Thursday, May 29, 2014
Institutional Shareholder Services (ISS) has always had a lot of influence - some think too much- and it's also received quite a bit of press this week. First, the Wall Street Journal reported that the proxy advisory firm slammed Wal-Mart's board for lack of independence regarding its executive pay practices in particular how compensation is (un)affected by declining company performance. ISS also raised concerns about the company's ongoing FCPA troubles and how or whether executives will be held accountable. ISS called for more board independence. Given the fact that the Walton family owns 50% of the company stock, it’s not likely that ISS’ recommendations will have much weight, but it’s still noteworthy nonetheless.
This morning, the press reported that ISS took aim at another troubled company, Target. In addition to its revenue declines, Target also reported a massive data breach last year, which led to numerous shareholder derivative suits. ISS recommended that seven of the ten board members lose their seats for failing to adequately monitor the risk. Target has already made a number of significant management changes. This recommendation from ISS may be an even bigger wake up call to board members (including those outside of Target) about their Caremark duties, even if Target shareholders do not follow the ISS recommendation.
I will stay tuned and will be sure to save these articles for next semester's business associations class.