On February 11, 2025, the Institutional Shareholder Service (“ISS”) announced that it will indefinitely halt consideration of gender, racial, or ethnic diversity of directors of U.S. companies when making vote recommendations with respect to director election or re-election proposals. This change will apply to reports published after February 25th under its Benchmark and Specialty policies. U.S. companies will continue to be evaluated under other considerations outlined in ISS voting guidelines including independence, accountability and responsiveness. Prior to this policy change, companies that lacked gender, racial or ethnic diversity on their board risked receiving adverse recommendations in their ISS reports, including “withhold” recommendations for certain directors, due to that lack of diversity.
The policy change at ISS comes in the wake of mounting pressure on organizations that have championed diversity, equity, and inclusion (DEI), and in its statement ISS pointed to increased attention in the U.S. on DEI, specifically noting the Trump administration’s recent Executive Orders on DEI. Glass Lewis, the other major proxy advisory firm, has not weighed in on this topic and it will be interesting to see if their policies shift along the lines of ISS.
Companies that are considering the composition of their board of directors should consult with counsel and advisors for assistance navigating the complexities of structuring an effective board in a shifting landscape.
You can find more information on 2025 ISS updates, other than this late-breaking update, in our LEGALcurrents “Reporting for the 2025 Proxy and Annual Reporting Season.” If you have any questions about ISS voting guidelines and their application, please contact a member of Harter Secrest & Emery’s Securities and Capital Markets group.