

x X x x x x x x x x

107

Whatpartofthetotal

remunerationreceived

bydirectorsisoptions-

based?

x

325

Aredirectorswhoare

eligibletoreceive

grants/awardsunderthe

planalsoinvolvedinthe

x x x

OverviewandUpdates




administrationofthe

plan?

341

Doesthecompany

disclosethe

remunerationpaidtothe

boardinAGMproxy

filings?

x

112

Doesthecompany

disclosedetailsof

individualexecutives’

remuneration?

X X x x x x

376

Doesthecompanyhave

apolicyonexecutive

remunerationand

computationbasisfor

thepay?

X

113

Doesthecompany

discloseperformance

metricsfortheshort

termincentiveplan(for

executives)?

X x x X x x x x x x x

246

Whatisthelevelof

disclosureon

performancemeasures

forthelatestactiveor

proposedlongterm

incentiveplan?

X x x

121Doesthecompany

discloseaperformance

measureformatching? x X x x x x x

OverviewandUpdates




122

Doesthecompany


measureforstock

optionsplans(for

executives)?

x x X x x x x x x x

123

Doesthecompany


measureforrestricted

shareplans(for

executives)?

x x X x x x x x x

125

Doesthecompany


measureforotherlong

termplans(for

executives)?

x X x x x x x x

353

Doesthecompany

employatleastone

metricthatcomparesits

performancetoa

benchmarkorpeergroup

(relativeperformance)?

X

166

Hasthecompany

voluntarilyadopteda

managementsay-on-pay

advisoryvoteresolution

forthemostrecent

annualmeetingor

committedtoa

resolutiongoing

forward?

x x x

OverviewandUpdates




328

DidthemostrecentSay

onPayproposalreceive

shareholders'support

below70%?

X

250Whatisthelevelof

disclosureonCEO

ownershipguidelines? x

148Whatisthetriggerunder

thechange-in-control

agreements?X x

153

Doequitybasedplansor

otherlongtermawards

vestcompletelyupona

changeincontrol?

X x x x

150

Intheeventof

terminationofthe

contractofexecutives,

doestheequitybased

remunerationvest?

x x

161

Whatisthemultipleof

payintheseverance

agreementsfortheCEO

(uponachange-in-

control)?

X x x x x x x x x

247

Whatisthebasisforthe

change-in-controlor

severancepaymentfor

theCEO?

X x x x x x x x x

OverviewandUpdates




160

Whatisthemultipleof

thechangein

control/severance

paymentforexecutives

excludingtheCEO(upon

achange-in-control)?

x x x x x x x

248

Whatisthebasisforthe

change-in-controlor

severancepaymentfor

executivesexcludingthe

CEO?

x x x x x x x

152

Howlongisthenotice

periodfortheCEOifthe

companyterminatesthe

contract?

x x

162

Doesthecompany

provideexcisetaxgross-

upsforchange-in-control

payments?

X x

163Whatisthelengthof

employmentagreement

withtheCEO?*

300

HasISS'qualitative

reviewidentifiedapay-

for-performance

misalignment?

X x

301

HasISSidentifieda

problematicpaypractice

orpolicythatraises

concerns?

X x x x x x x x x x x x

OverviewandUpdates



AppendixIII:Region-specificFactorMethodologyUnitedStates1 Non-Auditfeesrepresentwhatpercentageoftotalfees?

347 Whatisthetenureoftheexternalauditor?*

2 Didtheauditorissueanadverseopinioninthepastyear?

3 Hasthecompanyrestatedfinancialsforanyperiodwithinthepasttwoyears?

4 Hasthecompanymadenon-timelyfinancialdisclosurefilingsinthepasttwoyears?

5 Hasaregulatorinitiatedenforcementactionagainstthecompanyinthepasttwoyears?

200 Hasaregulatorinitiatedenforcementactionagainstadirectororofficerofthecompanyinthepast

twoyears?

201 Isthecompany,adirectororofficerofthecompanycurrentlyunderinvestigationbyaregulatory

body?

8 Hasthecompanydisclosedanymaterialweaknessesinitsinternalcontrolsinthepasttwofiscal

years?

6 Howmanyfinancialexpertsserveontheauditcommittee?

9 Howmanydirectorsserveontheboard?*

304 Whatisthenumberofwomenontheboard?

354 Whatistheproportionofwomenontheboard?

10 WhatistheindependentdirectorcompositionoftheBoardaccordingtoISSclassification?

13 Whatproportionofnon-executivedirectorsontheboardhaslengthytenure?

355 Whatproportionofnon-executivedirectorshasbeenontheboardforlessthan6years?

14 WhatistheclassificationoftheChairmanoftheBoard?

16 HasthecompanyidentifiedaSeniorIndependentDirectororanindependentLeadDirector?

205 Whatpercentageoftheboardconsistsofimmediatefamilymembersofmajorityshareholders,

executivesandformerexecutives(withinthepastfiveyears)?*

206 Whatpercentageoftheboardareformerorcurrentemployeesofthecompany?*

19 Whatistheindependentstatusofthenominatingcommitteemembers?

25 Whatistheindependentstatusofthecompensationcommitteemembers?

31 Whatistheindependentstatusoftheauditcommitteemembers?

37 DoestheCEOserveonasignificantnumberofoutsideboards?

38 Howmanynon-executivesserveonanexcessivenumberofoutsideboards?

45 Didanydirectorsattendlessthan75%oftheaggregateboardandapplicablekeycommittee

meetingswithoutavalidexcuse?

49 Howmanydirectorsreceivedwithhold/againstvotesof50%orgreateratthelastannualmeeting?

312 Whatpercentageofdirectorsreceivedshareholderapprovalratesbelow80%?

348 DoesthecompanydisclosetheexistenceofaformalCEOandkeyexecutiveofficerssuccessionplan?

315 Whatwastheaverageoutsidedirector'stotalcompensationasamultipleofthepeermedian?

144 Doalldirectorswithmorethanoneyearofserviceownstock?

243 Didanyexecutiveordirectorpledgecompanyshares?

41 Doesthecompanydiscloseapolicyrequiringanannualperformanceevaluationoftheboard?

46 Doesthecompanydiscloseboard/governanceguidelines?

349 Doestheboardhaveanymechanismstoencouragedirectorrefreshment?*

OverviewandUpdates



143 Aredirectorssubjecttostockownershipguidelines?

244 Doesthecompanyhavearobustpolicyprohibitinghedgingofcompanysharesbyemployees?

50 WhatpercentofthedirectorswereinvolvedinmaterialRPTs?

51 DothedirectorswithRPTssitonkeyboardcommittees?

216 Aretherematerialrelated-partytransactionsinvolvingtheCEO?

99 Hastheboardadequatelyaddressedashareholderresolutionsupportedbyamajorityvote?

350 Hastheboardadequatelyrespondedtolowsupportforamanagementproposal?

345 HasISS'reviewfoundthattheboardofdirectorshastakenunilateralactionthatmateriallyreduces

shareholderrightsorthecompanyhashadothergovernancefailures?

54 Doesthecompanyhaveclassesofstockwithdifferentvotingrights?

55 Arethereanydirectorsontheboardwhoarenotupforelectionbyallclassesofcommon

shareholders?

56 Isthereasunsetprovisiononthecompany'sunequalvotingstructure?

77 Arealldirectorselectedannually?

83 Istheboardauthorizedtoissueblankcheckpreferredstock?

78 Doesthecompanyhaveapoisonpill(shareholderrightsplan)ineffect?

79 Whatisthetriggerthresholdforthepoisonpill?

80 Doesthepoisonpillhaveasunsetprovision?

81 DoesthepoisonpillhaveaTIDEprovision?*

82 Doesthepoisonpillhaveaqualifiedofferclause?

91 Whatistheexpirationdateofthepoisonpill?

220 Isthepoisonpilldesignedtopreservetaxassets(NOLpill)?

222 Whenwasthepoisonpillimplementedorrenewed?

223 Doesthecompany'spoisonpillincludeamodifiedslow-handordead-handprovision?

290 Doesthecompanyhaveacontrollingshareholder?*

224 Ifthecompanyhasamajorityvotingstandard,isthereapluralitycarve-outinthecaseofcontested

elections?

89 Doesthecompanyrequireasuper-majorityvotetoapproveamendmentstothecharterand

bylaws?

90 Doesthecompanyrequireasuper-majorityvotetoapprovemergers/businesscombinations?

97 Whatisthepercentageofsharecapitalneededtoconveneaspecialmeeting?

98 Canshareholdersactbywrittenconsent?

52 Doesthecompanyhaveamajorityvotestandardinuncontestedelections?

225 Aretherematerialrestrictionsastotimingortopicstobediscussed,orownershiplevelsrequiredto

callthemeeting?

351 Doesthecompanyhaveanexclusivevenue/forumprovision?

363 Doesthecompanyhaveafeeshiftingprovision?

364 Doesthecompanyhavearepresentativeclaimlimitationorothersignificantlitigationrights

limitations?

346 Doesthecompanyprovideproxyaccesstoshareholders?

359 Whatistheownershipthresholdforproxyaccess?

360 Whatistheownershipdurationthresholdforproxyaccess?

361 Whatisthecaponshareholdernomineestofillboardseatsfromproxyaccess?

362 Whatistheaggregationlimitonshareholderstoformanominatinggroupforproxyaccess?

OverviewandUpdates



352 Cantheboardmateriallymodifythecompany'scapitalstructurewithoutshareholderapproval?

226 Whatisthedegreeofalignmentbetweenthecompany'scumulative3-yearpaypercentilerank,

relativetopeers,andits3-yearcumulativeTSRrank,relativetopeers?*

227 Whatisthedegreeofalignmentbetweenthecompany's1-yearpaypercentilerank,relativeto

peers,andits1-yearTSRrank,relativetopeers?*

228 WhatisthesizeoftheCEO's1-yearpay,asamultipleofthemedianpayforcompanypeers?

229 Whatisthedegreeofalignmentbetweenthecompany'sTSRandchangeinCEOpayoverthepast

fiveyears?

232 WhatistheratiooftheCEO'stotalcompensationtothenexthighestpaidexecutive?

329 Whatisthedegreeofalignmentbetweenthecompany'sannualized3-yearpaypercentilerank,

relativetopeers,andits3-yearannualizedTSRrank,relativetopeers?

156 AreanyoftheNEOseligibleformulti-yearguaranteedbonuses?

237 WhatistheratiooftheCEO'snon-performance-basedcompensation(AllOtherCompensation)to

BaseSalary?

129 Dothecompany'sactiveequityplansprohibitsharerecyclingforoptions/SARS?

138 Dothecompany'sactiveequityplansprohibitoption/SARrepricing?

238 Doesthecompany'sactiveequityplansprohibitoption/SARcashbuyouts?

239 Dothecompany'sactiveequityplanshaveanevergreenprovision?

240 Dothecompany'sactiveequityplanshavealiberaldefinitionofchange-in-control?

139 Hasthecompanyrepricedoptionsorexchangedthemforshares,optionsorcashwithout

shareholderapprovalinthelastthreeyears?

130 Doesthecompany'sequitygrantrateexceedthemean+1standarddeviationofitsindustry/index

peers?

155 Didthecompanydiscloseaclawbackormalusprovision?

131 Whatarethevestingperiodsmandatedintheplandocumentsforexecutives'stockoptionsorSARS

intheequityplans(adopted/amendedinthelast3years)?

132 Whatarethevestingperiodsmandatedintheplandocumentsforexecutives'restrictedstock/

stockawards(adopted/amendedinthelastthreeyears)?

134 Whatistheholding/retentionperiodforstockoptions(forexecutives)?

135 Whatistheholding/retentionperiodforrestrictedshares/stockawards(forexecutives)?

145 Whatproportionofthesalaryissubjecttostockownershiprequirements/guidelinesfortheCEO?

113 Doesthecompanydiscloseaperformancemeasurefortheshorttermincentiveplan(for

executives)?

246 Whatisthelevelofdisclosureonperformancemeasuresforthelatestactiveorproposedlongterm

incentiveplan?

353 Doesthecompanyemployatleastonemetricthatcomparesitsperformancetoabenchmarkor

peergroup(relativeperformance)?

328 DidthemostrecentSayonPayproposalreceiveshareholdersupportbelow70%?

148 What'sthetriggerunderthechange-in-controlagreements?

153 Doequitybasedplansorotherlongtermawardsvestcompletelyuponachangeincontrol?

161 WhatisthemultipleofpayintheseveranceagreementsfortheCEO(uponachange-in-control)?

247 Whatisthebasisforthechange-in-controlorseverancepaymentfortheCEO?

162 Doesthecompanyprovideexcisetaxgross-upsforchange-in-controlpayments?

163 WhatisthelengthofemploymentagreementwiththeCEO?*

OverviewandUpdates



300 HasISS'qualitativereviewidentifiedapay-for-performancemisalignment?

301 HasISSidentifiedaproblematicpaypracticeorpolicythatraisesconcerns?

OverviewandUpdates



Canada1 Non-Auditfeesrepresentwhatpercentageoftotalfees?






twoyears?


years?

6 Howmanyfinancialexpertsserveontheauditcommittee?*

9 Howmanydirectorsserveontheboard?











38 Howmanynon-executivesserveonasignificantnumberofoutsideboards?






215 Whatisthequorumfordirectormeetings?

100 Doesthecompanyallowthechairasecondorcastingvoteatdirectormeetingsintheeventofatie?



50 WhatpercentofthedirectorswereinvolvedinmaterialRPTs?

51 DothedirectorswithRPTssitonkeyboardcommittees?


55 Arethereanydirectorsontheboardwhoarenotupforelectionbyallclassesofcommon

shareholders?

56 Isthereasunsetprovisiononthecompany'sunequalvotingstructure?

217 Isthereacoattailprovisionattachedtothecompany'sunequalvotingstructure?





bylaws?

OverviewandUpdates



90 Doesthecompanyrequireasuper-majorityvotetoapprovemergers/businesscombinations?


98 Canshareholdersactbywrittenconsent?*

52 Doesthecompanyhaveamajorityvotestandardinuncontestedelections?

343 Ifthecompanyhasamajorityvotingpolicyindirectorelections,doesthepluralitystandardapplyfor

contestedelections?

101 Isshareholderquorumforshareholders'meetingsatleast2personsrepresentingatleast25%ofthe

outstandingshares?

226 Whatisthedegreeofalignmentbetweenthecompany'scumulative3-yearpaypercentilerank,

relativetopeers,andits3-yearcumulativeTSRrank,relativetopeers?*

227 Whatisthedegreeofalignmentbetweenthecompany's1-yearpaypercentilerank,relativeto

peers,andits1-yearTSRrank,relativetopeers?*



fiveyears?



156 AreanyoftheNEOseligibleformulti-yearguaranteedbonuses?

154 Doesthecompanyprovideloanstoexecutives?

118 Ispartofthebonusgrantedortobegrantedguaranteed?

138 Dothecompany'sactiveequityplansprohibitoption/SARrepricing?

238 Doesthecompany'sactiveequityplansprohibitoption/SARcashbuyouts?

139 Hasthecompanyrepricedoptionsorexchangedthemforshares,optionsorcashwithout

shareholderapprovalinthelastthreeyears?






133 Whatarethevestingperiodsmandatedintheplandocuments,adopted/amendedinthelastthree

years,forexecutives'otherlong-termplan?



104 Doesthecompanyprovideloanstodirectors?

109 Dodirectorsparticipateinequitybasedplans?

107 Whatpartofthetotalremunerationreceivedbydirectorsisoptionsbased?


executives)?

122 Doesthecompanydiscloseaperformancemeasureforstockoptionsplans(forexecutives)?

123 Doesthecompanydiscloseaperformancemeasureforrestrictedshare/stockawardplans(for

executives)?

166 Hasthecompanyvoluntarilyadoptedamanagement'sayonpay'advisoryvoteresolutionforthe

mostrecentannualmeeting?

148 What'sthetriggerunderthechange-in-controlagreements?

OverviewandUpdates






162 Doesthecompanyprovideexcisetaxgross-upsforchange-in-controlpayments?

300 HasISS'qualitativereviewidentifiedapay-for-performancemisalignment?


OverviewandUpdates



Anglo1 Non-Auditfeesrepresentwhatpercentageoftotalfees?

347 Whatisthetenureoftheexternalauditor?*




years?









211 Whatisthenumberofnominatingcommitteemembers?


28 What'stheclassificationofthechairmanofthecompensationcommittee?

29 IstheChairmanoftheboardofdirectorsamemberofthecompensationcommittee?

212 Whatisthenumberofremunerationcommitteemembers?


34 What'stheclassificationofthechairmanoftheauditcommittee?

35 IstheChairmanoftheboardofdirectorsamemberoftheauditcommittee?

213 Howmanymembersserveontheauditcommittee?

36 Dotheexecutivesserveonasignificantnumberofoutsideboards?



39 Doesthechairserveonasignificantnumberofoutsideboards?



140 Whatistheaggregatelevelofstockownershipoftheofficersanddirectors,asapercentageof

sharesoutstanding?



57 Whatistheproportionofmultiplevotingrights(orvotingcertificates)relativetothetotalnumber

ofvotingrights?

58 Whatistheleveloffreefloatofthemultiplevotingrightsorvotingcertificates?

63 Whatpercentageofthecompany'ssharecapitalismadeupofnon-votingshares?

64 Whatistheleveloffreefloatofvotingsharesinrelationtothenon-votingshares?

67 Doesthecompanyhaveanownershipceiling?

68 Doesthecompanyhaveownershipceilingsforspecificparties?

69 DoshareholdersortheStatehavethepriorityright?

218 Arethereownershipfactorsthataffectthetakeoverdefenses?

219 Aretherepriorityrightsthataffectthetakeoverdefenses?

OverviewandUpdates



114 IsthereacaponCEO'sannualbonus?

115 Isthereacaponexecutives'(excludingtheCEO)annualbonus?

116 WhatpercentageoftheannualbonusforCEOisorcanbedeferred?

117 Whatpercentageoftheannualbonusforexecutives(excludingtheCEO)isorcanbedeferred?



fiveyears?






127 Whatisthetotalproportionofalloutstandingequitybasedplanstowardsthesharecapital?

128 Isthereamaximumlevelofdilutionperyear?

136 Whatarethepricingconditionsforstockoptionsgrantedtoexecutives?











146 Whatproportionofthesalaryissubjecttostockownershiprequirements/guidelinesforexecutives

(excludingtheCEO)?

110 Donon-executivedirectorsparticipatetoperformancerelatedremuneration?


executives)?

121 Doesthecompanydiscloseaperformancemeasureformatching?



executives)?

125 Doesthecompanydiscloseaperformancemeasureforotherlongtermplans(forexecutives)?



160 Whatisthemultipleofthechangeincontrol/severancepaymentforexecutivesexcludingtheCEO

(uponachange-in-control)?

248 Whatisthebasisforthechange-in-controlorseverancepaymentforexecutivesexcludingtheCEO?


OverviewandUpdates



AsiaPacific1 Non-Auditfeesrepresentwhatpercentageoftotalfees?



302 HasthecompanymadelatefilingofAnnualReportforthemostrecentfiscalyear?



twoyears?

201 Isthecompany,adirectororofficerofthecompanycurrentlyunderinvestigationbyaregulatory

body?


288 Hasthecompanychangeditsauditfirmduetoinvalidorquestionablereasonsinthepasttwo

years?

280 Canauditfirmbeindemnifiedwithoutshareholdervote?

281 Whatistheindependentstatutoryauditors’composition?





11 WhatistheindependentdirectorcompositionoftheBoard(shareholderelectedboardmembers)?

289 IsthereanoutsidedirectorontheBoard?

282 WhatistheoutsiderdirectorcompositionoftheBoard?




206 Whatpercentageoftheboardareformerorcurrentemployeesofthecompany?


306 Arethereexecutivesonthenominatingcommittee?

23 What'stheclassificationofthechairmanofthenominatingcommittee?

330 Doesthecompanymaintainaformalremunerationcommittee?


27 Arethereexecutivesonthecompensationcommittee?



33 Arethereexecutivesontheauditcommittee?


309 Howmanydirectorsserveonanexcessivenumberofoutsideboards?

337 Hasthecompanydisclosedtheattendanceofeachdirector?

44 Whatpercentageofthedirectorsattendedlessthan75%ofboardand/orkeycommitteemeetings?


312 Whatpercentageofdirectorsreceivedshareholderapprovalratesbelow80%?

144 Doalldirectorswithmorethanoneyearofserviceownstock?*

46 Doesthecompanydiscloseboard/governanceguidelines?

216 Aretherematerialrelated-partytransactionsinvolvingtheCEO?

OverviewandUpdates



345 HasISS'reviewfoundthattheboardofdirectorsrecentlytookactionthatmateriallyreduces

shareholderrights?


80 Doesthepoisonpillhaveasunsetprovision?

290 Doesthecompanyhaveacontrollingshareholder?

333 Whatistheleveloftagalongrightsforminorityshareholders?

338 Doesthecompanyusecumulativevotingfordirectorelection?

335 Didthecompanyfileitsproxymaterialslateinthepastyear?

263 ArethereRPTswithsignificantshareholders?

318 Whatisthedilutionlimitofthegeneralmandatetoissueshares?

319 Whatisthediscountlimitofthegeneralmandatetoissueshares?

320 Whatisthedilutionlimitofthegeneralmandatetoissuerepurchasedshares?

321 Whatistheaggregatedilutionlimitofshareissuanceandreissuancemandate?

322 Doesthecompanyhaveanequity-basedcompensationplan?

239 Dothecompany'sactiveequityplanshaveanevergreenprovision?











years,forexecutives'Deferralplan?


325 Aredirectorswhoareeligibletoreceivegrants/awardsundertheplanalsoinvolvedinthe

administrationoftheplan?

112 Doesthecompanydisclosedetailsofindividualexecutives’remuneration?

158 Didthecompanydiscloseaperformanceoverviewforitslongtermincentiveplans?


executives)?


incentiveplan?




executives)?



OverviewandUpdates



Japan365 Doesthecompanyhaveapolicyonevaluatingcompetencyandindependenceoftheexternal

auditor?





years?


years?

280 Canauditfirmbeindemnifiedwithoutshareholdervote?





289 IsthereanoutsidedirectorontheBoard?*

282 WhatistheoutsiderdirectorcompositionoftheBoard?

281 Whatistheindependentstatutoryauditors’composition?


367 HasthecompanyappointedaLeadIndependentDirectororestablishedotherwaysofeffective

collaborationbetweenindependentdirectorsandmanagementandstatutoryauditors?







283 Doesthecompanyhaveathreecommitteesystem?*


366 Doesthecompanyroutinelyholdindependentdirectormeetingsorhaveothermechanismsto

facilitateeffectivecollaborationofindependentdirectors,managementandstatutoryauditors?

368 DoesthecompanyhaveamechanismtoappropriatelymonitorandsuperviseitsCEOsuccession

planning?


369 Doesthecompanyhaveclassshareswithfullormultiplevotingrights?




221 Wasthepoisonpillapprovedbyshareholders?


284 Doestheremovalofadirectorrequireasupermajorityvote?

285 Doesthecompanyhavediscretionoverdividendpayments?

286 Aretheshareholdersallowedtosubmitdividendproposals?

262 Whatisthenumberofvacanciesontheboard?

OverviewandUpdates



371 Howmanynumberofdaysbeforethegeneralmeetingdidthecompanypublishitsproxymaterials?

373 DoesthecompanyprovideproxymaterialsinEnglish?

370 Doesthecompanydisclosethepolicyoncross-shareholding,includingvotingpolicyforsuchshares?

287 Doesthecompanyholditsgeneralmeetingonapeakdate?

372 Doesthecompanycollaboratewithintermediariestoaccommodatebeneficialownerstoattend

shareholdermeetings?

374 Doesthecompanyparticipateinanelectronicvotingplatform?


375 Doesthecompanyhaveaperformance-basedpayorotherincentivesforitsexecutives?


376 Doesthecompanyhaveapolicyonexecutiveremunerationandcomputationbasisforthepay?

OverviewandUpdates



WesternEurope1 Non-Auditfeesrepresentwhatpercentageoftotalfees?









203 WhatistheindependentdirectorcompositionoftheBoardifthecompanyismajoritycontrolled?



17 Whatisthetermofmandateproposedforsupervisoryboardmembers(atthelatestgeneral

meeting)?









35 IstheChairmanoftheboardofdirectorsamemberoftheauditcommittee?







sharesoutstanding?




ofvotingrights?


59 Whatpercentageofthecompany'ssharesisrepresentedbydepositaryreceiptswhereafoundation

votesunexercisedproxies?

60 Hasthecompanyindicatedtoeliminatethesystemofdepositaryreceipts?

61 Aredepositaryreceiptholdersrestrictedintheirvotingrights?



65 Doesthecompanyhaveanabsolutevotingrightceiling?

66 Doesthecompanyhavearelativevotingrightceiling?

OverviewandUpdates






72 Doesthecompanyhavetargetedstockplacementthatcanbeusedasatakeoverdefense?

73 Doesthecompanymaintainpre-emptiverightsintheeventofatakeoverbid?

74 Canthecompanytargetrepurchasedsharesintheeventofatakeoverbid



84 Whatproportionofsharesmustberepresentedatthegeneralmeetingtocancelthebindingnature

ofthenominationofsupervisoryboardmembers(andorexecutiveboardmembers)?

53 Didthecompanyhaveaslateballotatitslastshareholders'meeting?








fiveyears?

















years,forexecutives'Matchingplan?


years,forexecutives'Deferralplan?





(excludingtheCEO)?


OverviewandUpdates





executives)?




executives)?










OverviewandUpdates



SouthernEurope1 Non-Auditfeesrepresentwhatpercentageoftotalfees?








203 WhatistheindependentdirectorcompositionoftheBoardifthecompanyismajoritycontrolled?




meeting)?



211 Whatisthenumberofnominatingcommitteemembers?




212 Whatisthenumberofremunerationcommitteemembers?




213 Howmanymembersserveontheauditcommittee?







sharesoutstanding?


100 Doesthecompanyallowthechairasecondorcastingvoteatdirectormeetingsintheeventofatie?










73 Doesthecompanymaintainpre-emptiverightsintheeventofatakeoverbid?

OverviewandUpdates








bylaws?








fiveyears?






159 Didthecompanygrantaone-offrewardtoanyofitsexecutives?














(excludingtheCEO)?






executives)?




executives)?

OverviewandUpdates




150 Intheeventofterminationofthecontractofexecutives,doestheequitybasedremunerationvest?






152 HowlongisthenoticeperiodfortheCEOifthecompanyterminatesthecontract?


OverviewandUpdates



Nordic1 Non-Auditfeesrepresentwhatpercentageoftotalfees?










meeting)?

207 Doesthecompanymaintainaformalnominatingcommittee?

208 Arethereanyboardmembersonthenominatingcommittee?

210 Istheremorethanoneboardmemberwhoisdependentonmajorshareholdersonthenominating

committee?










ofvotingrights?
















fiveyears?



OverviewandUpdates














executives)?




executives)?








OverviewandUpdates



Germanic1 Non-Auditfeesrepresentwhatpercentageoftotalfees?






















43 Whatpercentageofallmeetingswereattendedbyatleast50%ofthesupervisoryboard?


sharesoutstanding?




ofvotingrights?















OverviewandUpdates






fiveyears?






128 Isthereamaximumlevelofdilutionperyear?*














executives)?




executives)?


250 WhatisthelevelofdisclosureonCEOownershipguidelines?







OverviewandUpdates



Australasia1 Non-Auditfeesrepresentwhatpercentageoftotalfees?







13 Whatproportionofnon-executivedirectorsontheboardhaslengthytenure?*











38 Howmanynon-executivesserveasignificantnumberofoutsideboards?




sharesoutstanding?





54 Doesthecompanyhaveclassesofstockwithdifferentvotingrights?*




262 Whatisthenumberofvacanciesontheboard?








233 Whatistheperformanceperiodforthelatestactivelongtermincentiveplan(ortheproposedplan)

forexecutives?



OverviewandUpdates

















(excludingtheCEO)?



executives)?


incentiveplan?


150 Intheeventofterminationofthecontractofexecutives,doestheequitybasedremunerationvest?

152 HowlongisthenoticeperiodfortheCEOifthecompanyterminatesthecontract?


OverviewandUpdates



LatinAmerica1 Non-Auditfeesrepresentwhatpercentageoftotalfees?




years?


304 Whatisthenumber/proportionofwomenontheboard?





executivesandformerexecutives(withinthepastfiveyears)?


207 Doesthecompanymaintainaformalnominatingcommittee?

330 Doesthecompanymaintainaformalremunerationcommittee?

331 Doesthecompanymaintainaformalauditcommittee?

332 Doesthecompanymaintainaformalfiscalcouncil?

36 Dotheexecutivesserveonasignificantnumberofoutsideboards?*

37 DoestheCEOserveonasignificantnumberofoutsideboards?*

38 Howmanynon-executivesserveonasignificantnumberofoutsideboards?*

39 Doesthechairserveonasignificantnumberofoutsideboards?*


sharesoutstanding?








77 Arealldirectorselectedannually?*


333 Whatistheleveloftagalongrightsforminorityshareholders?










OverviewandUpdates








325 Aredirectorswhoareeligibletoreceivegrants/awardsundertheplanalsoinvolvedinthe

administrationoftheplan?




executives)?



301 HasISSidentifiedaproblematicpaypracticeorpolicythatraiseconcerns?

OverviewandUpdates



Africa1 Non-Auditfeesrepresentwhatpercentageoftotalfees?




years?
















sharesoutstanding?



ofvotingrights?










233 Whatistheperformanceperiodforthelatestactivelongtermincentiveplan(ortheproposedplan)

forexecutives?








OverviewandUpdates









executives)?




executives)?










OverviewandUpdates



Russia1 Non-Auditfeesrepresentwhatpercentageoftotalfees?












executivesandformerexecutives(withinthepastfiveyears)?










sharesoutstanding?


336 DoesthecompanydiscloseinformationonRelatedPartyTransactions?










334 Arethenamesofthenomineedirectorsdisclosed?








OverviewandUpdates












executives)?


incentiveplan?







OverviewandUpdates



SouthKorea1 Non-Auditfeesrepresentwhatpercentageoftotalfees?







twoyears?

201 Isthecompany,oranyofitsdirectorsandofficers,currentlyunderinvestigationbyaregulatory

body?


















285 Doesthecompanyhavediscretionoverdividendpayments?


338 Doesthecompanyusecumulativevotingfordirectorelection?


287 Doesthecompanyholditsgeneralmeetingonapeakdate?







intheequityplansadopted/amendedinthelast3years?

341 DoesthecompanydisclosetheremunerationpaidtotheboardinAGMproxyfilings?

OverviewandUpdates



India1 Non-Auditfeesrepresentwhatpercentageoftotalfees?





twoyears?

201 Isthecompany,oranyofitsdirectorsandofficers,currentlyunderinvestigationbyaregulatory

body?

















340 Hasthecompanydisclosedinformationonkeycommitteeattendance?

337 Hasthecompanydisclosedtheattendanceofeachdirector?



336 DoesthecompanydiscloseinformationonRelatedPartyTransactions?










intheequityplansadopted/amendedinthelast3years?


years,forexecutives'restrictedstock/stockawards?


325 Aredirectorseligibletoreceivegrants/awardsundertheplaninvolvedinitsadministration?

OverviewandUpdates






incentiveplan?


OverviewandUpdates



Addendum› November24,2014:Updatedtextonpage7forquestion99,whichwasnotedinconsistentlyinthe

documentandintheappendices.Thefactoris,“Hastheboardadequatelyaddressedashareholder

resolutionsupportedbyamajorityvote?(Q99).”

› November24,2014:Updatedthetextforquestion130,basedonISS2015policyupdates.Thefactoris,

“Doesthecompany’sequitygrantrateexceedthemeanplusonestandarddeviationofits

industry/indexpeers?(Q130).”

› November24,2014:Additionalnoteisprovidedforquestion41regardingtheperformanceevaluation

oftheboardforU.S.companies.

› November24,2014:ThefactorsconsideredunderthePayforPerformancesubcategoryarescored

basedontheISS2015PolicyUpdates.Noteisaddedtoquestions228,229and329.

› November24,2014:AdditionalinformationonthescoringintheAudit&RiskOversightpillarisincluded

onpage8.

› November24,2014:RemovedCanadafromtheMarketApplicabilitysectioninthefactordescriptionof

question201.

› November24,2014:Removedthereferenceto“VoteResults”inAppendixI,asthe“inprogress”

considerationofvoteresultcollectionisnotedinthefactordescriptioninthedocumentforquestions

49,312and328.

› November24,2014:AddedexplanationunderMajorityVoteStandard,question52,howa“Majority

VotePolicy”intheU.S.isnotequivalenttoamajorityvotestandard.ClarifiedapplicationinCanada.

› November24,2014:Removedquestion21fromthetext,“Arethereemployeerepresentativesonthe

nominatingcommittee?”asitisnolongeranalyzedinQuickScore3.0.

› November24,2014:Correctedtextonquestion288fromthreefiscalyearstotwofiscalyears,added

Asia-Pacificregion.

› May26,2015:Removedquestion342forSouthKorearegardingtheavailabilityofproxymaterialin

English.

› October30,2015:Removedinformationoncoverageinthe1stparagraphoftheoverviewonpage4.

Thisinformationistakenuponpage5.

› October30,2015:Updatedtextoncoverageinthe1stparagraphregardingthecoverageofQuickScore

onpage5.

› October30,2015:Updatedtexton“SummaryofUpdatesinQuickScore3.0”onpage6toreflectthe

updatedmethodology.

› October30,2015:Removedtablesonpage5and6andreplacedwithtextofthenewfactoronproxy

accessonpage6.

› October30,2015:Updatedtexton“OthernotableQuickScore3.0updates”onpage6and7toreflect

theupdatedmethodology.

› October30,2015:AddedaparagraphoutliningthedifferenceinstandardsbetweenFTSE350companies

inUKandISEQ20companiesinIrelandandtheremainingcompaniesintheAngloregionintermsof

independenceonpage10.

OverviewandUpdates



› October30,2015:Addedaparagraphoutliningthedifferenceinstandardsbetweenconstituentsofthe

differentlistingsegmentsinBrazilintermsofindependenceonpage10.

› October30,2015:AddedW.Europetothemarketapplicabilitysectioninthefactordescriptionof

question11onpage10.

› October30,2015:AddedfurtherexplanationinthefirstparagraphofthefactordescriptiononQ212

outliningthedifferenceinstandardsbetweenFTSE350companiesinUKandISEQ20companiesin

IrelandandtheremainingcompaniesintheAngloregion,onpage16.

› October30,2015:AddedfurtherexplanationinthefirstparagraphofthefactordescriptiononQ213

outliningthedifferenceinstandardsbetweenFTSE350companiesinUKandISEQ20companiesin

IrelandandtheremainingcompaniesintheAngloregion,onpage18.

› October30,2015:Removedreferencetopreviousthresholdinthesecondparagraphofthefactor

descriptiononQ312onpage22.

› October30,2015:AddedasentenceinthelastparagraphofthefactordescriptiononQ143forAustralia

takingintoaccountsignificantshareownershipofdirectors,onpage25.

› October30,2015:RemoveddatereferenceinthelastparagraphofthefactordescriptiononQ228on

page29.


page30.


page31.

› October30,2015:Removedquestion158fromthetext,“Didthecompanydiscloseaperformance

overviewforitslong-termincentiveplans?”asitisnolongeranalyzedinQuickScore3.0.

› October30,2015:RemovedS.Europefromthemarketapplicabilitysectioninthefactordescriptionof

question153onpage44.

› October30,2015:AddedCanadatothemarketapplicabilitysectioninthefactordescriptionofquestion

77onpage53.

› October30,2015:Movedfactordescriptionofquestion52topage60.


89onpage57.


90onpage58.

› October30,2015:RemovedS.Europefromthemarketapplicabilitysectioninthefactordescriptionof

question53onpage59.


97onpage60.


98onpage60.

› October30,2015:Movedfactordescriptionofquestion225topage61.

› October30,2015:Addednewfactordescriptiononquestion346onproxyaccessonpage62.

› October30,2015:RemovedsentenceontheUSinthefactordescriptiononQ13onpage13.

OverviewandUpdates



› October30,2015:UpdatedinformationontheUSinthefactordescriptiononQ45onpage24.

› October30,2015:RemovedsentenceinthelastparagraphontheUSinthefactordescriptiononQ228

onpage33.

› October30,2015:RemovedsentenceinthelastparagraphontheUSinthefactordescriptiononQ229

onpage33.

› October30,2015:RemovedlasttwoparagraphsontheUSinthefactordescriptiononQ329onpage34.

› February2016:AmendedcoveragetableentryforIreland.

› April2016:AmendedcoveragetableentriesforBrazil,China,HongKong,India,Japan,Singaporeand

SouthKorea.

› September2016:AmendedtheUS-specificsectionofQ131andQ132onpages34and35.

› November2016:ReviseddocumenttoreflectISSQualityScorebranding.

› November2016:AmendedthenumberofglobalmarketsundertheOverviewSectiononpage4.

› November2016:AddeddecileclarificationundertheOverviewSectiononpage4.

› November2016:AmendedAsia-Pacificcoveragetableonpage5.

› November2016:ReplacedSummaryofUpdateswithrenewedsectiononpage7.

› November2016:RemovedsectiononOthernotable3.0Updates.

› November2016:AmendednumberofQuickScorefactorsonpage10.

› November2016:AmendedquestiontextandexplanationonQ304onpage12.

› November2016:AddedquestionandexplanationonnewQ354onpage12.

› November2016:AmendedquestiontextandaddedexplanationonCanada(majorityexemption)for

Q10onpage13.

› November2016:UpdatedexplanationonQ289onpage14.

› November2016:AmendedexplanationonQ282onpage14.

› November2016:InsertedandupdatedexplanationonQ281onpage15.

› November2016:Replaced9yeartenurebytenureasrecommendedbylocalpracticeonQ13onpage

15.

› November2016:AddednewQ355andexplanationonpage15.

› November2016:AmendedexplanationonQ14andupdatedmarketapplicabilitytoallregionsonpage

16.


› November2016:AddedexplanationonCanada(majorityexemption)forQ19andupdatedmarket

applicabilitytoincludeJapanonpage18.

› November2016:AmendedexplanationonQ23andupdatedmarketapplicabilitytoincludeSouthKorea

andJapanonpage19.



› November2016:AmendedexplanationonQ28andupdatedmarketapplicabilitytoincludeJapanon

page21.

OverviewandUpdates





› November2016:AmendedmarketapplicabilityonQ34toincludeJapanonpage24.

› November2016:UpdatedquestiontextandexplanationonQ283onpage25.

› November2016:UpdatedquestiontextandmarketapplicbilitytoincludeAngloonQ36onpage26.

› November2016:UpdatedquestiontextandmarketapplicabilitytoincludeAngloonQ37onpage27.

› November2016:Updatedquestiontext,explanationsandmarketapplicabilitytoincludeAngloonQ38

onpage27.

› November2016:UpdatedquestiontextandmarketapplicabilitytoincludeAngloonQ39onpage27.

› November2016:UpdatedmarketapplicabilityonQ44toexcludeAngloandincludeJapanonpage28.

› November2016:UpdatedmarketapplicabilityonQ45toincludeAngloonpage28.




› November2016:AmendedquestiontextandexplanationonQ144onpage31.

› November2016:AmendedexplanationonQ243onpages31and32.




› November2016:UpdatedquestiontextandexplanationonQ345onpage37.

› November2016:AddedexplanationonAustralAsiaandAngloonQ116onpage38.

› November2016:AddedexplanationonAustralAsiaandAngloonQ117onpage39.

› November2016:UpdatedexplanationonQ228andamendmarketapplicabilitytoincludeW.Europe,

Germanic,Anglo,S.EuropeandNordiconpage40.







› November2016:UpdatedquestiontextandexplanationsonQ131onpage46.

› November2016:UpdatedquestiontextandexplanationsonQ132onpage47.

› November2016:UpdatedmarketapplicabilityonQ325toincludeIndiaonpage51.

› November2016:UpdatedmarketapplicabilityonQ112toincludeJapanonpages51and52.


› November2016:AmendedmarketapplicabilityonQ246toexcludeIndiaonpage53.

› November2016:AmendedmarketapplicabilityonQ122toincludeIndiaonpage53.

› November2016:RemovedQ326andQ327onpage54.

OverviewandUpdates




› November2016:AmendedmarketapplicabilityonQ166toincludeAfricaonpage54.

› November2016:AmendedquestiontextandexplanationonQ328onpages54and55.


› November2016:RemovedQ307andQ308.

› November2016:AddednewQ369onpage60.

› November2016:AmendedmarketapplicabilityonQ77toexcludeAsiaPaconpage66.

› November2016:AmendedmarketapplicabilityonQ83toincludeSouthKoreaonpage66.

› November2016:RemovedQ317.











› November2016:AmendedexplanationonQ346onpage78.










› November2016:AmendedmarketapplicabilityonQ4toincludeSouthKoreaonpages84.


› November2016:AmendedmarketapplicabilityonQ200toincludeIndiaonpages84to85.

› November2016:AmendedmarketapplicabilityonQ201toincludeIndiaandSouthKoreaonpage85.

› November2016:RemovedQ281(movedtoboardsection).

OverviewandUpdates



GetstartedonISSQualityScore.Emailsales@issgovernance.comorvisitwww.issgovernance.com/solutions/iss-analyticsformore

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