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2012-2013 Policy Survey Summary of Results

September 2012

2012-2013 Policy Survey Summary of Results - 2 - © 2012 Institutional Shareholder Services Inc.

About the Survey

For the past nine years, ISS has sought feedback on emerging corporate governance issues as a critical

component of its annual policy formulation process. ISS seeks input from both its institutional investor

clients and the corporate issuer community, in order to get a better understanding of the breadth of

financial market views on a range of topics including boards of directors, shareholder rights, and

executive compensation/remuneration.

This year’s survey was conducted from July 24, 2012, through Aug. 31, 2012. ISS’ institutional investor

clients, as well as a broad global contact list of corporate issuers, were invited to participate in an

online survey covering corporate governance developments worldwide. Issuers and investors

completed the same survey.

More than 370 total responses were received. A total of 97 institutional investors responded.

Approximately 71 percent of investor respondents were located in the United States, with the

remainder divided between U.K., Europe, Canada, and Asia-Pacific. 273 corporate issuers responded,

with 79 percent of them located in the United States and the remainder divided between U.K., Europe,

and Canada.

Institutions-Category

Alternative asset management 1%

Commercial or investment bank 4%

Foundation/endowment 2%

Government- or state-sponsored pension fund 8%

Insurance company 3%

Investment manager or asset manager 62%

Investor industry group 1%

Labor union-sponsored pension fund 2%

Mutual fund or mutual fund company 8%

Private bank/wealth management/brokerage 1%

Other 8%

Size of Organization*

Institutions Issuers

Over $100 billion 32% 5%

$10 billion - $100 billion 22% 29%

$1 billion - $10 billion 30% 31%

$500 million - $1 billion 4% 7%

$100 million - $500 million 6% 7%

Under $100 million 5% 2%

Not applicable 2% 19%

*For institutions, size is measured by equity assets under

management or assets owned (in U.S. dollars); For issuers, size is

measured by market capitalization (in U.S. Dollars)

2012-2013 Policy Survey Summary of Results - 3 - © 2012 Institutional Shareholder Services Inc.

Key Findings

ISS Research

ISS’ outreach activities with respect to policy formulation and engagement are useful to both

investors and issuers. A significant majority (over 72 percent) of both investor and issuer respondents

indicated that all elements of ISS’ outreach process (policy survey, policy roundtables, and comment

period) for policy formulation were either “very useful” or “somewhat useful” to their organization

when developing voting policies or assessing governance practices.

Likewise, a significant majority (over 72 percent) of both investors and issuers indicated that all

elements of ISS’ engagement process with issuers were either “very useful” or “somewhat useful” to

their organization, considering the benefits of enhancing dialogue and providing additional information

on ISS reports.

Top Governance Issues

Executive compensation is the top area of focus across the globe. Investor respondents cite the issue

of executive compensation as the perennial top governance topic for the coming year. Issuer

respondents also cited executive compensation as their top concern in North America and Europe and

as their second most commonly cited topic in both the Asia-Pacific and the Developing Markets.

On a global basis, investors focused on board competence/director qualifications and board

independence. Across every region, board competence and board independence were identified

among the three most important governance topics by investor respondents. For issuer respondents,

board competence was the third most commonly cited topic across every region.

Issuers focus on risk oversight. For issuer respondents, the most commonly cited topic in Asia-Pacific

and Developing Markets was risk oversight; this was the second most commonly cited topic in North

America and Europe.

Nominating Process

When voting on new nominees in director elections, issuers value diversity in skill set and track

records at other boards. Investors are more likely to vote against or withhold votes from new

nominees where their qualifications/experiences/skills raise concerns, as opposed to targeting

nominating committees. When evaluating a new or prospective director nominee’s experience,

qualifications, and skills, a nominee’s track record at other boards was cited as "very important" by

most investor respondents (61 percent). For issuer respondents, a nominee's diverse skill set relative

to other directors received the highest percentage (84 percent) for "very important." Recent (past five

years) direct experience in the respective industry was cited as “very important” by 62 percent of

issuers and 51 percent of investors.

A majority of both investors and issuers would consider nominee diversity with respect to skill sets to

be “very important” when evaluating a new nominee’s qualifications while gender/race diversity was

most commonly cited as “somewhat important” by both issuers and investors.