Category: ESG

Framework developed by the Investor Stewardship Group establishes common set of investor expectations for corporate governance

The Investor Stewardship Group—a group of the largest, most prominent institutional investors and global asset managers investing, in the aggregate, over $20 trillion in the U.S. equity markets—has developed the Framework for U.S. Stewardship and Governance, a “framework of basic standards of investment stewardship and corporate governance for U.S. institutional investor and boardroom conduct.” The stewardship framework identifies fundamental responsibilities for institutional investors, and the corporate governance framework identifies six fundamental principles that “are designed to establish a foundational set of investor expectations about corporate governance practices in U.S. public companies. Generally, the principles “reflect the common corporate governance beliefs embedded in each member’s proxy voting and engagement guidelines,” although each ISG member may differ somewhat on specifics. The ISG encourages company directors to apply these basic principles—while acknowledging that they are not designed to be “prescriptive or comprehensive” and can be applied in various ways—and indicates that it will “evaluate companies’ alignment with these principles, as well as any discussion of alternative approaches that directors maintain are in a company’s best interests.” The framework does not go “into effect” until January 1, 2018, so that companies will have “time to adjust to these standards in advance of the 2018 proxy season,”  the implication being that failure to “comply or explain” by that point could ultimately lead to shareholder opposition during proxy season.  Check out the countdown clock at the link above!