Institutional Shareholder Services: The Uninvited Guest at the Equity Table

5 Pages Posted: 15 Sep 2010 Last revised: 3 Sep 2013

See all articles by David F. Larcker

David F. Larcker

Stanford University - Graduate School of Business

Brian Tayan

Stanford University - Graduate School of Business

Date Written: May 17, 2010

Abstract

In recent years, Institutional Shareholder Services (was RiskMetrics Governance Services (RMG)) has played an influential role in the proxy voting process. According to some estimates, a recommendation by ISS can sway a proxy vote by 15 to 20 percent. Several companies are highly critical of ISS and the methodology it uses to inform its recommendations - particularly as they relate to equity-based compensation plans. ISS believes that its methodology is both rigorous and objective. We take a closer look and highlight some key issues and reasons for concern.

Topics, Issues and Controversies in Corporate Governance and Leadership: The Closer Look series is a collection of short case studies through which we explore topics, issues, and controversies in corporate governance. In each study, we take a targeted look at a specific issue that is relevant to the current debate on governance and explain why it is so important. Larcker and Tayan are co-authors of the book Corporate Governance Matters, and A Real Look at Real World Corporate Governance.

Keywords: corporate governance, proxy voting, proxy access, corporate governance ratings

JEL Classification: G30, G34

Suggested Citation

Larcker, David F. and Tayan, Brian, Institutional Shareholder Services: The Uninvited Guest at the Equity Table (May 17, 2010). Rock Center for Corporate Governance at Stanford University Closer Look Series: Topics, Issues and Controversies in Corporate Governance No. CGRP-01. Available at SSRN: https://ssrn.com/abstract=1677630

David F. Larcker (Contact Author)

Stanford University - Graduate School of Business ( email )

Graduate School of Business
518 Memorial Way
Stanford, CA 94305-5015
United States
650-725-6159 (Phone)

Brian Tayan

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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