ISS Benchmark Policy Changes For 2025: Canada Edition

On December 17, 2024, proxy advisor Institutional Shareholder Services, Inc. (“ISS”) released its 2025 Benchmark Policy Updates for Canada. These changes are effective February 1, 2025, unless otherwise stated.

In this Sodali & Co update, we outline the key changes and clarify amendments affecting Canadian issuers for the upcoming proxy season:

• Virtual-only Meetings: ISS now adds a new policy application to recommend against proposed amendments of bylaws or articles of association that would grant the board the discretion to hold shareholders' meetings in virtual-only format without compelling rationale.
• Definition of Independence (Former/Interim CEO): ISS provides clarification regarding the definition of independence in the case of former CEOs in respect of minimum five year cooling off periods whereby a former CEO will be deemed as non-independent unless circumstances exist which make a minimum five-year cooling off period sufficient. 
• Former CEO on the Audit or Compensation Committee: Consistent with the above definition of independence (former/interim CEO) policy clarification, ISS will continue to recommend withholding votes on the election of former CEOs who have been deemed non-independent and serve as members of the Audit and/or Compensation committees. 
• Pay-for-performance Evaluation: ISS now allows the consideration of the compensation of a named executive office (NEO) in the ISS pay-for-performance evaluation, as opposed to the CEO’s compensation, in cases of exceptional circumstances where an NEO's compensation is regularly significantly higher than that of the CEO if doing so would provide a more appropriate assessment of pay-for-performance alignment.
• TSX Composite Index - Racial Ethnic Diversity: ISS now removes the prior policy language associated with the initial implementation of the racial/ethnic diversity standards in the market, because they became mandatory for all TSX Composite Index boards from February 1, 2024. Namely, the racial diversity policy for TSX Composite Index issuers is now final.
• Gender Diversity: ISS now removes a prior reference to "extraordinary circumstances", providing greater transparency and simplifying the framework for the analysis of gender diversity at the board level.

The Sodali & Co Canadian team will continue to monitor market developments and provide necessary updates in a timely manner.

Contact our experts at canada@sodali.com to find out what influence ISS has on your shareholder base, what these changes mean for your organization, or for any advisory needs.